Building for Bharat: Opportunities hidden in plain sight…
PM Crosstalk #1 (Part 1)
Every month, Crosstalk brings together Product Managers from top startups across India to discuss insights, challenges and the emerging opportunities they encounter while building digital products for the country.
Update: Part 2 is now published here.
Over a couple of hours, we discussed issues like domestic migration, friction in agricultural supply chains and inefficiencies in the SMB sector in India. If there was one thing that everyone took away from the conversation, it was the fact that:
The opportunity to Build for Bharat is greater than ever before
Abhishek Tiwari lead the conversation this month. At Reverie — where he worked until recently — Abhishek witnessed first-hand unique issues that arise when dealing with the newly online Indian audience:
“Never having shopped at supermarkets, the cart icon on an e-commerce website means nothing to them”
From the downright absurd, tune in below to some of the jugaad that our desi PMs have used to tackle India-specific problems.
Part 1 of the meetup deals with credit, agriculture and its supply chain in India. Despite being an agrarian economy, it’s funny how little us privileged Indians think or even know about issues in the domain.
Part 2, coming soon, will deal with opportunities in the SMB sector.
Below is an edited transcript for Part 1 and here is an unedited audio version.
Abhishek: Setting the context here, Building for Bharat doesn’t mean “Don’t build for urban Indians or Germans or anybody else”. It’s just that a bunch of us need to start looking at opportunities within India.
The average age of India will be 29 in the next 5–10 years. To give you context, the same in China is 37, the US at 42 and Japan at 48 (source).
We are going to be the youngest country in the world with a lot unskilled people AND a lot of growing automation that’s stealing — or optimizing — jobs… depends on the way you look at it.
And we have a population with incredibly high aspiration. Our internet is growing at 40% year on year. We would have about 500 million people online by 2020.
15% can read English (in varying degrees). The literacy rate of English is not as high as internet penetration. So the cost is going to be big and we’ll have to move beyond (the two) languages.
Adam: So that’s 15% of the total population or the online population?
Abhishek: The total population. Out of online, it would be somewhere between 60–100 million is my estimate, and these are all Indians — pretty much all Indians who are comfortable with English are already online.
Anyone who speaks English already has internet.
A couple of interesting things are happening.
Out of 200 million families in India, 90 million directly depend on agriculture for livelihood (source). That’s a sharp 45% of your population. So within agriculture, what can be done?
This is a space where there are no Harvard Business Review case studies done yet.
It’s a very leap-froggy situation where you leapfrog over 3G, broadband and so on. Your first computing device is a mobile phone. You didn’t graduate from a CRT to an LCD to a laptop to a phone. Your first UI is a phone.
A bunch of other things are happening — we have a strong migrant population. The last Economic Survey of India (2016–17) estimated that 10 million migrate within India every year.
By the way, the 2014 economic survey was so good that pirated copies started selling on Amazon. So the government woke up and said, “Hey, this is what people are actually interested in!”
[laughter]
So the one this year is excellent and interesting. It’s 400 pages and I’m trying to summarize parts of it here!
So these inter-city migrants are people who can really send back substantial remittance back at home. They come into cities but they have no information systems that drive them into it.
For example, if I were to move into Bombay and I wanted to get into pottery, I have an information system like meetup.com or there are a bunch of groups on Facebook that help me.
But if you talk to any golgappa or panipuri guy, they typically come from Allahabad because, let’s say, a hundred of them first came and said, “Hey cousin, you can come and you can expand it and it’s becoming big”. And that’s how these centers got formed.
It’s almost a sub-regional supply chain that is invisible to us because we don’t have the optics for it.
We don’t even have the vocabulary to tell what kind of small businesses these people can possibly create.
Information systems that allow them to differentiate between incomes are extremely important.
Talk to any Uber driver and ask him if he has a credit card. These people don’t have credit cards.
We have 850 million debit cards in India, but 30 million credit cards. It’s not just a difference between card holding capacity but also how much credit the formal economy offers to its own citizens.
There is a large gap.
You also ask him if he takes credit and he says, “Yes”. When you ask him, “How much?”, he won’t say a percentage. Instead, he’ll say, “4 rupees”.
4 rupees means 4% monthly! We have 2% on our credit cards and we never use our credit cards at ATMs.
These guys earn 1/10th of us and take credit at 4–6% in urban centers.
In rural centers, this goes up to 15–20% credit. These people never run away with the money cause they are small shops and have nowhere to go and they typically pay back the amount that they are lent but still there is no system to offer them credit.
Credit is extremely CIBIL based — and that’s a European concept that came to India so it only caters to people who are extremely wealthy.
I was doing a startup with a good salary in the 99th-percentile and HDFC refused to give me a credit card. They said, “You’re from a startup that doesn’t have a name brand, so I won’t give you a credit card.”
Nazz: I have a friend who works at a bank and they won’t give him a credit card.
[laughter]
Ujjwal: That is so below the belt!
Kartic: Who are the guys that are taking money from, who are the lenders?
Abhishek: These are the sahukars. They have the money and their business model is, “I know you own this much fee, I’ll give you so much money at exactly at the time of need and make you sign things and over a ten year period I know I’ll end up owning your field.”
This is a big business model.
Nazz: The local subziwala guy who sells subzi (vegetables). They go and take subzi on credit at about 50%. Even at 50%, they will go and sell it off and then pay it all back in the evening.
Abhishek: A friend of mine comes from the grassroots and now he does DevOps for a very fancy firm. But he still has Potato fields in Kannauj, UP. When they pluck fresh potatoes and put them into a sack, the sack carries 60 kg, it gets sold for 160 bucks and gets onto a truck.
Ujjwal: 160 bucks for 60 kgs?!
Abhishek: Yes! Fresh from the soil. When that reaches Azadpur Mandi — one of the second largest mandi’s in Asia, some 600 km from Delhi. This is where all the distribution for NCR happens.
There, my ex was one of these potato distributors —
[laughter]
–well, her father was a potato distributor. I asked her, “how much do you buy it at?”
They buy the same sack for 1,200 bucks! So imagine the loss, because there is a substantial loss in distribution due to multiple players being involved…
Dalan: Another interesting thing that Niti Ayog has done: one of the restrictions on sellers and farmers was that they HAD to sell to a Government-designated intermediary, who would then go on to sell to the urban centers. This was started in Bombay and Nashik where farmers in Nashik have bought their own trucks and are selling their produce in markets in Bombay themselves.
They don’t need to sell it to a government intermediary or any wholesale market. They go on and sell it straight off in the Bombay markets. They manage the whole supply chain and they, of course, reap the whole profit.
Abhishek: The Planning Commission has been renamed “Niti Ayog”.
Nazz: Its just Hindi for the “Planning Commission”.
[laughter]
Ujjwal: No, it was also structurally changed a lot!
I know a person, who volunteers with me at Headstart, working with the Niti Ayog. He gave some insight into that — there is a substantial, overhauling of the entire system.
It was also about keeping the prices in check. Because then if you own it and you don’t have any set thing where you can sell at this scale, people will start hoarding their produce.
Nazz: The government actually has a website (link here) that gives you real-time pricing of every vegetable and farm product.
Ujjwal: That is correct but then the thing that, as you pointed out, now the nexus of all the middlemen has become so strong, and so deep rooted that, that’s what now we have to fight for. A lot of these startups — like Ninjacart, are working towards trying to get all these farm fresh things.
That’s not really targeting that problem but these are the challenges that they are also facing. All these nexuses have become so strong, that if you try to short-circuit them that they will probably…
Nazz: I had a personal experience with this because I did a 15-day research internship in a very internal village of Maharashtra. So at that time I was doing mandates. This organization itself–
Abhishek: What organization?
Nazz: Swayam Shikhan Prayog.
Abhishek : Are you from TISS?
Nazz: No, not TISS. It was a 15-day research internship on farming inputs: the viability of selling farming inputs to farmers.
What I learnt was, for example, there’s this guy who makes a lot of vermicompost. And vermicompost was being sold at Rs. 10 per gunny bag. It’s not even weighed, it’s just one gunny bag.
I come back to Pune and there vermicompost is also being sold for Rs 100 per kg. Now compare that with Rs. 10 per gunny bag, which is probably 10 kg.
Abhishek: It’s a lot like the diamond market, right? You control, you have a monopolistic control over the supply and you choose the rate at which you sell it. That’s the reason when prices fall, right, trucks and trucks of potatoes are just thrown at the streets–
[Everyone nods in agreement] [additional reading]
– because it’s not viable.
Ujjwal: So people actually threw truck loads of onions all across the pathway between — I come from Madhya Pradesh — between Ujjain and Indore.
Otherwise it’s such a peaceful land, right between these two cities and I was like, “what is this smell?!” Then I realized there were onions on either side of the road!
Nazz: Same thing in Jhaharkand. When tomatoes here were 50 paisa per kg [additional reading], tomatoes were being thrown on the road.
Abhishek: So if I bought them for 35 and the selling price there was 40 and transportation cost 7 bucks, it makes no sense for me to carry them.
Nazz: A huge problem is also with the information sharing and how much these guys…
Abhishek: That is in fact THE problem. In fact, Lalitesh says [in this talk] that all forms of poverty, if you trace them, are linked to an information problem.
Nazz: You don’t know. So, that was something very interesting that came out of my research. I did research on different types of farming — there was sugarcane farming, there was onion farming, so I tried to do a comparison between farms which are very similar, growing the same things.
I even found two brothers were doing exactly the same things, maybe just with one small difference. And it’s shocking that with that your profit margins can go between 2% to even 1000%.
Abhishek: This friend of mine, the potato story, right. He said, “If you want enmity with somebody, give them free potatoes. That guy will go bankrupt in 4 years!”
Nazz: Even farming techniques. The reason why the margins were so different was, that farming techniques were completely different. So the guy who was making a 2% margin was an uneducated guy and I asked him, “How do you farm?” And this guy, he just said, “Oh, I use this much of this and this much of that”.
And I said, “Why?”, “Because my father told me so.” And I go to this other guy who was making a lot of money and ask, “Why do you do this?”. “Oh, this is the right way to do it” He is doing drip irrigation! This is the right way to go!
Arvindh: Couple of things on that. There is a startup called Hosachiguru.
Abhishek: Called?
Arvindh: Hosachiguru
Abhishek: Spell.
Arvindh: H-O-S-A-C-H-I , guru
Abhishek: Where is this from?
Arvindh: Bangalore.
Arvindh: So what these guys do is… you can invest and buy land. They buy vehicles of land, right, and you can buy, say, 1 acre. And you lease it to them, and then they do agriculture..
Abhishek: Like cash crops.
Arvindh: Yes, cash crops.
Abhishek: Yea, in fact a bunch of my friends started doing this. Like Tapioca lake root from South Africa, grow it in Sikkim — it sells at 8x. If you build a chips-like product out of it, it sells at 30x. So a lot of these things…
Arvindh: They do a few things here. One is lease it out and take a percent of the profits.
Like you said, they do the best parts of farming. They have a hoard of these smart people who do it.
They take a revenue with everything. They also take the land from farmers, employ them there, grow it, sell it in the market and give them a cut.
Abhishek: By the way, this is not a new model, this is how farming has always been done. Like the land we own, we give it to somebody and there is a 40:60 ratio, depending on how big the land is and if you also give them a tractor and also have a tube well attached. There are nuances but traditionally most farming in India happens like this. The average plot size here is one to two acres. Whereas in the US you have hundreds of acres as the average plot size.
EM3 is an interesting company that is the Uber for agriculture. Farming equipment can be rented out for two weeks, one week and so on. If you want this tractor to sow seeds as it tills, things of that sort.
Nazz: There is another one in Bombay called Krishistar. So what they are doing is, they are going to the farmers, helping start up this food processing plant. So they start with tomatoes and get puree and salsa out of it and sell it to restaurants.
Abhishek : Exactly, right. You just have to move the value here. And the quality suddenly props up, right. And information system can do this at any scale, right. The more the people, the better you can optimize this thing.
(Note: Conversations have been condensed and edited for clarity.)
Follow Crosstalk on Medium (below) for Part 2, where we talk about opportunities in the Indian SMB sector.
