The criticality of food processing
LALIT KANODIA: Food processing is extremely crucial to India – agriculture today constitutes around 15 per cent of GDP but provides employment to about 60 per cent of our working population, which means the per capita income is very low.
The finance minister has promised that he will double farmer’s income in five years. The panel here would discuss aspects like how to go up the value chain, what can food processing do to increase the income of the farmer etc. Food processing is a bridge that links agriculture and industry. First, it provides you with better quality of food and more nutrition. Profit from the food processors are employment generation. An estimate says that the job creation potential is of 9 million jobs, which is massive if you compare it with IT sector which is about 3.5 million jobs. Then there is more income for farmers. There is enhanced food security, since processed food can be stored for longer periods of time.
DILIP RATH: Dairy is a vital tool for doubling farmer’s income as it contributes about 25 per cent of the total income of the rural households. Today, we all know that a significant part of the milk produced is retained in the villages. We also know that a significant part of production is handled by the unorganised milk vendors. Between these two, the situation is that only 17 per cent comes to the organised processing sector and the untapped potential today is still huge. Even today we are present only in 50 per cent of India’s six lakh villages.
Demand-wise, we are looking at a surge to take place across the entire range of dairy products in the coming years. Surge will be in traditional products as well as new and futuristic products like dairy based wellness products, nutraceuticals, specialised health and functional products. Once you can give market access, then milk starts flowing. We estimate a rise of 60 per cent in organised procurement in the next five years. With greater market access being provided, and also the increase in the productivity of animals, there is scope to increase profitability of the farmer level.
NEELKANTH MISHRA: From the perspective of the broader economies, food processing is critical to agriculture and informal employment. In this context, I will just run through five key transformative changes in the Indian economy. The first is that we are now a food surplus nation, seeing sustained surplus across categories— cereals, potatoes and milk. When the local marginal increase in demand is not as much, we need to target export markets. Along with all this, is a simultaneous rise in electrification and village roads. We have built around five lakh kilometres of non-highway rural roads across last 15-20 years. This allows villages to join the economic mainstream and witness a very transformative change. Both these factors individually increase the life and access area across which food can get evacuated from its local production base and get sold.
The fourth big change is the availability and access of finance, which enables micro and small enterprises – which otherwise had limited retained profits and non-existent credit access – to grow. With digitisation, more bank accounts and system-driven evaluation of applications, it is now easier to talk of small loans like Rs 15,000-20,000 loans. This makes the potential for small food processing units much higher.
The last point is that the registration of small enterprises is actually starting to become much easier and cost of avoidance is much higher, so there is an incentive to actually become formal. The moment you become formal, you get better regulation, you get better finance, and most states are easing labour regulations. This is a change which will have impact over 5-10 years. In the combination of all this, I think food processing will benefit. You can create jobs in the villages in this environment.