Food Processing – A Game Changer for Indian Economy?

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TOPIC: General Studies 3

• Food processing and related industries in India- scope and significance, location, upstream and downstream requirements, supply chain management.

India is one of the fastest growing economies in the world and Food Processing Sector has emerged as an important segment of the Indian economy in terms of its contribution to GDP, employment and investment. During 2015-16, the sector constituted as much as 9.1 and 8.6 per cent of GVA in Manufacturing and Agriculture sector respectively.

Thus it is now needed that food processing services and industry be incentivised for farmers to get better income and creating jobs.

For this, there has been launch of a central sector scheme- SAMPADA (Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters) as “Pradhan Mantri Kisan Sampada Yojana (PMKSY) to create world class food processing infrastructure. This will leverage investment of 5 billion dollar investment, benefit 2 million farmers and create more than half a million jobs. It incorporates ongoing schemes such as Mega Food Parks, Integrated Cold Chain and Value Addition Infrastructure, etc. and also new schemes like Infrastructure for Agro-processing Clusters, Creation of Backward and Forward Linkages, Creation / Expansion of Food Processing & Preservation Capacities.

Scope of food processing in India

India as one of the biggest food producers of the world is in an advantageous position to become the hub for food processing industry. In any agricultural commodity, India is in 1,2or 3 position. However, this industry in India has not been able to take off as yet. Till now, even small time snacks such as chips, biscuits were imported.

Now the Indian agriculture is being modernised and it has to be ensured that the farmers’ produce gets a good market at fair price to keep up the agriculture productivity. It means not only consumption of main cereals but also that the surplus food output has to be converted into food processing snacks for domestic consumption as well as exports.

Food processing creates jobs, helps farmers double farmers’ income through good output, livestock and food processing facilities. This creates much bigger market for farm produce.

India has to fit into the global supply chain and system of food processing. For this, the good domestic market helps because people don’t like to do investment to export completely. It’s a combination of good domestic market and India’s own strength in food sector.

Food processing is one of the most important part of manufacturing process as it is also a significant part of make in India programme.

Challenges

• The exports are only 2.2% of the global food processing exports. This is because of problems created by US and EU in terms of TBT (Technical Barriers to Trade) and SPS (Sanitary/Phyto-Sanitary) measures. This impacts the export scenario significantly.
• There is poor warehousing and storage capacity. It is needed to upgrade the agri-infrastructure to become the food processing hub.
• Lesser facilitation by a dedicated agency to the farmer. Though there is FSSAI, but it is for post-production facilities. So there is need for dedicated approach for pre-harvest procedures.
• Lot of inorganic chemicals are used in agricultural production. This needs to be shifted to organic chemicals because the advanced economics are identifying the pesticides in the products.
• In dairy sector, the canned meat industry is being hit because of few stray remarks. The unproductive cattle is not being able to reach the cattle mandis which is hampering the entire value chain. Political and administrative focus should be given to this area as there is lot of scope for meat exports within the laws.

Potential

• Developing the agri-infrastructure.
• Increasing gross capital in agri-infrastructure along with public investments.
• Connect the farm to the mandis so the facilitation with start with them. Linking them with good warehouses and increasing the storage capacities, then increasing the productivity of the farm sector and thus increasing the part in global food market.
• Food parks model can be replicated across the country. The food parks offer an alternative to farmers. There are different crops grown which also replenishes the soil nutrients, leads to better water management.

Some steps by government to encourage food processing

• 100% FDI in trading including through e-commerce, in respect of food products manufactured and / or produced in India.
• Special Fund of Rs. 2000 crore in NABARD to make available affordable credit at concessional rate of interest to designated food parks and agro processing units.
• Food and agro-based processing units and cold chain infrastructure have been brought under the ambit of Priority Sector Lending (PSL) to provide additional credit for food processing activities and infrastructure.

Conclusion

India has about 40 billion worth food processing market. There is a need for diversification of crop pattern because most of farmers are concentrating on few farm products like rice and wheat only. India is importing about 22 billion dollar food processing products. So if there is diversification and substituting the imports, there is huge scope for second green revolution.

There is lot of diversity in the productivity levels of all the states which needs to be minimised.  There is a need to adopt the good agricultural practices of the states like Punjab and Haryana.

More food processing training institutes should be opened up in different parts like UP, MP and not only in coastal areas. It is critical for Skill sets to be improved in food processing sector.

India has its own brands like Amul, haldiram, bikarnewala which are good companies that can diverse in the food processing markets. They aree trusted by consumers as they give quality products. Hence, strict enforcement of quality and hygiene is must.

There is need to strengthen the university industry linkages to create centre for excellence for food processing sector. With these, it will give push to food processing sector as it will give awareness to the farmers and to food processing units for the international practices to generate good productivity and to generate good production in export markets.

Connecting the dots:

• Food processing like tourism is a critical sector for development of Indian economy. Analyse.