Tuesday, October 25, 2016

Agro-Based Industries in India - Problems Faced and Development Potential

Agriculture is the dominant employment providing sector in economy and as such, has a huge impact on welfare of people. In recent times agro based industry especially food processing has come under intense focus. This is on account of the huge growth potential as well as the labour intensive nature of it.

The problems faced by agro-based industries in India are:

Small Land holdings – This makes economies of scale difficult to operate and farmers are forced to rely on subsistence farming

Seasonal nature – This means that the farmers have a small window to reap benefits of their hard labour. In recent times, climate change has affected weather patterns which in turn has had an adverse impact on agricultural production

Perishable nature – Products are of perishable nature and thus it requires huge infrastructure in terms of cold storage, good road connectivity etc. India suffers on account of both forward and backward linkages.
Agro-Based Industries in India

Variability - Agro industries have variability in the quantity and quality of raw materials. Quantity is uncertain because of fluctuations in weather, in soil condition etc. Quality varies because of standardization, of raw materials remain elusive even though there have been advancement in animal and plant genetics. These variations exert additional pressure on agro-industrial units in terms
operations related to production, scheduling, and quality control.

Sugarcane industry in India is suffering on account of poor export scenario, large arrears due on sugar manufacturers, over regulation in the sector. Since the advent of globalization of trade, developments in one region has an impact on all other regions. For instance, the sugar prices globally are low which affects the Indian manufacturers.

India is increasingly facing competition from other countries in the region such as Bangladesh, LCMV etc which offer similar advantages as India such as low labour cost, good soil etc

The impact of agro-based industry on regional development is :

1. Well functioning agriculture sector is critical for the overall macroeconomic framework. Inflation in India is largely due to supply side constraints and as such any variability in performance in agricultural sector has a direct impact on the poor.

2. Agriculture is the mainstay of providing employment to vast section of Indian population. Agro based industries are labour intensive and thus the scope they have for generating employment is immense

3. It has a huge potential in terms of contribution to GDP. The food industry, which is currently valued at US$ 39.71 billion!is expected to grow at a Compounded Annual Growth Rate (CAGR) of 11 per cent to US$65.4 billion by 2018. Food and grocery account for around 31 per cent of India’s consumption basket. The benefits thus accrued can help in socio economic welfare of people through
greater social spending

4. Agro based industry provide raw materials for several other industries. Thus other industries are also dependent on this feeder sector.

5. It affects the nutritional security of the country.

Agro based industries are receiving adequate attention from the government through schemes like Make in India (Food Processing), Pradhan Mantri Krishi Vikas Yojana etc. The PM’s dream of doubling farmer income by 2022 is dependent on this sector’s performance.

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