Tuesday, 25 October 2011

monetary policy of india

                                MONETARY POLICY:

Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.[1] The official goals usually include relatively stable prices and low unemployment. Monetary theory provides insight into how to craft optimal monetary policy. It is referred to as either being expansionary or contractionary, where an expansionary policy increases the total supply of money in the economy more rapidly than usual, and contractionary policy expands the money supply more slowly than usual or even shrinks it. Expansionary policy is traditionally used to try to combat unemployment in a recession by loweringinterest rates in the hope that easy credit will entice businesses into expanding. Contractionary policy is intended to slow inflation in hopes of avoiding the resulting distortions and deterioration of asset values.
Monetary policy differs from fiscal policy, which refers to taxation, government spending, and associated borrowing

Moneary policy rests on the relationship between the rates of interest in an economy, that is, the price at which money can be borrowed, and the total supply of money. Monetary policy uses a variety of tools to control one or both of these, to influence outcomes like economic growth, inflation, exchange rates with other currencies and unemployment. Where currency is under a monopoly of issuance, or where there is a regulated system of issuing currency through banks which are tied to a central bank, the monetary authority has the ability to alter the money supply and thus influence the interest rate (to achieve policy goals). The beginning of monetary policy as such comes from the late 19th century, where it was used to maintain the gold standard.
A policy is referred to as contractionary if it reduces the size of the money supply or increases it only slowly, or if it raises the interest rate. An expansionary policy increases the size of the money supply more rapidly, or decreases the interest rate. Furthermore, monetary policies are described as follows: accommodative, if the interest rate set by the central monetary authority is intended to create economic growth; neutral, if it is intended neither to create growth nor combat inflation; or tight if intended to reduce inflation.
There are several monetary policy tools available to achieve these ends: increasing interest rates by fiat; reducing the monetary base; and increasing reserve requirements. All have the effect of contracting the money supply; and, if reversed, expand the money supply. Since the 1970s, monetary policy has generally been formed separately from fiscal policy. Even prior to the 1970s, the Bretton Woods system still ensured that most nations would form the two policies separately.
Within almost all modern nations, special institutions (such as the Federal Reserve System in the United States, the Bank of England, the European Central Bank, the People's Bank of China, and the Bank of Japan) exist which have the task of executing the monetary policy and often independently of the executive. In general, these institutions are called central banksand often have other responsibilities such as supervising the smooth operation of the financial system.
The primary tool of monetary policy is open market operations. This entails managing the quantity of money in circulation through the buying and selling of various financial instruments, such as treasury bills, company bonds, or foreign currencies. All of these purchases or sales result in more or less base currency entering or leaving market circulation.
Usually, the short term goal of open market operations is to achieve a specific short term interest rate target. In other instances, monetary policy might instead entail the targeting of a specific exchange rate relative to some foreign currency or else relative to gold. For example, in the case of the USA the Federal Reserve targets the federal funds rate, the rate at which member banks lend to one another overnight; however, the monetary policy of China is to target the exchange rate between the Chinese renminbi and a basket of foreign currencies.
The other primary means of conducting monetary policy include: (i) Discount window lending (lender of last resort); (ii) Fractional deposit lending (changes in the reserve requirement); (iii) Moral suasion (cajoling certain market players to achieve specified outcomes); (iv) "Open mouth operations" (talking monetary policy with the market)

Objectives and Framework
In India, the objectives of monetary policy evolved as maintaining price stability and ensuring adequate flow of credit to the productive sectors of the economy. With progressive liberalisation and increasing globalisation of the economy,   maintaining orderly conditions in the financial markets   emerged as an additional policy objective. Thus, monetary policy in India endeavours to maintain a judicious balance between price stability, economic growth and financial stability.
The monetary policy framework in India from the mid-1980s till 1997-98 can be characterized as a monetary targeting framework on the lines recommended by Chakravarty Committee (1985). Because of the reasonable stability of the money demand function, the annual growth in broad money (M3) was used as an intermediate target of monetary policy to achieve the final objectives. Monetary management involved working out M3 growth consistent with projected GDP growth and a tolerable level of inflation. In practice, however, the monetary targeting approach was used in a flexible manner with ‘feedback’ from the developments in the real sector. For example, if the real GDP growth was expected to be higher, M3 projection was revised upwards.
In the 1990s, the increasing market orientation of the financial system and greater capital inflows imparted instability to the money demand function. Consequently, there was a shift to multiple indicators approach in the late 1990s. Under this approach, interest rates or rates of return in different markets along with movements in currency, credit, fiscal position, trade, capital flows, inflation rate, exchange rate, refinancing and transactions in foreign exchange – available on a high frequency basis – are juxtaposed with output data for drawing policy perspectives. The multiple indicators approach continued to evolve and was augmented by forward looking indicators and a panel of parsimonious time series models. The forward looking indicators are drawn from the Reserve Bank’s industrial outlook survey, capacity utilization survey, professional forecasters’ survey and inflation expectations survey. The assessment from these indicators and models feed into the projection of growth and inflation.   Thus, the current framework of monetary policy can be termed as augmented multiple indicators approach1.

Operating Procedure
Operating procedure refer to the day to day management of monetary conditions consistent with the overall stance of monetary policy. It is in essence the ‘nuts and bolts’ of monetary policy. It involves: first, the choice of the operational target; second, the nature, extent and the frequency of different money market operations by the central bank; third,  the use and width of the corridor for very short-term market interest rates and; finally, the manner of signalling policy intentions. The choice of the operating target is crucial as this variable is at the beginning of the monetary transmission process. The operating target of a central bank could be bank reserves, base money or a benchmark interest rate. While actions of a central bank could influence all these variables, the final outcome is determined by the response of financial markets and institutions to the central bank action. I will briefly survey the international experience before turning to our own experience
Indian Experience
Consistent with the objectives and policy framework, the operating procedure of monetary policy in India has also witnessed significant changes. The choice of targets, instruments and operating procedure was circumscribed to a large extent by the nature of the financial markets and the institutional arrangements.  During the monetary targeting period (1985-1998), while M3growth provided the nominal anchor, reserve money was used as the operating target and   cash reserve ratio (CRR) was used as the principal operating instrument.  Besides CRR, in the pre-reform period prior to 1991, given the command and control nature of the economy, the Reserve Bank had to resort to direct instruments like interest rate regulations and selective credit control. These instruments were used intermittently to neutralize the expansionary impact of large fiscal deficits which were partly monetised. The administered interest rate regime kept the yield rate of the government securities artificially low. The demand for them was created through periodic hikes in the Statutory Liquidity Ratio (SLR) for banks. The task before the Reserve Bank was, therefore, to develop the financial markets to prepare the ground for indirect operations.
The year 1992-93 was a landmark in the sense that the market borrowing programme of the government was put through the auction process. This was buttressed by a phased deregulation of lending rates in the credit market. The Reserve Bank also brought down the SLR to its statutory minimum of 25 per cent by October 1997, while CRR was brought down from 15 per cent of net demand and time liabilities (NDTL) of banks to 9.5 per cent by November 1997. The automatic monetization of deficits was also phased out in April 1997. All these developments resulted in a decline in pre-emption of resources from the banking system from a peak of 63 per cent in 1992 to 35 per cent by 1997.
The Narsimham Committee (1998), however, noted that the money market continued to remain lopsided, thin and volatile and the Reserve Bank also had no effective presence in the market. Therefore, it reiterated the need to transform the call money market into a pure inter-bank market and recommended the Reserve Bank’s operations to be market-based. Following these recommendations, the Reserve Bank introduced the liquidity adjustment facility (LAF) in June 2000 to manage market liquidity on a daily basis and also to transmit interest rate signals to the market.  Under the LAF, the Reserve Bank’s policy reverse repo and repo rates set the corridor for overnight market interest rates. Thus, OMO including LAF emerged as the dominant instrument of monetary policy, though CRR continued to be used as an additional instrument of policy.
The call money market was transformed into a pure inter-bank market by August 2005 in a phased manner. Concomitantly, to enable a smooth exit of non-banks, new instruments such as the collateralized borrowing and lending obligations (CBLO) were introduced in January 2003. With the introduction of prudential limits on borrowing and lending by banks in the call money market, the collateralized money market segments developed rapidly.  Maturities of other money market instruments such as commercial papers (CPs) and certificates of deposit (CD) were gradually shortened to seven days in order to align the maturity structure.
Managing large and persistent capital inflows in excess of the absorptive capacity of the economy added another dimension to the liquidity management operations during the 2000s. Although, initially the liquidity impact of large capital inflows were sterilised through OMOs and LAF operations, given the finite stock of government securities in the Reserve Bank’s portfolio and the legal restrictions on issuance of its own paper, additional instruments were needed to contain liquidity of a more enduring nature. This led to the introduction of the market stabilisation scheme (MSS) in April 2004. Under this scheme, short-term government securities were issued but the amount remained impounded in the Reserve Bank’s balance sheet for sterilisation purposes. Interestingly, in the face of reversal of capital flows during the recent crisis, unwinding of such sterilised liquidity under the MSS helped to ease liquidity conditions

Policy Formulation Processes
The process of monetary policy in India had traditionally been largely internal with only the end product of actions being made public. The process has overtime become more consultative, participative and articulate with external orientation. The internal work processes have also been re-engineered to focus on technical analysis, coordination, horizontal management and more market orientation. The process leading to monetary policy actions entails a wide range of inputs involving the internal staff, market participants, academics, financial market experts and the Bank’s Board Several new institutional arrangements and work processes have been put in place to meet the needs of policy making in a complex and fast changing economic environment. At the apex of the policy process is the Governor, assisted closely by Deputy Governors and guided by deliberations of the Board of Directors. A Committee of the Board meets every week to review the monetary, economic and financial conditions and renders advice on policy. There are several other standing and ad hoccommittees or groups which play a critical role with regard to policy advice. An interdepartmental Financial Markets Committee focuses on day-to-day market operations and tactics while periodic monetary policy strategy meetings analyse strategies on an ongoing basis

Information Dissemination and Policy Communication
It is generally believed that greater information dissemination and policy communication could lead to better policy outcome. It is, however, not clear as to what extent the communication would result in shaping and managing expectations.  For example, the US Federal Reserve, since 1994, appears to have been providing forward guidance, while the ECB appears to be in the mould of keeping the markets informed rather than guiding it. In India, a middle path is followed by sharing of both information and analysis.
The stance of monetary policy and the rationale are communicated to the public in a variety of ways, the Governor’s most important being the quarterly monetary policy statements. Further, the policy measures are analysed in various statutory and non-statutory publications, speeches and press releases. Information on areas relating to the economy, banking and financial sector is released with stringent standards of quality and timeliness. Dissemination of information takes place through several channels (Chart 4).  The Reserve Bank has also developed a real time database on the Indian economy, which is available to the public through its website

With the changing framework of monetary policy in Indian from monetary targeting to an augmented multiple indictors approach, the operating targets and processes have also undergone a change. There has been a shift from quantitative intermediate targets to interest rates, as the development of financial markets enabled transmission of policy signals through the interest rate channel. At the same time, availability of multiple instruments such as CRR, OMO including LAF and MSS has provided necessary flexibility to monetary operations. While monetary policy formulation is a technical process, it has become more consultative and participative with the involvement of market participant, academics and experts. The internal process has also been re-engineered with more technical analysis and market orientation. In order to enhance transparency in communication the focus has been on dissemination of information and analysis to the public through the Governor’s monetary policy statements and also through regular sharing of policy research and macroeconomic and financial information.


* Speech by Deepak Mohanty, Executive Director, Reserve Bank of India, delivered at the Bankers Club, Bhubaneswar on 15th March 2010. The assistance provided by Shri Bhupal Singh and Shri Binod B. Bhoi is acknowledged.
1 Mohanty, Deepak (2010), “Monetary Policy Framework in India: Experience with Multiple-Indicators Approach”, Speech delivered at the Conference of the Orissa Economic Association in Baripada, Orissa, on February 21, 2010.
2 Mehran H., Laurens, B. and M. Quintyn (eds.) (1996), Interest Rate Liberalization and Money Market Development: Selected Country Experiences, Washington, DC: International Monetary Fund
And official site of RBI

Monday, 26 September 2011


Detailed case study
On January 31, 2007, India based Tata Steel Limited (Tata Steel) acquired the Anglo Dutch steel company, Corus Group Plc (Corus) for US$ 12.20 billion. The merged entity, Tata-Corus, employed 84,000 people across 45 countries in the world. It had the capacity to produce 27 million tons of steel per annum, making it the fifth largest steel producer in the world as of early 2007.

Before the acquisition, the major market for Tata Steel was India. The Indian market accounted for sixty nine percent of the company's total sales. Almost half of Corus' production of steel was sold in Europe (excluding UK). The UK consumed twenty nine percent of its production.

After the acquisition, the European market (including UK) would consume 59 percent of the merged entity's total production.

Commenting on the acquisition, Ratan Tata, Chairman, Tata & Sons, said, "Together, we are a well balanced company, strategically well placed to compete at the leading edge of a rapidly changing global steel industry"

Financing the deal
Tata Steel outbid the Brazilian steelmaker Companhia Siderurgica Nacional's (CSN) final offer of 603 pence per share by offering 608 pence per share to acquire Corus.
Tata Steel had first offered to pay 455 pence per share of Corus, to close the deal at US$ 7.6 billion on October 17, 2006. CSN then offered 475 pence per share of Corus on November 17, 2006.

Finally, an auction was initiated on January 31, 2007, and after nine rounds of bidding, TATA Steel could finally clinch the deal with its final bid 608 pence per share, almost 34% higher than the first bid of 455 pence per share of Corus.

Expert’s opinion
Many analysts and industry experts felt that the acquisition deal was rather expensive for Tata Steel and this move would overvalue the steel industry world over.
Commenting on the deal, Sajjan Jindal, Managing Director, Jindal South West Steel said, "The price paid is expensive...all steel companies may get re-rated now but it's a good deal for the industry." Despite the worries of the deal being expensive for Tata Steel, industry experts were optimistic that the deal would enhance India's position in the global steel industry with the world's largest and fifth largest steel producers having roots in the country. Stressing on the synergies that could arise from this acquisition, Phanish Puram, Professor of Strategic and International Management, London Business School said, "The Tata-Corus deal is different because it links low-cost Indian production and raw materials and growth markets to high-margin markets and high technology in the West.     
The cost advantage of operating from India can be leveraged in Western markets, and differentiation based on better technology from Corus can work in the Asian markets."

Tata Steel Vs CSN: The Bidding War
There was a heavy speculation surrounding Tata Steel's proposed takeover of Corus ever since Ratan Tata had met Leng in Dubai, in July 2006. On October 17, 2006, Tata Steel made an offer of 455 pence a share in cash valuing the acquisition deal at US$ 7.6 billion. Corus responded positively to the offer on October 20, 2006.
Agreeing to the takeover, Leng said, "This combination with Tata, for Corus shareholders and employees alike, represents the right partner at the right time at the right price and on the right terms." In the first week of November 2006, there were reports in media that Tata was joining hands with Corus to acquire the Brazilian steel giant CSN which itself was keen on acquiring Corus. On November 17, 2006, CSN formally entered the foray for acquiring Corus with a bid of 475 pence per share. In the light of CSN's offer, Corus announced that it would defer its extraordinary meeting of shareholders to December 20, 2006 from December 04, 2006, in order to allow counter offers from Tata Steel and CSN...       

There were many likely synergies between Tata Steel, the lowest-cost producer of steel in the world, and Corus, a large player with a significant presence in value-added steel segment and a strong distribution network in Europe. Among the benefits to Tata Steel was the fact that it would be able to supply semi-finished steel to Corus for finishing at its plants, which were located closer to the high-value markets...   

The Pitfalls
Though the potential benefits of the Corus deal were widely appreciated, some analysts had doubts about the outcome and effects on Tata Steel's performance. They pointed out that Corus' EBITDA (earnings before interest, tax, depreciation and amortization) at 8 percent was much lower than that of Tata Steel which was at 30 percent in the financial year 2006-07

Saturday, 24 September 2011



                                                                          BHAVESH SUTHAR

Agriculture is backbone of Indian Economy. 85 percent of the population is directly or indirectly dependent on Agriculture where as 26 percent of GDP comes from Agriculture. 110 million farmers are dwelling in 6.25 lakh villages producing more than 200 MT of food grains feeding the country. More than profession, business, agriculture is culture. Hence, adding additional income generating activities to existing Agriculture would certainly increase contribution of Agriculture to national GDP. Serious efforts need to be made in this direction. Agriculture tourism is one such activity.

Tourism is termed as instrument for employment generation, poverty alleviation and sustainable human development. During 1999-2000, direct employment created by tourism is 15.5 millions. Besides, tourism also promotes national integration, international understanding and supports local handicrafts and cultural activities. During 2000, number of foreign tourists visited India is 26.41 lakhs. India’s share in world tour market is just 0.38 percent. With this meager share, foreign exchange earned is Rs.14,475 crores. Turnover in domestic tourism is much more than this. To promote domestic tourism, thrust areas identified by Government of India are development of infrastructure, product development and diversification, development of eco-adventure sports, cultural presentations, providing inexpensive accommodation, streamlining facilitation procedures at airports, human resource development, creating awareness and public participation and facilitation of private sector participation. In this process, important stakeholders are state and central department of tourism, Indian Institute of Tourism and Travel Management, Tourism Development Corporations, foreign embassies, Travel Agents Association of India (TAAI), Indian Association of Tour Operators (IATO), Tourists, Transport Operators Association, Indian convention promotion bureau and Pacific Asia Travel Association (PATA).

Some issues which are to be learned for Agricultural marketing:
Ø Understand key marketing concepts such as competitive advantage and value chains, and how they can be applied to your farm operation
Ø Explore various marketing models and strategies, and gain an appreciation for the most appropriate approach for your farm business
Ø Gain an understanding of value-added and diversified agriculture as an entrepreneurial mechanism to expand into new ventures and enhance overall profitability
Ø Recognize niche marketing opportunities and brand management strategies for your products
Ø Learn product management strategies and how to bring consumers to the farm gate through direct marketing, Agriculture tourism, and E-marketing
Ø Perform market research and learn how to use market and consumer trends to expand your farm business

Marketing concepts and overview:
Ø  Describe the meaning of the marketing concept
Ø  Explain how to implement the marketing concept to agricultural production
Ø  Identify and assess the suitability of different kinds of markets
Ø  Discuss key concepts in contemporary marketing
Ø  Apply the necessary skills to gather and use current and potential market information

Niche vs Brand Marketing:
The focus of this is on how to add value to farm products via direct marketing, niche marketing and brand management. There will be many opportunities for you to apply the lessons learned to your own operation. how a value chain approach differs from a supply chain approach
Ø  Evaluate the relative merits of alternative approaches to agricultural marketing and their problems and issues
Ø  Calculate the risks and success factors of a value chain approach for your own operation
Ø  Assess your personal and business suitability for a value chain approach
Global Marketing:
Ø Describe the factors that drive and inhibit global economic development
Ø Use the Internet as a research and information tool to locate and bookmark important Internet sites for future reference
Ø Start to isolate global marketing opportunities for your own business
Ø Experience how global companies are using the Internet as a marketing tool to inform and promote their product(s) and service(s)
Ø Apply various assessment tools to evaluate your readiness to enter a new market

Promotion of Agriculture tourism involves some more important stakeholders namely Ministry of Agriculture and line departments at state and central governments and farmers. Promotion of Agriculture tourism needs conceptual convergence with Rural Tourism, Eco-Tourism, Health Tourism, Adventure Tourism and culinary adventures.
1)  It brings major primary sector Agriculture closer to major service sector tourism. This convergence is expected to create win-win situation for both the sectors.

2) Tourism sector has potential to enlarge.

3) Agriculture sector has the capacity to absorb expansion in Tourism Sector.

(1) An inexpensive gateway:- The cost of food, accommodation, recreation and travel is minimum in Agriculture tourism. This widens the tourist base. Present concept of travel and tourism is limited to urban and rich class which constitute only small portion of the population. However, the concept of Agriculture tourism takes travel and tourism to the larger population, widening the scope of tourism due to its cost effectiveness.

(2) Curiosity about the farming industry and life style:- The urban population basically which has roots in villages always has curiosity about sources of food, plants, animals, raw materials like wood, handicrafts, languages, culture, tradition, dresses and lifestyle. Agriculture tourism which revolves around the farmers, villages and agriculture has the capacity to satisfy the curiosity of this segment of population. Agriculture tourism provides scope for re-discoursing the rural life which is rich in diversity.

(3) Strong demand for wholesome family oriented recreational activities “ villages provide recreational opportunities to all age groups i.e. children young, middle and old age, male, female, in total to the whole family at cheaper cost. Rural games, festivals, food, dress and the nature provides variety of entertainment to the whole family.

(4) Health consciousness of urban population and finding solace with nature friendly means “ Modern lifestyle has made the life stressful and average life span has comedown. Hence, people are in constant search of pro-nature means to make life more peaceful. Ayurveda which is pro-nature medical approach has roots in villages. Indigenous medical knowledge of villagers is respected. Organic foods are in greater demand in urban areas and foreign countries. In total, health conscious urban population is looking towards pro-nature villages for solutions.

(5) Desire for peace and tranquility:- Modern life is the product of diversified thinking and diversified activities. Every individual attempts to work more, in different directions to earn more money to enjoy modern comforts. Hence, peace is always out of his system. Tourism is the means for searching peaceful location. Peace and tranquility are inbuilt in Agriculture tourism as it is away from urban areas and close to nature.

(6) Interest in natural environment - Busy urban population is leaning towards nature. Because, natural environment is always away from busy life. Birds, animals, crops, mountains, water bodies, villages provide totally different atmosphere to urban population in which they can forget their busy urban life.

(7)  Disillusionment with over crowded resorts and cities - In resorts and cities, over crowded peace seekers disturb each others peace. Hence, peace is beyond cities and resorts. Even though efforts are made to create village atmosphere in the sub urban areas through resorts, farm houses, it looks like a donkey painted with tiger colour. Artificiality is highlighted and not satisfying.

(8) Nostalgia for their roots on the farm “ Cities are growing at the cost of villages. Villagers are migrating to cities in search of jobs and seeking comforts of modern life. Hence, yesterday’s villagers are today’s urbanites. Deep in the heart of urbanites lies the love and respect for their ancestors and villages. Hence, visit to villages satisfies their desire. This is also expressed through the hatredness of urbanites to flat culture and love for farmhouses located in the outskirts of cities. Any opportunity to visit villages and spend time with family is dream of any urbanite. But, minimum decent facilities are always problem. Agriculture tourism attempts to overcome this problem.

(9) Rural recreation “ Villages provide varieties of recreation to urbanites through festivals and handicrafts. Villagers (farmers) lifestyle, dress, languages, culture / traditions which always add value to the entertainment. Agriculture environment around farmers and the entire production process could create curiosity among urban taught. Places of agriculture importance like highest crop yielding farm, highest animal yielding farm, processing units, farms where innovations tried add attraction to the tourists. Agriculture products like farm gate fresh market, processed foods, organic food could lure the urban tourists. As result of this Agri-atmosphere in the villages, there is scope to develop Agriculture tourism products like Agri-shopping, culinary tourism, pick and own your tree / plot, bed and breakfast, pick and pay, bullock cart riding, camel riding, boating, fishing, herbal walk, rural games and health (Ayurvedic) tourism.

(10) Educational value of Agriculture tourism:- Agriculture tourism could create awareness about rural life and knowledge about agriculture science among urban school childrens. It provides a best alternative for school picnics which are urban based. It provides opportunity for hands on experience for urban college students in Agriculture. It is a means for providing training to future farmers. It would be effectively used as educational and training tool to train agriculture and line department officers. This provides unique opportunity for education through recreation where learning is fun effective and easy. Seeing is believing, doing is learning and most importantly experiences are USP of Agriculture tourism.

Basic principles of Agriculture tourism:
1. Have something for visitors to see:- Animals, birds, farms and nature are the few things which Agriculture tourism could offer to the tourist to see. Apart from these, culture, dress, festivals and rural games could create enough interest among forest in Agriculture tourism.
2. Have something for visitors to do:- Participating in agricultural operations and swimming, bullock cart riding, camel riding, buffalo riding, cooking and participating in the rural games are the few activities to quote in which tourist can take part and enjoy.
3. Have something for visitors to buy:- Rural crafts, dress materials, farm gate fresh agriculture products, processed foods are the few items which tourist can buy as memento for remembrance.

Three important factors of Agriculture tourism:

1. Farmer: Majority of the cases, farmer is less educated, less exposed and innocent. For farmer, any outsider is a guest and treated wholeheartedly without any commercial motive. Treating guest is pleasure for them than pain. He entertains the guest while entertaining himself in the process. He is not like an exploitative natured businessman which itself facilitate a clean tourism atmosphere

2. Village : Village, which is located far from the city lacks urban facilities, but blessed with natural resources. The investment is made by nature in the form of water bodies, fields, forest, mountains, deserts and islands. Community is more homogenous and treating a guest is part of their culture rather than a profession leading to natural environment required for urban tourist.

3. Agriculture : Rich resources in agriculture namely land, water and plants are unique from place to place bringing diversity and creating curiosity. Each field is unique which adds to the attraction of tourists. The way of cultivation and the products are great attraction to the urban population. Indigenous knowledge of rural people is a wealth, which adds to novelty and curiosity of urban population.
Combination of farmer, village and agriculture create a wonderful situation which provides unlimited satisfaction to the tourist specially from urban areas.

Agriculture tourism opportunities in India:
As Indian tourism industry is growing @10.1%. The World Tourism organization has estimated that the tourism industry is growing at the rate of 4% a year and that by the year 2010 there will be more than one billion tourist visit various parts of the world. But Indian tourism industry is growing at the rate of 10% which is 2½ times more that the growth rate at global level. By introducing Agriculture tourism concept, not only present growth rate is sustained but also this value addition contributes to further growth.

As India has entered amongest the top 10 tourist destinations list (Conde Nast Travellor “ A leading European Travel Magazine). India is already established as one of the top tourist destination in the world. Value addition by introducing novel products like Agriculture tourism would only strengthen the competitiveness of Indian tourism industry in global market.

As India has diverse culture and geography which provide ample and unlimited scope for the growth of this business. India has diverse Agro-climatic conditions, diverse crops, people, culture, deserts, mountains, coastal systems and islands which provide scope for promotion of all season, multi-location tourism products.

As There is an increasing number of tourists preferring non-urban tourist spots (financial express). Hence, there is scope for promotion of non-urban tourist spots in interior villages by establishing Agriculture tourism centres. But, adequate facilities and publicity are must to promote such centres.

As Government initiatives and policies in X five year plan, allocation has been increased from 525 crore to 2900 crores. Increased financial allocation reaffirms the government commitment. The increased financial allocation by six times could be used for capacity building of service providers, creation of infrastructure and publicity.

Market mix strategy:
 The proposed market mix strategy for the promotion of Agriculture tourism concept is as follows.

1. Product - The product in Agriculture tourism is seeing, believing and ultimately experiencing. This experience is unique and unmatched. The experience of climbing a tree , buffalo riding in the pond and enjoying the sugarcane juice in the field itself are unique and none of the million dollar tourist centres can create and offer such experiences.

2. Price
a) Customer segment pricing as “ Domestic and foreign tourist could be priced differently as the capacity to pay is different. For a bullock cart riding, a foreign tourist can pay one dollar where as a domestic tourist can pay only one fourth.

b) Location pricing as “ Pricing in Agriculture tourism depends upon location and importance. Agriculture tourism which just offers agriculture and rural life as attraction can charge normal pricing. Where as Agriculture tourism spots which are very close to established tourism centres like temple towns, hill stations, around big citres can go far little bit higher charging due to added value. As the pricing in established tourism places are high, it works out to be cheaper for tourist to stay and enjoy in Agriculture tourism spots.

c) Time pricing as “ Agriculture tourism units can charge higher in peak season i.e. November to January and change less during rest of the period. During rural festivals or at the time of important events Agriculture tourism units can charge more, even though it is during off season.

3. Place as “ The place where tourists are accommodated also influence the pricing. It the tourists are accommodated in villages itself with the farmer, the charging can be less where as accommodation in farms cost high. Because, exclusively for tourist purpose infrastructure is created in farm whereas existing facilities are used in farmers house in village.

4. Promotion as “ Promotion of Agriculture tourism and strategic alliance can takes place at three levels.
(i) Alliance with airlines, tour operators and foreign embassies. This alliance brings foreign tourists and upper middle class urban tourists into Agriculture tourism fold. It may not be possible for individual farmers to take up this task. Government can assist the Agriculture tourism units through promotion and co-ordination activities through central and state tourism departments.

(ii) Alliance with hotel industry as “ Large number of domestic tourists can be attracted through alliance with hotel industry. The hotel industry can be used to promote Agriculture tourism concept.

(iii) Promotion by Agriculture tourism units as “ Basically the promotion takes place through mouth to mouth and local publicity given by Agriculture tourism units. As the absorption capacity of each unit is very less, direct marketing with little aggressive mode is enough for a Agriculture tourism units to survive. They can go for combined publicity on cost sharing basis and also publics the Agriculture tourism potential in other part of the country. But, promotion of this group approach needs initial government interventions.

5. Policies as “ Some of the policy initiatives of urban government would surely help promotion of Agriculture tourism . They are
(i) Building brand identity as Incredible India.
(ii) Rs.60 crore budget for promoting brand
(iii) X five year plan budget increased from Rs. 525 to 2900 crores.
(iv) An allocation of Rs.50 lakhs per village for village tourism has been proposed.
(v) The states are encouraging private public partnership in tourism sector.

6. Positioning as “ Ultimately Agriculture tourism concept has to be positioned in the minds of tourists as  Come, pluck a fruit, smell a flower, run in the fields, lie on the hay and be lost in rural India.

Entertainment Agriculture tourism : Agriculture tourism involvement in agricultural operations create joyful experience to the tourist. Agri-tourist involvement in milching, harvesting competitions, tree climbing, edible adventure, bullock cart race, buffalo race in wet fields namely Kambala in Karnataka, shooting a coconut target, fishing etc could generate enormous joy atleast cost. There is enough scope to charge entry fee to farmers, providing feed and accommodation on payment basis and charging the participation of Agri-tourist during rural games would also generate income to the farmers.

The issues which needs attention for the promotion of Agriculture tourism are:
1. Publicity as “ It is difficult to provide publicity to a remote Agriculture tourism unit. Hence, either collectively such Agriculture tourism operators can provide publicity or organizations like ITDC, State tourism development corporations, NGOs, press and tour operators can take up this responsibility

Information technology can play very important role in promotion of Agriculture tourism. An interactive website containing all details about Agriculture tourism locations and a toll free 24 hours help line can provide necessary information to Agri-tourists.

2. Transport as “ Reaching the remote Agriculture tourism units is the greatest challenge due to lack of approach roads and poor transportation facilities in rural areas. Tele connectivity is must which is yet to reach villages. Government should play important role in creating these facilities namely roads, transport and telecommunication to rural areas specially where Agriculture tourism units are established on priority basis. This efforts could be effective with private participation in partnership mode.

3. Accommodation as “ Safe and clean accommodation is must in Agriculture tourism. Urban and foreign tourists look for these minimum facilities. Orienting Agri tour operators on one hand and providing incentive to such efforts on other hand is necessary. Regular clean water supply and neat toilets are important. At the same time, it is necessary to limit modern facilities in which Agri-tourist is not interested.

4. Networking as “ Networking public and private stakeholders at national and state level to assist the Agriculture tourism operator at remote place is necessary. This network can get policy support, infrastructure and publicity to Agriculture tourism units.

5. Capacity building of farmers as “ Farmer need to be oriented on maintenance of facilities, hospitality and public relation which he is not aware.

6. Safety of tourists as “ Agriculture tourism units are located in remote areas which lacks roads, medical facilities, telecommunication and sometimes threat from theft and wild animals. Hence, support of local population is must besides facilities for emergency medical care.

7. Private as “ pubic partnership as “ Agripreneurs, farmers organizations, co-operatives, NGOs and agribusiness companies can take up these ventures with the help of farmers and government agencies tour operators. Transporters and hospitality industry would also benefit in the process.