The surprising economy of a small North East Indian state in the Himalayas
I spent some time in Sikkim last winter and something shocked me from day 1.
I stayed in a fairly remote village, population <1000 and the people I met felt like any Tier-1 city in India. Fluent in English, educated, good fashion sense and chatted with me about crypto! I made a bunch of friends, we hiked to 2 monasteries, partied at a local mela and ended the night at a Karaoke bar. Any perception I had of a village was broken. Of course, I did some digging...
Sikkim is a small state in the North East and has a per capita income of ~INR 4.2L, 2nd highest in the country after Goa. Every person is guaranteed a Government job. People are joyful, kind and have little to no stress of survival.
Between 2004 and 2012, high-growth states like Maharashtra & Gujarat grew by 435% & 654% respectively, but Sikkim grew by 1670%! How? Organic farming, branding and playing the long game.
In 2016, Sikkim became the first state in the world to go 100% organic. Typically, when transitioning to organic farming, yields initially drop by 20-50%. But Sikkim convinced its farmers to make the switch.
Turns out that the higher selling price of organic products compensates for the initial drop in yield and higher production costs. Avg organic corn cultivation costs in India are INR 30k/per acre, whereas conventional is INR 21.5k. But revenue from organic corn was INR 41k/per acre, compared to INR 27.5k from conventional corn. So organic farming led to lower yields, but is ~INR 13.5k/acre more profitable.
The Sikkim government went hard on policy. They banned chemical fertilizers and subsidized costs for vermi-composting units. They even took on the cost of organic certification for farmers. Organic farming has a positive feedback loop. No chemicals -> healthier soil and groundwater -> long-term sustainable yields -> farmers happy -> no chemicals
You might be wondering if there’s that big a market in India for organic produce. So did Sikkim, so they went big on exports. They invested in the brand “Sikkim Organic”, organized buyer-seller meetups with importers from around the world and carved out their position in the global market. Super high quality product at premium price but competitive rates given labour arbitrage.
They figured out unit economics, distribution, flywheel and environmental sustainability. Sikkim’s organic revolution has been a win-win. It's beneficial economically, environmentally, and socially, uplifting 66,000 families in the state.
Definitely going back soon.
