In order to be a power to reckon with in this world, a country needs to be industrially advanced too. Although agriculture has its own importance and provides the basic necessities of life but it is not enough for making a country take the path to progress.
In India, even today agriculture is the mainstay of majority of population. Various factors favourable for industrialisation in India are its rich natural resources such as minerals, forests, and fisheries. Till today, in spite of all the favourable conditions for agricultural and industrial sectors’ development, these sectors are not comparable to those that are in developed countries. The process of economic development of the economy encompasses the simultaneous development of many interrelated variables that interlink both these sectors of the economy. In this context, the process of agro industrialisation with special reference to food processing industry is significant.
Food processing industries have been and are among the most important industries during the early stages of industrialisation of an agricultural economy like India. This industry is termed as ‘agriculture plus industry’ and is a link between ‘farm’ and ‘shelf.’ India is world’s second- largest producer of food next to China and holds the potential to acquire the numero uno status with sustained efforts.
The Indian food processing industry is widely recognised as a ‘sunrise industry’ having huge potential for upliftment of agricultural economy, creation of large-scale processed food manufacturing and food chain facilities and the resultant generation of employment and export earnings. Food processing involves any type of value addition to agricultural & horticultural produce and also includes processes such as grading, sorting and packaging which increase shelf life of food products. This industry provides vital linkages and synergies between industry and agriculture. India’s position in the world in this regard can be seen as Largest producer of milk in the world; Largest livestock population; Second-largest producer of fruits and vegetables; Third- largest producer of food grain; and Third-largest producer of fish.
At the time of India’s independence, the most crucial issue was that of development. The conception of both economists and policy makers regarding the role of agriculture and industry in economic development has undergone an important evolution. Now, both are regarded as active and co-equal partners in the process of economic development. With the passage of time, India’s agriculture has been transformed from subsistence level to commercial level. India’s rich agricultural base has potential to add significant value to the food processing sector. Food processing industries are given high priority in India because of their great linkages in the development of many interrelated variables. The significance of food industries lies in the fact that they create employment opportunities, mobilise investible resources from rural sector, promote agricultural production, make use of local resources, add value to the farm products, improve quality, achieve efficient marketing, combat rural-urban migration and promote industrialisation in an agricultural economy. The availability of raw material, changing lifestyle and relaxation in regulatory policies is fuelling the growth of this sector.
Also in case of India, the agricultural and non-agricultural sectors are closely linked with each other. Hence, the growth in one sector will induce growth in the other and vice-versa. Among many strands of literature, there is a consensus that agriculture has strong linkages and a large growth multiplier with other sectors, especially with food processing sector. Food processing is where business meets agriculture. Agro-processing being a crucial linkage between the large unorganised agriculture, on the one hand, and the formal industrial sector, on the other hand, can be seen as a way to integrate farming with processing to enhance farm incomes.
The liberalisation of Indian economy and increased prosperity has opened up new vistas for growth of this industry. Now this industry ranks fifth in the country, employs 19 per cent of the country’s total labour force and accounts for 5 to 6 per cent of the share in GDP. The industry has started producing new items like ready-to-eat food, beverages, processed and frozen fruit and vegetable products, and marine and meat products. The pivotal segments of this industry are fruits and vegetables processing, meat processing, dairy processing, fisheries sector, grain processing sector and so on. The share of FDI in this industry has increased from 1.86 per cent of the total FDI in India to 16.39 per cent from the year 2000-01 to 2013-14. This surely indicates that the government is trying to develop the country as a food processing hub, which is likely to boost the Indian food processing sector because FDI is the major investment which served as a link between investment and saving and ensure the catalyst for the development of the economy particularly a country like India.
Under the changing FDI policy from time to time, the Government of India allows 100 per cent FDI under automatic route in this industry and food infrastructure including food parks distillation and brewing of alcohol, cold storage chain and warehousing. Automatic approvals are provided for foreign investment and technology transfer in most of the cases. Different types of tax concessions and holidays are also provided. Still the figures from the total exports from food processing sector of the principal commodities such as sugar, groundnuts, coffee, sesame seeds and processed vegetables have shown negative growth trends over the period 2006-07 to 2012-13. The following are the issues concerning this industry in India:
1) Three As (Availability, Affordability and Awareness) are a must to be attached to food processing industry. Working couples, DINK (Double Income No Kids) couples are the main contributors to the increased demand for processed and ready-to-eat food - also with increasing per capita income day by day, particularly in urban areas, the demand for such food is arising. Grains and pulses (35 per cent) have the biggest share followed by beverages and others (30 per cent). Hence the supply should match the increased demand. Processed food is costly i.e. why majority of the people have choice for fresh foods. The mindset of the people is such that fruits, vegetables, meat, dairy are demanded fresh, which constitutes a major part of day to day consumption. Moreover, there is lack of awareness regarding the daily requirement of balanced diet and nutrients. These three As are the pillars supporting improvement in India’s nutritive future.
2) Another aspect relating to food processing is quality and safety of the food. Majority of the processing, say in case of dairy, is done in the unorganised sector. If the co-co-operatives exist they are weak. Quality standards and checks are missing. Majority of the samples in case of dairy, particularly, during summer/lean period fail, having harmful synthetic chemicals present in the milk products. As said earlier, India is the largest producer of milk in the world but the people fail to extract nutrition from milk and milk products. It is here where hygienic collection, grading, packaging and marketing are required.
3) India is also one of the largest producers of fruits, vegetables and food grains. But the post- harvesting losses are highest among the competitor-producer countries. In case of rice and wheat, procurement is done by government agencies. Due to lack of storage and usage, the damaged food grains are distributed to the poor people under PDS (Public Distribution System), which affects their health. The role of food grain processing becomes apparent in this case too.
4) The role of food processing industry as a provider of nutritional food to the people is important. India has the highest number of underweight children in the world i.e. 44 per cent of the children below the age of five years are underweight. The Global Hunger Index 2012 says that India ranks 106th out of 120 countries. During the processing of food, efforts should be made to add the nutritive value as much as it is possible. Otherwise, the processing can add the economic value to the raw product but will have high economic costs in terms of poor unhealthy workforce and hence low productive human capital.
5) Since majority of the food processing is done in unorganised sector, hence only 12 per cent prevails at large scale and 38 per cent at home scale, particularly in case of fruit and vegetable processing. This results in denial of economies of scale to this industry. If the scale of processing is increased with the help of Public-Private Partnership, (in areas of production, extension services, supply chain, high nutrition and quality checks) there is no reason that processed food cannot be affordable.
6) Liberalisation in India has opened up new export avenues, but threats under the WTO (World Trade Organization) regime also kept on prevailing.Under various clauses, large numbers of consignments are rejected. Also taxes on processed food in India are among the highest in the world. In order to compete in the world market, sophisticated technology is required. Hence the government’s responsibility is to give various incentives to this industry through concessions, tax holidays and so on through the budgetary allocation. The great saviour can be the domestic demand which can for more be higher than exports. Since Indian brands are yet to get recognition in the world market, then why this processed food cannot be made affordable in the country.
7) There are number of complex regulations and cumbersome procedures that make investments unviable and affect the entire supply chain which had not allowed this sector to reach its full potential.
So the need of the hour is that concentrated efforts of the government should be towards the development of the food processing industry, as the challenges for the food processing sector are diverse and demanding and need to be addressed on several fronts to derive maximum market benefits. The government must address some significant constraints such as exploration of untapped potential of industry; value-addition in unprocessed categories of food must be raised for the domestic and international demand; investment in supply chain in order to improve costs; tighten-supplies-and-minimise-waste must be adopted; and thus the focus towards food processing industry as a priority sector must ensure policies to support investment in this sector and attract more FDI inflows.
