Unlock India’s food processing potential

GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Context: The challenge to feed the 10 billion population by mid-century is being deliberated on several fronts.

It demands efficient ways of production that are both economically viable and ecologically sustainable.
Fortunately, technologies are emerging that revamp the traditional approach of agriculture with a lower environmental footprint.

India and Processed Food Industry

Being one of the largest producers of fruits and vegetables in the world, India has formulated a unique Production-Linked Incentive Scheme (PLIS) to boost processed food in large quantities.
The scheme incentivises firms for incremental sales and branding/marketing initiatives taken abroad.
- In export market, sales promotion is positively related to increased sales volume but inversely related to profitability. To bridge this gap government provides support for branding and marketing activities in foreign markets.
A sum of ₹10,900 crores has been earmarked for the scheme.
Beneficiaries have been obliged to commit a minimum investment while applying for the scheme. The sector is likely to witness at least ₹6,500 crore worth of investment by 2024.
Higher investment is being concentrated in States such as AP, Gujarat, Maharashtra, Tamil Nadu and UP, as these states have better public infrastructure.
- A study in the US concluded that a 1% increase in public infrastructure increased the food manufacturing output by 0.06% in the longer run

Pandemic & impact on Food Processing sector

As a result of pandemic, significant number of people are now working from home which has accelerated the demand for ready-to-eat products (saw 170% increase in sales volume between March-June 2020)
The pandemic has bolstered consumer awareness of functional foods, which is expected to provide a boost for health-orientated start-ups and micro-food processing units.

What should be the way forward?

Address access to capital: The access of MSMEs to finance is a perennial problem in the country due to a lack of proper credit history mechanism for MSMEs. Smart financing alternatives such as peer-to-peer (P2P) lending hold potential for micro-food processors
Reform TReDS platform: Access to working capital has in theory been addressed by the Trade Receivables Discounting System (TReDS). However, the platform requires considerable scaling-up and simultaneous enforcement of stringent measures for corporates to comply with.
- Integrating the TReDS platform with the Goods and Service Tax Network’s e-invoicing portal will make TReDS more attractive and give relief to financiers.
International Collaboration: With growing populations, changing food habits and unrestricted use of natural resources, nations must come together and lay out a road map for a common efficient food value chain.
Promote innovation in both food products and processes: There is a need to replace the staples of rice and wheat in the form of Nutri-cereals, plant-based proteins, fermented foods & health bars.

Conclusion

50 years hence, the progress of nations will be benchmarked to their ability to sustainably feed their populations.

Connecting the dots:

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