Higher scale will have multiple benefits
The food processing industry, even though in its infancy, has emerged as the biggest employer of labour in the manufacturing sector. The numbers presented by the government, in reply to a question in Parliament last week, showed that over 2 million people were engaged in the food processing units in 2018-19 (Annual Survey of Industries data). This relegates the textiles sector, employing about 1.6 million people, to the second position. These figures, notably, pertain only to employment in the organised sector’s food processing plants. The employment in unorganised or informal agro-processing and preservation activities is in addition to that.
An earlier National Sample Survey report (2015-16) had estimated that number at around 5.1 million. These figures are bound to have surged by now as this sector has continued to grow at a fast pace in recent years, including the pandemic period, driven largely by the spurt in demand for ready-to-consume and home-deliverable foods. Liberal financial assistance, as also other kinds of hand-holding by the government, has helped this industry to outpace other labour-intensive sectors in terms of growth. Besides, this sector has attracted nearly $5.51 billion foreign direct investment between 2014 and 2021. Unsurprisingly, therefore, the gross value added in this sector has risen from Rs 1.34 trillion in 2014-15 to Rs 2.24 trillion in 2019-20, translating into a compound annual growth of 10.8 per cent.
However, despite this impressive performance, the food processing sector still has a huge untapped potential. India is the world’s second largest producer of fruits and vegetables, a sizeable part of which goes waste for want of processing facilities. Currently, hardly 10 per cent of the produce is processed into value-added and shelf life-enhanced products. This compares poorly with the developed countries, where over 80 per cent of the harvest is processed into value-upgraded products. Even in several emerging economies, more than a third of the farm produce is processed to prolong its shelf life. Though India has also set a goal to raise the processing level to 25 per cent by 2025, it would still be under par. The country can achieve a far more ambitious target if some of the major constraints besetting this sector could be suitably addressed.
One of the most formidable handicaps is the paucity of supply chain infrastructure, including storage and transportation facilities. The much-needed preliminary post-harvest treatment of the produce, in terms of cleaning, grading and safe handling, is generally missing. This is vital given that the quality of agricultural produce begins deteriorating immediately after harvest. Besides, most of the crop varieties planted by the farmers are meant for fresh consumption rather than processing. It is only recently that the plant breeders have begun to churn out crop varieties suited specifically for industrial processing. The research and development facilities for evolving innovative processed products and convenience foods are also underdeveloped as yet. On top of that, the food processors have to procure their supplies through the regular marketing channels (read regulated mandis) in most states, which add to the costs besides creating several other problems. If these issues can be suitably addressed, this sector can scale new highs to supply good quality, nutritious, hygienically-produced and packed food products to the consumer and ensure better income for the growers.