How India is part of the new scramble
12 Nov 2012 10:36 PM GMT
In the wake of the dramatic increase in food prices on world markets in 2008, and growing concerns about India’s increased reliance on volatile global markets for food imports, recent studies have found several Indian companies are increasingly involved in what critics call ‘land-grabbing’ in Africa and other developing countries with poor governance records and little regard for small farmers who may be displaced in the process. The increase in the trend has been striking, from a previous average annual increase in global agricultural land use of about four million hectares before 2008 to tens of millions of hectares leased or purchased just since 2009, with about half the deals occurring in Africa. In the largest study, 1,006 deals since 2000 and covering 70.2 million hectares around the world were counted, with the bulk of these acquisitions have taken place between just 2008 and 2010.
The major factors driving this steep increase include new international markets for bio-fuel production; increased demand for animal feed owing to growing international meat consumption; and asset price speculation as institutional investors have come to view agricultural land in developing countries as a new commodity.
As India has become increasingly dependent on imported grains in recent years, it has joined other countries such as China, Saudi Arabia, Kuwait and South Korea in what some critics have called a new ‘scramble for Africa’ in search of agricultural lands on which to produce food to be shipped home to its domestic market. This ‘outsourcing’ of national food production is only one part of India’s recent dramatic increase in outward foreign direct investment by Indian companies, which has quadrupled in the last decade. Reflecting a decade-long process regulatory liberalisation that has allowed leading Indian companies to globalise and raise capital abroad, outward foreign direct investment by Indian multinationals surged to $43.9 billion in the 2010/2011 fiscal year, compared with just $18 billion in the previous year.
While many investments are seen as purely commercial endeavours, in some cases the overseas investments in agricultural land stem directly from India’s growing strategic concerns about ensuring its long-term food security. With limited farmland resources and a rapidly increasing population, national food grain production has been more or less stagnant for a decade.
Consequently, the country has become increasingly dependent on imports of oilseeds and lentils and is likely to become dependent on wheat imports in the near future. Additionally, the rainfall patterns upon which half the nation’s cultivable land depends have become more erratic in recent years.
While Indian companies’ investments in Africa range across the board from oil and mining to light manufacturing, some of their recent investments in agriculture are drawing attention, particularly because the dramatic increase in such investments and the large sizes of land involved. As with other countries investing in such land deals in Africa, strategic concern about future access to water is a related and major contributing factor currently driving India’s effort to outsource its food production. According to statistics provided by some governments in Africa in 2010, more than 80 Indian companies had recently invested about $2.4 billion in buying or leasing very large plantations in countries such as Ethiopia, Kenya, Madagascar, Senegal and Mozambique that will be used to grow food grains, some of which is intended for export to the Indian market.
The trend has raised concerns among land rights groups, small farmers advocates and others about a lack of due process, prior informed consent and adequate compensation for local people who often get displaced in the process, particularly in countries like Ethiopia and Madagascar, which have poor records of governance. Regarding the role of Indian companies, a 2011 report by the New Delhi-based Economics Research Foundation and the international advocacy NGO, GRAIN, ‘India’s Role in the New Global Farmland Grab,’ examined five disclosed contracts between Indian firms and the Ethiopian government. Critics say the lack of detail in the contracts raises questions about the limited obligations of investors towards local people and the environment.
Despite such concerns, the Indian government has supported this push by Indian agricultural companies to go abroad with trade delegations. It has lowered import tariffs on their food exports form selected African countries which are heading into the Indian market. The government has also stepped up the use of India’s Export-Import Bank lines of credit to developing countries, particularly in Africa, for development projects, many of which include concessions for Indian investors to improve productivity of their agriculture sectors. In this way, India’s foreign aid credits are being used to provide inroads for Indian agriculture firms venturing into Africa.
Rick Rowden is a doctoral candidate in Economic Studies and Planning at JNU, Delhi
The major factors driving this steep increase include new international markets for bio-fuel production; increased demand for animal feed owing to growing international meat consumption; and asset price speculation as institutional investors have come to view agricultural land in developing countries as a new commodity.
As India has become increasingly dependent on imported grains in recent years, it has joined other countries such as China, Saudi Arabia, Kuwait and South Korea in what some critics have called a new ‘scramble for Africa’ in search of agricultural lands on which to produce food to be shipped home to its domestic market. This ‘outsourcing’ of national food production is only one part of India’s recent dramatic increase in outward foreign direct investment by Indian companies, which has quadrupled in the last decade. Reflecting a decade-long process regulatory liberalisation that has allowed leading Indian companies to globalise and raise capital abroad, outward foreign direct investment by Indian multinationals surged to $43.9 billion in the 2010/2011 fiscal year, compared with just $18 billion in the previous year.
While many investments are seen as purely commercial endeavours, in some cases the overseas investments in agricultural land stem directly from India’s growing strategic concerns about ensuring its long-term food security. With limited farmland resources and a rapidly increasing population, national food grain production has been more or less stagnant for a decade.
Consequently, the country has become increasingly dependent on imports of oilseeds and lentils and is likely to become dependent on wheat imports in the near future. Additionally, the rainfall patterns upon which half the nation’s cultivable land depends have become more erratic in recent years.
While Indian companies’ investments in Africa range across the board from oil and mining to light manufacturing, some of their recent investments in agriculture are drawing attention, particularly because the dramatic increase in such investments and the large sizes of land involved. As with other countries investing in such land deals in Africa, strategic concern about future access to water is a related and major contributing factor currently driving India’s effort to outsource its food production. According to statistics provided by some governments in Africa in 2010, more than 80 Indian companies had recently invested about $2.4 billion in buying or leasing very large plantations in countries such as Ethiopia, Kenya, Madagascar, Senegal and Mozambique that will be used to grow food grains, some of which is intended for export to the Indian market.
The trend has raised concerns among land rights groups, small farmers advocates and others about a lack of due process, prior informed consent and adequate compensation for local people who often get displaced in the process, particularly in countries like Ethiopia and Madagascar, which have poor records of governance. Regarding the role of Indian companies, a 2011 report by the New Delhi-based Economics Research Foundation and the international advocacy NGO, GRAIN, ‘India’s Role in the New Global Farmland Grab,’ examined five disclosed contracts between Indian firms and the Ethiopian government. Critics say the lack of detail in the contracts raises questions about the limited obligations of investors towards local people and the environment.
Despite such concerns, the Indian government has supported this push by Indian agricultural companies to go abroad with trade delegations. It has lowered import tariffs on their food exports form selected African countries which are heading into the Indian market. The government has also stepped up the use of India’s Export-Import Bank lines of credit to developing countries, particularly in Africa, for development projects, many of which include concessions for Indian investors to improve productivity of their agriculture sectors. In this way, India’s foreign aid credits are being used to provide inroads for Indian agriculture firms venturing into Africa.
Rick Rowden is a doctoral candidate in Economic Studies and Planning at JNU, Delhi
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