Why Economists are goofing up on Food Production and Supply Chains?


Why the Economists from the developed markets always goof up when it comes to global projections.

Now it is the turn of the Food Production and supply chains.

The whole system of production and of supply of food has always been on a cliff edge right from the beginning when large scales were thought of in the developed countries. They have always teetered on the edge and they have to keep in business not by establishing a segment but on constant expansion where the negatives from the previous fiscal would be compensated by more volumes and inflationary trends. This model of business is very much dependent on perceived and projected margins from a non-dependable future. This is what exactly happened in the real estate sector in the US which in turn devastated the banks which in turn brought down the viability of more modest economies of Europe for debts were called in and the downward spiral could not be absorbed without buffers. Until the government came to the rescue by infusing funds there was a threat of the whole economy of the developed country markets collapsing totally. The opening up of some third world country markets absorbed some of the shock, but there was an irrational projection for that too as these markets are little understood by western economists.

It was first done in the Automobile sector and because there was no buffer from the third world markets Detroit was totally destroyed. Then it was the real estate’s turn, nearly destroyed the whole of the western economy.

And now the same kind of methodology is now being tried in the Agricultural and Food distribution sector. China has seen a rapid expansion but India would not; due to political and conservative resistance. Right now the promise of the opening up of the Markets to this sector due to the promises of the new government in India has sent all the wheeler dealers back to the drawing board with great expansion plans and the same kind of ill placed optimism. This is going to be the final nail if it fails, and it is bound to fail due to its unsustainable and overoptimistic fundamentals. In the beginning there will be an illusion of “business as usual” for that is exactly what the new Government is hoping to project to the world business community and a seemingly fast and progressive change to “good times” for the Indian populace. But the “benefits” of this exercise; when it remains with the elite few; and hardly any trickle-down effect; is seen by the vast middle class, the main target of all markets; then there is going to be a hiccup, and subsequently breath arrest. That is the most probable scenario when you throw in the resistance to industrialized agriculture and the deteriorating quality food nutrition in supermarket chains. Add to that; the following; Indian population does, of western trends, and a penchant for the educated middle class to follow popular movements happening in the west. When the clamor for non-GMO and chemical free food and a return to organic and nutritious food gets loud enough then the Indian buyer is going to follow suit. That will be the final nail, because all the business models are being built on the perceived notion that there is huge market waiting to be tapped. As it has been pointed out recently of the Giant Chain Tesco Express in UK the sales have dipped and they are closing down more than 43 stores which are in the red and overall the sales in the top 4 chains have dipped by 5% according to Nielsen; the honeymoon with supermarkets and large supply chains is over. They will get an initial boost for surviving a few more years from the third world markets but it will just be a postponement of the inevitable.

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