Food processing can be India’s answer to the current PM’s call for doubling farmers’ income. This critical sector links agriculture, manufacturing sector and final consumers; reduces post-harvest wastage through infrastructure creation and adds significant value to agriculture produce through processing technologies. The added value, when it flows back to farmers via the value chain along with the value realised through wastage prevention, can add significantly to farmers’ income.
The sector has also grown at a faster CAGR of 9.5 per cent1 as compared to agriculture’s five-year CAGR of 3.4 per cent. KPMG in India in its recent report – “Indian Food Processing Industry- Growth opportunities post the COVID-19 pandemic” estimates that, going forward, this sector will reach USD535 billion by 2025 at a CAGR of 15 per cent, which indicates significant potential for increasing farmers’ income through processing. The sector also aims to add 9 million jobs by 2024. Thus, the sector can potentially be the solution India needs to double farmer’s income.
In the past, efforts have been made to increase farmers’ income by increasing food production and introducing new ways to increase productivity, providing incentives through better crop prices and subsidies, and via public investment in agriculture and facilitating agricultural institutions2 . While these efforts have increased our agriculture produce by 3.7 times since independence, it has not translated into a corresponding increase in farmers’ income. Majority of the farmers (small and marginal - accounting for 82 per cent of all farmers) still have not seen any significant rise in their income. Being at the lowest end of the value chain without any bargaining power, these farmers continue to bear losses arising due to several reasons, including lack of post-harvest storage and transportation and processing facilities.
Globally all major economies have advanced food processing ecosystems with high levels of processing (70-80 per cent against 10 per cent in India)3 and correspondingly higher value added per worker in agriculture. India, despite being the leader in production of several agricultural commodities, lags behind several countries in terms of value added per worker in agriculture.