Mains Practice Questions

Introduction:

Agriculture employs nearly 45% of India’s workforce but contributes only about 18% to GDP, reflecting low productivity and disguised unemployment. In contrast, manufacturing, particularly food processing and agro-based industries, offers a critical pathway to absorb surplus labour, enhance value addition, and accelerate structural transformation.

• Strengthening this sector can bridge the gap between farm and factory, enabling India’s transition to a manufacturing-led economy.

Body:

Role of Food Processing and Agro-Based Industries in Driving Structural Economic Transformation

• Value Addition And Income Enhancement For Farmers: Food processing reduces post-harvest losses (estimated at ₹92,000 crore annually as per ICAR) by converting perishable produce into higher-value products.
  • Example: Tomato processing units in Andhra Pradesh and Maharashtra have stabilised farmer incomes through contract farming and assured procurement.
• Employment Generation Beyond Agriculture: Agro-processing is labour-intensive and can absorb surplus rural labour across storage, packaging, logistics, and marketing.
  • The food processing sector contributes 12.41% of employment in the organized manufacturing sector, with strong potential for women and youth employment in rural areas.
• Boost To Manufacturing Output And Exports: Processed food exports (ready-to-eat, marine products, dairy) are growing faster than raw agricultural exports.
  • Schemes like PLI for Food Processing Industries and PM-FME are encouraging MSMEs to scale up value-added production.
• Strengthening Rural Industrialisation And Supply Chains: Development of food parks, cold chains, and agro-logistics integrates farmers with markets and reduces intermediation.
  • Mega Food Parks create cluster-based agro-industrial ecosystems, linking farm gates to global markets.
• Catalyst For Allied Sectors And Innovation:Growth of food processing stimulates demand for packaging, cold storage, transport, and agri-tech solutions.
  • Start-ups in food processing, traceability, and farm mechanisation support technological upgrading of agriculture.

Persisting Challenges Limiting the Transformative Potential

• Inadequate infrastructure and cold-chain gaps: Insufficient storage, logistics, and transport facilities continue to cause high post-harvest losses and limit scale efficiency.
  • For example , only 10% of perishables are stored in cold chains in India.
• Fragmented supply chains and small farm sizes: Small landholdings and weak farmer–industry linkages hinder consistent quality and large-scale processing.
  • Over 86% of the farmers are small and marginal, unable to scale on their own.
• Limited access to finance and technology: MSMEs face credit constraints, outdated machinery, and low adoption of modern processing technologies.
  • Farm mechanisations remain around 40-45% below compared to China and Brazil.
• Regulatory and policy bottlenecks: Complex regulations, varying state policies, and compliance burdens discourage private investment.
• Skill and capacity constraints: Shortage of skilled manpower in food processing, quality control, and packaging reduces productivity and competitiveness.

Measures to Unlock the Full Potential of Food Processing and Agro-Based Industries

• Strengthening Physical Infrastructure and Cold Chains: Expand integrated cold-chain networks, warehouses, and logistics parks to reduce post-harvest losses and ensure seamless farm-to-market connectivity, especially in perishables.
• Enhancing Access to Credit and Financial Support: Improve access to affordable credit for MSMEs and Farmer Producer Organisations (FPOs) through targeted schemes, credit guarantees, and interest subvention to encourage investment in processing units.
• Promoting Technology Adoption and Innovation: Encourage use of modern processing technologies, automation, and food-grade packaging through subsidies, technology transfer, and public–private partnerships to improve efficiency and quality standards.
• Strengthening Farm–Industry Linkages: Promote contract farming, cluster-based food parks, and aggregation models to integrate farmers directly with processors and reduce supply chain fragmentation.
• Simplifying Regulatory Frameworks and Ensuring Policy Stability: Rationalise licensing requirements, harmonise food safety standards, and ensure predictable policies to attract long-term private investment.
• Skill Development and Workforce Training: Expand specialised skill programs in food processing, quality control, cold-chain management, and logistics under initiatives like PM Kaushal Vikas Yojana.
• Promoting Export Orientation and Global Standards: Support compliance with international quality and safety standards (HACCP, Codex) and strengthen export infrastructure to enhance India’s competitiveness in global food markets.

Conclusion:

Strengthening food processing and agro-based industries is essential for achieving SDG 2 (Zero Hunger) while accelerating India’s structural transformation. By enhancing value addition, exports, and rural employment, the sector can support India’s target of USD 100 billion in agricultural exports by 2030. A robust, inclusive, and technology-driven agro-industrial ecosystem will be central to sustainable and resilient economic growth.