(GIST OF KURUKSHETRA) Potential in Food Processing Industry

(GIST OF KURUKSHETRA) Potential in Food Processing Industry



  • On account inclusive rural growth, the potential for the food processing industry to drive growth and employment is immense. At present, the sector constituted as much as 8.98 percent and 11.11 percent of GVA in the manufacturing and agriculture sectors respectively.
  • It employs the largest number of persons, not just in the formal sector, where it constitutes 12.38 percent of registered employees, but also in the informal sector.


  • The importance of the food processing industry cannot be overstated as it is the link industry between agriculture and manufacturing. Building up processing capabilities, especially basic and primary processing at the farm level can enhance incomes. There is a strong argument for increasing inclusivity of economic growth as well. It has been estimated that 70-80 percent of rural women are involved in agriculture, playing roles of cultivators, entrepreneurs, and labourers. 
  • As per the Ministry of Food Processing, women’s share of employment in registered food processing industries stood at 12.6 percent of total employment, whereas the number in the unregistered industries was almost a double and stood at 24.7 percent. The Food Processing sector holds the potential to infact empower women by creating avenues for entrepreneurship and employment. However, within this sector also, differential access of women to resources is something which needs to be addressed.

Recognising the importance of the food-processing industry, several initiatives have been undertaken to boost growth and employment.

  • First, the agriculture reforms announced in 2020 have the potential to unlock bottlenecks in procurement by processors and exporters. Direct selling by farmers and contract farming can help create more backward linkages between the food-processing and exports sector. These steps taken to liberalise agriculture markets must be seen in conjuction with a host of other steps, indicating a holistic approach towards development of the agriculture and food processing sector.
  • Dedicated funds have been launched to develop infrastructure at all levels. The Agriculture Infrastructure Fund (AIF), with a corpus of Rs. 1 lakh crore, aims at developing infrastructure at the farmgate level and aggregation points, boosting pre-processing and primary processing capabilities. In the Budget Speech, the AIF was extended to APMC market yards as well, boosting infrastructure in the mandi system as well. Similarly, a dedicated Animal Husbandry Development Fund and the Pradhan Mantri Matsya Sampada Yojana have been launched as part of the Aatma Nirbhar Bharat Abhiyaan. Another important intervention is the formation of 10,000 Farmer producer organisations (FPOs). 
  • FPOs offer the benefits of aggregating farmers, with a modern corporate structure, allowing the spirit of cooperatives, that drove India’s White Revolution to be maintained with more transparency and accountability.
  • Aggregating farmers in through FPOs enhances their bargaining power, both in terms of purchasing inputs and also selling their produce. Small and marginal farmers, who often lack bargaining power at both the inputs and outputs side, can be empowered through FPOs. It is pertinent to note that 85 percent of India’s farmers are either small or marginal, so the benefits are likely to accrue at the bottom of the pyramid, as intended.

PM- Formalisation of Micro Food Enterprises:

  • In 2020 alone, 46 food processing projects were operationalised. With an outlay of Rs. 10,000 crores, the PM- Formalisation of Micro Food Enterprises (PM-FME) scheme was launched. The One District One Product (ODOP) is being effectively leveraged as well. The Operation Green was extended from tomatoes, onions, and potatoes to 22 perishable commodities. In terms of foreign investment, 100 percent FDI is allowed under automatic route in food processing industries, 100 percent FDI in manufacture of food products and for trading (including e-commerce).
  • Cumulatively S10 Bn worth of FDI equity inflows have come to the food processing industry between April 2000 and December 2020. FDI scan bring in the much-required tech infusion across the value chain which can help reduce wastage, maintain quality, and enhance shelf life of food products. Fiscal incentives to domestic industry include income tax exemptions and capital investment support.

Uses of technology:

  • Tech based innovative solutions go a long way in ensuring the progress of any sector. It is a well-known fact that the agriculture and food sector is facing multiple challenges, digitisation might as well be a part of the solution. In India, there exists a vibrant Agri-Tech ecosystem. 
  • There are start-ups providing solutions across the entire value chain - from Crop Advisory to Farming as a Service (FaaS) and from Agri-logistics to Financial services. The sector can experience tremendous growth in the coming few years if tech driven solutions are embraced as they highly optimise and individualise the management of resources. In scaling these solutions, partnerships with corporate and the government will play an extremely critical role.

Increasing awareness:

  • Lack of consumer awareness is one of the major bottlenecks faced by the industry. While some of the food items like Kale, Oats etc. are widely regarded as nutrient dense foods, their alternatives are known only by a few. In this regard, Indian ‘Super Foods’ can be promoted as alternatives to the prominent healthy food products.

Way forward:

  • The impact of the food processing sector on the economy is wide ranging. The sector can contribute immensely to the empowerment of farmers, especially females, by providing improved bargaining power to them, leading to reduction in distress sales and ensuring steady supply to the processors. It provides farmers the access to formal lending, apart from support from various government schemes. It also enables them to capture value through on-farm pre-processing and processing activities, resulting in reduced wastage. With the growth of the sector, off-farm employment will be generated right across the value chain, providing a lucrative avenue for employment generation in the country. 
  • As high export potential will be tapped, the domestic industry will also see
  • growth, leading to an overall economic growth. yet, at the same time in pursuit of increased production and productivity, sustainability will have to play an equally important role to ensure our food and nutritional security going ahead.



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Courtesy: Kurukshetra