Essay on Food Processing Sector of India

What are the challenges in development of India’s Food processing sector? what steps should be taken up in order to Strengthen the food processing sector in India?

The food processing sector is of enormous significance as it provides vital linkages and synergies among all the sectors of the economy i.e. Primary (agriculture), Secondary (industry) and Tertiary (services). Food processing provides an opportunity to utilise excess production efficiently. It is also important for reducing food wastage as it increases shelf life and enhances quality. Despite its immense importance, food processing has been ignored for a long time in India. We can increase productivity in agriculture sector by connecting it with manufacturing and services through food processing by overcoming the following challenges and taking these steps.

Supply and demand side bottlenecks- Due to disconnection among small and marginal farmers, food processing units find it challenging to arrange regular supply of raw material. The demand of processed food is still in its primitive stages in urban areas so food processing units have to rely on exports for their growth.

Infrastructure bottlenecks- Lack of cold chain infrastructure is responsible for loss of 30% of the produce. A healthy food processing sector requires investment in cold supply chain, roads and rails so that there is minimal post-harvest loss.

Bad regulatory environment- numerous laws, multiple administrative bodies, red-tapism and involvement of multiple departments has directly affected efficiency of food processing companies. They are unable to perform in an easy business environment due to multiple legal and bureaucratic hurdles. 

Low secondary processing- Food processing in India is mostly performed as primary processing, which has lower value addition compared with secondary processing. As a result, value of agriculture exports from India is a mere 2% of GDP.

Various steps can be taken to overcome the above challenges. Some of them are-

Food processing can be promoted immensely by creating forward and backward linkages. Backward linkages are directed towards connectivity with suppliers i.e. farmers in this case. Forward linkages are directed towards connectivity with consumers i.e. vegetable markets.

There are no organized and recognized courses in the field of food processing. New entrepreneurs can enter the market only if there is a pool of human resource available to work for these entrepreneurs. The government can take active steps to encourage food processing as a profession so that quality employment can be created in this emerging sector.

Technology is the backbone of food processing. There is no specific program or mission to develop latest technology in food processing through state of the art R&D. The government needs to take first steps in creating a strong technological backbone so that a capital industry can be created in this specific area.

Food processing is not a luxury anymore. It has become a necessity for Indian agriculture. The persistent problems of low productivity, high wastage, high variation in production & sales of agri output and unavailability of the right price for farmers can be overcome by connecting agri with global and local organized market through food processing.

With the right focus and approach, India can become a future global leader in processed food products.

Advantages and Limitations of Minimum support price

MSP was introduced in mid 1960s to solve 3 major problems hurting Indian economy- firstly, it aimed to reduce food scarcity in the country by encouraging farmers to produce more through higher guaranteed prices under MSP; secondly, it aimed to reduce price fluctuations caused by droughts, floods, famine and international prices of exports & imports by providing guaranteed prices domestically; Thirdly, it aimed to maintain reasonable food prices for consumers by providing food grains through PDS, which are purchased by the government using MSP. While MSP has been very useful in making Indian agriculture stable and sustainable, it is not devoid of limitations. 95.7% of farming community in India is still unorganized in nature. These small and marginal farmers have limited bargaining power with powerful middlemen in mandis. They end up being exploited by the middlemen who buy cheap and sell at high prices. MSP provides price support to the farmers through which they can sustain their livelihood and sell their produce at attractive prices.

From being a food scarce country in 1960s, India emerged as a food surplus nation by 1990s. MSP has had a big role to play in the transformation. It encouraged farmers to improve their yield because they started getting attractive prices for their produce. It also increased availability and demand of food grains in the market by distributing it at cheap rates through PDS. Presently, India is one of the largest producers of food-grains in the world due to agriculture revolution which started in 1960s.

MSP has helped in containing price rise to a large extent by bridging the gap between supply and demand of food grains in the economy. Without MSP, India might have experienced deadly Inflation during the emergency of 1970s or the financial crisis of 1990s.

Despite all the advantages, MSP has also affected the Indian economy negatively in certain ways.

MSP results in distortion of market price since it is often higher than the market determined prices. A higher MSP pushes up the market price even further.

MSP is considered less efficient than other direct support transfers since it includes huge inventory costs for the government, big logistic support and the advantages of MSP are often taken by big & rich farmers rather than small & marginal farmers.

Traditionally, MSP was provided in only a limited set of crops. MSP in wheat and rice has resulted in monoculture in India. It is not only harmful for the environment but also harmful for the future of agriculture in India.

MSP has resulted in wastage of public money due to its inefficiencies. The same subsidy could be utilized better through other means like PMKISAN.

Although MSP has had its own strengths and weaknesses, it was introduced at a time when Indian agriculture was in shambles and the government was desperate for food security. It has provided the much needed support to the farmers and poor people. It also forced the government to lay focus on logistical support because without an efficient logistics system, MSP could not have work.

Importance of technology in Agriculture

Agriculture is assumed to be obsolete and labor oriented by its very nature, making it not so relevant for economic growth of a country. The truth is that adoption of technology in agriculture has been very slow in some economies, making it obsolete and reducing its contribution in Economic growth. Wise use of sophisticated technology can make agriculture one of the most important pillars in development.

Higher Productivity- Farmers can Monitor and control crop irrigation systems via smartphone. Moisture sensors in the ground are able to communicate information about the level of moisture present at certain depths in the soil. These technological inputs have a direct positive impact on productivity of grains.

Soil health and cost saving for farmers- Crop sensors help apply fertilisers in a very effective manner, maximising uptake. They sense how your crop is feeling and reduce the potential leaching and runoff into ground water. It saves the crop, soil and also reduces cost of fertilizers for farmers.

Better Forecasting- Agriculture is not considered an attractive profession due to its dependency over external factors like Climate & Monsoons. Satellite feeds and other technological advancements, if used wisely, can help farmers by providing accurate forecasts so that proactive steps can be taken to increase certainty in agriculture output.

Food processing, multiple cropping, mixed farming- Technology can help provide forward and backward linkages to agriculture with Industry and consumers. This can help increase contribution of agriculture in GDP. Many countries like New Zealand, Israel and Australia have effectively used technology to create organic models of multiple cropping and mixed farming. This is beneficial for farmers, consumers as well as GDP of a country.

Safer foods- Technology is a double-edged sword. On one hand, overuse of fertilizers has increased their proportion to alarming levels, which has a direct impact on human health. On the other hand, technology itself can make sure that crops are free from diseases and chemicals.

Indoor farming- Technology is taking farming to the next level. Indoor farming in the form of hydroponics has already become a reality in Israel. The new technology takes away all kinds of uncertainties from agriculture (failed monsoons, climate change etc). It also employs advanced and safer methods of growing and distributing food to the final consumer.

Technology is changing the way farmers work. After covid-19 pandemic, countries have realized the importance of a healthy agriculture system in sustainable development of the nation. India needs to make sure that it is able to realize the objective of doubling farmer’s income by 2022 because high growth in agriculture can take us out of the ongoing recession, into becoming a global leader

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