What is Food Processing?
Food Processing is the process under which any raw product of agriculture, dairy, animal husbandry, meat, poultry, or fishing is transformed through a process in such a way that its original physical properties undergo a change (physical or chemical) and the transformed product has commercial value and is suitable for human and animal consumption.
Various activities covered in this process are mincing, cooking, canning, liquefaction, pickling, macerating, and emulsification, etc.
Food Processing also includes the process of value addition to produce products through methods such as preservation, the addition of food additives, drying, etc. with a view to preserve food substances in an effective manner, enhance their shelf life and quality.
Food Processing in India:
- A well-developed food processing sector with a higher level of processing helps in the reduction of wastage, improves value addition, promotes crop diversification, ensures a better return to the farmers, promotes employment as well as increases export earnings.
- This sector is also capable of addressing critical issues of food security, food inflation, and providing wholesome, nutritious food to the masses.
- During the last 5 years, the Food Processing sector has been growing at an Average Annual Growth Rate (AAGR) of around 10.00%.
- The Food Processing Sector has also emerged as an important segment of the Indian economy in terms of its contribution to GDP, employment, and investment.
- This sector is highly labor-intensive per unit of capital deployed. Despite the low capital intensity, the output of food products is not compromised as it is the largest among all industries. Thus, every unit of capital invested in the food products industry employs the largest number of persons as compared to other industries while generating the highest output level as in other industries.
- 100% FDI is permitted under the automatic route in Food Processing Industries.
What is the significance?
The Food Processing Industry (FPI) is of enormous significance as it provides vital linkages and synergies that it promotes between the two pillars of the economy, i.e. agriculture and industry.
Employment Generation: India’s food processing sector is one of the largest in the world. It already provides direct and indirect employment opportunities because it acts as a bridge between Agriculture and Manufacturing. FPIs have a huge potential in the future in this regard.
Doubling of farmers’ income: The government in its Budget 2016-17 set a policy target of doubling farmers’ income by 2022. With the rise in demand for agri-products, there will be a commensurate rise in the price paid to the farmer, thereby increasing the income. In this light, food processing industries can be a vital tool to achieve this target.
Reduce malnutrition: Processed foods when fortified with vitamins and minerals can reduce the nutritional gap in the population. For instance, to tackle anemia, the government has devised plans to fortify rice, the staple food of more than 70 percent of the Indian population, with iron, folic acid, and vitamin B-12.
Reduce food wastage: UN estimates that 40% of production is wasted. Similarly, NITI Aayog estimated annual post-harvest losses of close to Rs 90,000 crore. With a greater thrust on proper sorting and grading close to the farm gate, and diverting extra produce to FPIs, this wastage could also be reduced, leading to better price realization and remuneration for farmers.
Boosts Trade and Foreign exchange: It is an important source of foreign exchange. For e.g. Indian Basmati rice is in great demand in Middle Eastern countries. 100% FDI is permitted under the automatic route in Food processing industries so in the coming years we can expect huge investments.
Curbing Migration: Food Processing is a labor-intensive industry. It can provide localized employment opportunities and thus will reduce the push factor in source regions of migration, especially rural-urban migration. In this way, FPIs can reduce rural poverty, disguised unemployment, exploitation of farmers. This, in turn, reduces stress on urban areas (slums/hygiene/social problems in cities)
Curbing Food Inflation: Over the last few years, Food inflation has been a major problem. Persistent high food inflation is no doubt bad for general macroeconomic stability. So a well-developed food industry with a strong supply chain can help in reducing food inflation via:
- Disintermediation (meaning no middlemen/commission agents)
- less wastage/spoilage of perishable products
Processing also increases the shelf life of the food thus keeping supplies in tune with the demand thereby controlling food inflation. For e.g. Frozen peas are available throughout the year.
Crop-diversification: Farmers are unable to access direct markets. In recent years, Government increased the minimum support prices for rice and wheat. So the majority of farmers prefer cereals. Which leads to surplus grain production. Private players give less price to farmers, it is a burden for the government has to buy wheat & Rice at MSPs. Again, FCI doesn't have enough storage capacity, so cereals get rotten in ill-equipped storage godowns.
On the other hand, we’ve to rely on imported oilseeds because of higher MSP, farmers prefer to grow rice/wheat than oilseeds. Higher oilseed import adds to the Current account deficit. So it is imperative that we need crop diversification, a developed FPI with access to farmers growing fruits, vegetables, milk, fish, meat, poultry, grain, etc. can improve diversification.
Enhances consumer choices: Today, food processing allows food from other parts of the world to be transported to our local market and vice versa.
