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Agriculture and Food Processing Industries: A Game Changer for Indian Economy

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Indian Prime Minister Mr. Narendra Modi has set an ambitious target for the Indian economy: the GDP of Indian must reach USD 5 trillion by 2025. To achieve this target, all sectors e.g. service, industry, and agriculture, and allied food processing industries must contribute significantly. The services sector is the largest sector of India till today. Gross Value Added (GVA) at current prices for the services sector is estimated at 96.54 lakh crore INR in the financial year 2020-21.The services sector accounts for 53.89% of total India's GVA of 179.15 lakh crore Indian rupees. With GVA of Rs. 46.44 lakh crore, the industry sector contributes 25.92%, while the agriculture and allied sector share 20.19%. The contribution of agriculture in Indian GDP has shown an increase from 17.8 percent in 2019-20 to 20.19% in 2020-21. The last time the contribution of the agriculture sector in GDP was at 20 percent was in 2003-04. As per the economic survey, Agri share in GDP hit 20% after 17 years. Indian agriculture and food industry have huge potential to grow further, thereby increasing its share beyond 20% in Indian GDP. There are a lot of untapped potentials in the agriculture and food processing industries. If these untapped potentials are utilized properly, these two sectors can do wonders in Indian economy.

Agriculture:

Agriculture is the main profession in India as it is the primary source of livelihood for about 58% of India’s population. Gross Value Added by agriculture, forestry, and fishing was estimated at Rs. 19.48 lakh crore (US$ 276.37 billion) in FY20. India has the following unique features in terms of the production of agricultural produce.
1. India is the second-largest producer of wheat and rice, the world's major food staples.
2. India is currently the world's second-largest producer of several dry fruits, agriculture-based textile raw materials, roots and tuber crops, pulses, farmed fish, eggs, coconut, sugarcane, and numerous vegetables.
3. India is the world's largest producer of many fresh fruits like banana, mango, guava, papaya, lemon, and vegetables like chickpea, okra, and milk, major spices like chili pepper, ginger, fibrous crops such as jute, staples such as millets and castor oil seed.
4. India is ranked among the world's five largest producers of many cash crops such as coffee and cotton.

Increase in Export of Agricultural Produce:

India’s Agriculture trade grows tremendously during 2020-21. Despite the covid pandemic, export of Agri and allied commodities during Apr 2020 - Feb 2021 shows an increase of 18.49%. India has witnessed tremendous growth of 727% for Wheat export and 132% for (non-Basmati) rice export during the financial year of 2021. Increase in export of Indian agricultural produces is a very good sign for Indian economy.

Central Govt’s initiative to strengthen Agriculture:

• The Agriculture Export Policy, 2018 was approved by the Government of India in December 2018. The new policy aimed to increase India’s agricultural export to US$ 60 billion by 2022 and US$ 100 billion in the next few years with a stable trade policy regime.
• The Government of India has initiated the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) with an investment of Rs. 50,000 crore (US$ 7.7 billion) targeting the development of irrigation sources for providing a permanent solution to drought.
• Rs. 4,000 crore (US$ 551.08 million) was allocated towards implementing Pradhan Mantri Krishi Sinchayee Yojana (PMKSY-PDMC) in the union budget of 2021-22.
• The Government of India came out with a Transport and Marketing Assistance (TMA) scheme to provide financial assistance for transport and marketing of agriculture products in order to boost agriculture exports.
• In October 2020, the Tribal Cooperative Marketing Development Federation of India (TRIFED) has included 100 new Forest Fresh Organic Products sourced from tribes across India on its e-marketplace (tribesindia.com).
• In October 2020, Agri-lender NABARD (National Bank for Agriculture and Rural Development) has proposed plans to set up a subsidiary to provide guarantees for loans under agriculture and rural development.
• The Government of India is going to allocate Rs. 2,000 crore (US$ 306.29 million) for computerization of Primary Agricultural Credit Society (PACS) to ensure cooperatives are benefitted through digital technology.
• In October 2020, the government announced that various farmers’ welfare-oriented flagship schemes e.g., PMFBY (Pradhan Mantri Fasal Bima Yojana), PM-Kisan Cards, and the Soil Health Card will be integrated through a common database, along with land record details.
• In September 2020, the government launched the PM Matsya Sampada Yojana, e-Gopala App, and several other initiatives in fisheries production, dairy, animal husbandry, and agriculture. Under this scheme, an investment of Rs. 20,000 crore (US$ 2.7 billion) will be allocated in the next 4-5 years in 21 provinces of India.
• In the next five years, the central government will aim for US$ 9 billion in investments in the fisheries sector under PM Matsya Sampada Yojana.
• In May 2020, Government announced the launch of an animal husbandry infrastructure development fund of Rs. 15,000 crore (US$ 2.13 billion).
• In September 2019, Prime Minister, Mr. Narendra Modi announced the National Animal Disease Control Programme (NADCP), aim of this program is to eradicate foot and mouth disease (FMD) and brucellosis in livestock. In May 2020, Rs. 13,343 crore (US$ 1.89 billion) was earmarked for this program.
• The Government of India has given permission for 100% FDI in the marketing of food products and in food product E-commerce under the automatic route.
• The Electronic National Agriculture Market (e-NAM) was launched in April 2016 to create a unified national market for agricultural commodities by networking existing APMCs. It had 16.9 million farmers and 157,778 traders registered on its platform until February 2021. Over 1,000 mandis in India are already linked to e-NAM and 22,000 additional mandis are expected to be linked by 2021-22.
• Formation of 10000 Farmers Producers Organization (FPO) by 2022 has been targeted and Rs. 1500 crore has been allocated for this.
• 3 farm laws have been introduced after the modification of old farm laws with aims: 1.Farmers can sell their products to any buyers. 2. Encouraging Contract Farming: Farmers can do agreements with various companies/ corporate sectors for contract farming. Provisions for safeguarding the interests of farmers are being enacted in these new farm laws.

Food Processing Industries:

The Indian food processing industries are slated for huge growth, increasing its contribution to the world food trade every year. In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition; particularly within the food processing industry.Food processing sectors are considered as the sunrise sectors. The Indian food and grocery market are considered the world’s sixth largest, with retail contributing 70 percent of the sales. The Indian food processing industry accounts for 32 percent of the country’s total food market, one of the largest industries in India, and is ranked fifth in terms of production, consumption, export, and expected growth. The Indian gourmet food market is currently valued at US$ 1.3 billion and is growing at a Compound Annual Growth Rate (CAGR) of 20 percent. India's organic food market is expected to increase by three times by 2022. Some significant signs in favor of more expansion of food processing industries are as follows.

1. Export of India’s processed food products has undergone a massive growth of 26.51% during April-February2020-21, despite challenges posed by the COVID19 pandemic.
2. As per the survey of KMPG, the markets of Indian food processing industries can grow at the estimated cost of USD 470 billion by 2025. As per the other survey, the estimated market value is pegged at USD 535 billion.
3. This sector is expected to create 9 million more jobs by 2024.
4. The Indian food industry is undergoing expansion at a CAGR of 11% and the food processing sector accounts for 32% of the total food industry.
5. The market for semi-processed/cooked ready-to-eat meals in India grew 20 percent during the 2018-2019 fiscal year.
6. Between 2020 and 2023, demand for snack foods will increase each year by 10 percent.
7. India’s food sector attracted US$ 4.18 billion in foreign direct investments between April 2014 and March 2020.
8. By 2030, Indian annual household consumption is expected to triple, making India the fifth-largest consumer in the world.
9. The Confederation of Indian Industry (CII) estimates that the food processing sectors have the potential to attract as much as US$ 33 billion of investment over the next 10 years.

Central Govt’s initiative to strengthen existing units and facilitate new units in Food Processing Industries:

1. Krishi Sampada Yojana: Subsidy-driven assistance for Food Processing units ( for both new and expansion of existing units) and cold chains by the Ministry of Food Processing Industries (MOFPI).
2. The Ministry of Food Processing has allocated Rs. 1,308.66 crore (US$ 180.26 million) in the Union Budget 2021-22.
3. Assistance in establishment of Food Quality Control and HACCP laboratories by the Ministry of Food Processing Industries (MOFPI).
4. Common facilities are available in various Food Parks. In November 2020, the government inaugurated a mega food park in Punjab worth Rs. 107.83 crore (US$ 14.6 million) that will be spread across over 55 acres of land.
5. Government plans to triple the capacity of the food processing sector in India from the current 10% of agriculture produce and has also committed Rs. 6,000 crore (US$ 936.38 billion) as investments for mega food parks in the country, as a part of the Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters (SAMPADA).
6. Product linked incentive (PLI) Scheme: The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi has given its approval to introduce the Production-Linked Incentive (PLI) Scheme in Food Products for Enhancing India’s Manufacturing Capabilities and Enhancing Exports… Atmanirbhar Bharat. Rs. 10,900 Crore has been allocated for this scheme and the incentives under this scheme would be disbursed for six years ending 2026-27.
7. Prime Minister Matsosampoda Yojana: Subsidy driven assistance for Fish Processing units.
8. Subsidy-driven assistance for dairy industries.
9. Export assistance schemes by APEDA.
10. Assistance in various Govt. research agencies for developing new, innovative food products.
11. Assistance in the adoption of food safety and quality assurance mechanisms such as Total Quality Management (TQM) including ISO 9000, ISO 22000, Hazard Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP), and Good Hygienic Practices (GHP).
12. Various Govt. seed grants, accelerators for Startups in food processing sectors.

The agriculture and food processing industry is one of the strongest pillars of the Indian economy. These two sectors have failed to perform in the expected line a few years back. But, because of govt. initiatives, favorable policies, and incentives, these two sectors have started to show green shots, contributing positively to Indian GDP during the covid pandemic era. We need to retain this momentum and carry out more favorable and suitable activities to increase the contribution of these two sectors in Indian GDP to over 30% in the next 7 to 10 years. If these two sectors grow positively and continuously, it will make the rural population economically stronger and it will enhance their purchasing capacities. The increased purchasing capacities of rural people will increase the sale of nonagricultural and nonfood commodities, thereby assisting other sectors to increase their sales, ultimately increasing the Indian GDP. The agriculture and Food Processing Industries are a game-changer for the Indian economy in a real sense.