Does the participation in modern marketing channels for dry chillies affect economic welfare? Evidence from India

Abstract

The choice of marketing channels holds significant implications for the economic welfare and stability of smallholder dry chilli farmers in India. This study aims to investigate the impact of participating in modern marketing channels on the economic welfare of smallholder dry chilli farmers. Dry chilli marketing in Andhra Pradesh encompasses both traditional and modern channels. Traditional avenues include Agricultural Produce Market Committees, while modern options involve linking with retail malls and utilizing the Kalgudi e-market online platform. The first stage of multivariate endogenous switching regression model (MESRM) reveals significant determinants influencing farmers’ participation in modern channels. Factors like access to extension services, education, technical support from ANGRAU and the Department of Agriculture, engagement with retail malls and e-markets, access to market information, and membership in Farmers’ Producer Organizations encourage farmers to adopt modern channels. The subsequent MESRM stage reaffirms these factors’ positive impact on household welfare across various marketing channels. The study’s focal point, Average Treatment Effects, highlights substantial income improvements for participants in modern marketing channels. The counterfactual analysis reveals that smallholder farmers engaging in modern marketing channels would have experienced lower gross economic welfare if they had not participated. These findings underscore modern channels’ vital role in enhancing smallholder farmers’ economic well-being. So, Government entities and agricultural institutions should prioritize developing linkages between farmers and retail malls. Ensuring robust digital infrastructure, including reliable internet connectivity and user-friendly online platforms, is essential to empower farmers in navigating modern channels effectively. Furthermore, policymakers should consider hybrid marketing strategies that seamlessly blend traditional and modern channels to cater to the diverse preferences of consumers. By acknowledging these findings and implementing corresponding policies, stakeholders can contribute to the growth and prosperity of smallholder dry chilli farmers, fostering sustainable development in the agricultural sector.

Keywords

• Modern marketing channels
• smallholder farmers
• economic welfare
• multinomial
• endogenous switching regression, average treatment effect on treated
• Q16