GS3 PYQ (Mains Answer Writing): Food Processing Sector | Indian Economy for UPSC CSE PDF Download

What are the challenges and opportunities of the food processing sector in the country? How can the income of the farmers be substantially increased by encouraging food processing? (UPSC Mains GS3 )

The food processing sector is one of the largest industries in India and is ranked 5th in terms of production, consumption, and export. It covers a range of products from sectors comprising agriculture, horticulture, plantation, animal husbandry, and fisheries.
However, over the years, with emerging of new markets and technologies, the sector has broadened its scope. It has started producing many new items like ready-to-eat food, beverages, processed and frozen fruits and vegetables, marine and meat products, etc. Food processing is one of the largest industries in the world from the viewpoint of the number of companies involved in the sector, as well as in terms of its total economic value.

Challenges related to the Food processing sector

• Small size companies: Indian food processing companies are small and can’t compete with global giants that invest heavily in R & D. 
• Lack of good laboratories in India: Food export to the US and EU demands high-quality standards. India lacks good laboratories to check heavy metal and other toxic contamination in food. 
• Lack of skilled workforce. We have only a few graduates in Food Technology. 
• Lack of the right vision and support from the government at the right time. 
• Lack of good transportation facilities. Roads are overburdened. 
• Lack of storage facilities and good production techniques. 
• Absence of Comprehensive national-level policy on the food processing sector: The food processing sector is governed by statutes rather than a single comprehensive policy on food processing. 
• Food Safety Laws & Inconsistency in State and Central policies: Though historically various laws were introduced to complement and supplement each other in achieving total food sufficiency, safety, and quality the result is that the food sector in India is governed by several different statutes rather than a single comprehensive enactment. 
• Lack of adequate trained manpower: Many positive developments in the food processing sector have also resulted in the apprehension about the emerging skill shortages due to a mismatch between the demand for specific skills and available supply. 
• Opportunities related to the food processing industry: This industry has very high employment intensity and hence it can play a role in employment generation as well. 
• In 2016, the Food Processing industry constituted more than 8% of India’s GDP through manufacturing. 
• The food-processing sector will address several concerns such as disguised unemployment in agriculture, rural poverty, food security, food inflation, improved nutrition, and prevention of wastage of food. 
• The cost of skilled manpower is relatively low as compared to other countries. 
• The Food Processing Industry is one of the major employment intensive segments contributing 13.04% of employment generated in all Registered Factory sector in 2012-13. 
• Food is the biggest expense for an urban and rural Indian household constituting a share of 38.5% and 48.6% of the total consumption expenditure of households in 2011-12 respectively. 
• With favorable economic & cultural transformation, a shift in attitudes & lifestyles, consumers are experimenting with different cuisines, tastes, and new brands. 
• The food processing sector in India ranks 1st in terms of employment& number of factories in operation and 3rd in terms of output.
• Curbing Migration: Employs in rural areas hence reduces migration from rural to urban. Resolves issues of urbanization. 
• 100% FDI is allowed in the sector. The Confederation of Indian Industry (CII) estimates that this sector has the potential to attract as much as the US $33 billion of investment over the next 10 years and also to generate employment of nine million person-days. 
• India’s share in global processed food items is very poor. It can help in offsetting the increasing trade deficit.

Potential of Food Processing Sector for substantially increasing farmer’s income

• India’s food processing sector is one of the largest in the world and its output is expected to reach $ 535 Billion by 2025-26. 
• It will help in increasing investment in Indian agriculture, bring new technological inputs, and will raise farmers’ incomes. It will also promote the diversification of Indian agriculture. 
• This sector also involves 16% of all the workforce in the organized sector and employs close to 5 crore people directly or indirectly. 
• Development of backward linkages by evolving conducive regulatory framework for contract and corporate farming and encouraging commodity clusters and intensive livestock rearing to source appropriate quality, quantities, and varieties of input by appropriate modifications to the APMC acts. 
• Develop dedicated freight corridors in rail, supplemented by concretized dual carriageways for the states and national highways, which will directly reduce the cost of goods supplied. 
• The Indian Council for Fertilizer and Nutrient Research (ICFNR) will adopt international best practices for research in the fertilizer sector, which will enable farmers to get good quality fertilizers at affordable rates and thereby achieve food security for the common man. 
• Several Fiscal Incentives to FPS including 100% income tax exemption to food processing units on profits for the first five years of operation and 25% thereafter for the next five years etc. provided by the government need to be continued 
• Reduction of Excise duty, customs duty exemption from service tax on pre-conditioning precooling, ripening waxing and retail packing, labeling of fruits and vegetables, and transportation of food grains are some other incentives available to the FPI sector 
• A special fund in NABARD worth INR 2,000 crore, designated as Food Processing Fund for proving affordable credit to food processing units in Mega & Designated Food Parks has been setup. This fund is used for providing loans at a concessional rate of 8-9% for 7 years period. 
• 42 mega food parks being set up with an allocated investment of INR 98 Billion which provides opportunities to increase farmer’s income. 
• Food processing industries make value addition to the raw food materials and hence make food items competitive in markets, easy to export, and easy to preserve.

Conclusion 
By serving as a link between the agriculture and manufacturing sectors and by fulfilling a basic need of Indian citizens – an assured supply of affordable and quality food at all locations, this sector has the potential to be a major driver in India’s growth. In India, the optimum development of the food processing industry will contribute significantly in tackling several developmental concerns such as unemployment, rural poverty, food security, food inflation, malnutrition, massive food wastage, etc.

Topics Covered - Food Processing