Processing marketable raw materials operations and to add usable are value applied products in order on agricultural to that produce bring forth profits and additional income to the producer.

Factors enhances the importance of agro based industries:

The following factors enhanced the importance of agro based industries in Indian context, viz.,

  • They are comparatively easy to establish and provide income in the rural areas with less investment;
  • They facilitate an effective and efficient utilization of raw materials;
  • They help in the transmission of industrial culture in rural areas bringing outlook change of farmers;
  • The food processing and food preparation industry have tremendous export potential, and they set up on cooperative basis ensuring participation of the people in the development process.

Linkages between Agriculture and Agro Based Industries:

  • Around two-thirds of the population depends on agriculture and agro-based industries. The story of Indian agriculture is mixed in ‘green reaction (characterized by mediocre growth, the stagnation of yields and persistent instability of output) whereas agro-based industries can be looked upon to provide a mass of livelihoods.
  • Agro-forestry in Indian farming system is practiced as complementary and supplementary enterprise to enhance the well being of farmers. Since it causes diversification and commercialization of agriculture, it not only enhances the incomes of farmers but also creates food surplus.
  • It is a well recognized fact across the world, particularly in the context of industrial development that the importance of agro industries is relative to agriculture increases as the economy develops. It should be emphasized that food is not just produce but also encompasses a wide variety of processed products. It is in this sense that the agro-industry is an important and vital part of the manufacturing sector in developing countries and the means for building industrial capacities.

Potential of Agro Based Industries in India:

  • The fluctuating and decelerating agricultural growth, if not arrested, will have serious consequences for the livelihoods of the population that depends on agriculture, particularly manufacturing sector that has strong backward and forward linkages with agriculture.
  • The liberalized food manufacturing sectors, as well as other forms of agribusinesses, could play an important role in stimulating agricultural growth.
  • Amongst various agro-industries, food manufacturing is more material-intensive, and thus possesses a greater potential to revitalize agricultural growth by strengthening forward and backward linkages with farmers, and speed up the process of commercialization and diversification of agricultural production.
  • Further, food processing industries, to reduce their own transaction costs, often tend to be located nearer to the source of raw material, and thus can create income opportunities for the rural people. Hence, accelerating agricultural growth through diversification and development of agro-processing is a major policy challenge.

Agribusiness in Agro-Based Industries:

  • Agribusiness denotes the collective business activities that are performed from field to plate.
  • Agribusiness is one of the main generators of employment and income worldwide. Agribusiness is characterized by raw materials that are mostly perishable, variable in quality and not regularly available. The sector is subject to stringent regulatory controls on consumer safety, product quality and environmental protection. Traditional production and distribution methods are being replaced by more closely coordinated and better planned linkages between agribusiness firms, farmers, retailers and others in the supply chains.

Farmer Producer Organization:

  • To overcome the problems of unorganized small farmers who lack access to resources and services, a group action of farmers was needed. This came in the form of innovative institutions viz. contract farming, Farmer Producer Organizations (FPOs), Joint Liability Group, etc.
  • The FPOs have emerged as an interface between small farmers and the external world by providing forward and backward linkages, giving them required voice, market access, bargaining power, economy of (42) scale and better prices. Structure and organization of
  • FPOs vary from country to country depending upon the legal and policy framework of the country.

Way forward:

  • There is a need to have a well-planned strategy for an agro-business idea based manufacturing operation. There is huge scope to set up a profitable venture for which there is a comparatively small startup capital to set up such businesses.

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Courtesy: Kurukshetra