There is an urgent need for reforms in the food processing sector, the poor, fragmented and often ignored cousin of agriculture. Such transformations would not only create hundreds of thousands of new jobs, but prove to be the catalyst for the much needed second Green Revolution in Indian agriculture.
Norman E. Borlaug, a Nobel laureate once said, “If you desire peace, cultivate justice, but at the same time cultivate the fields to produce more bread; otherwise there will be no peace.” Will a poorly managed and much ignored India’s food processing sector bring a peaceful smile on the country’s face?
<< Indian workers package ice cream at the Havmor ice cream plant in Ahmedabad. The ice cream factory, established in 1944 supplies ice cream to India’s Gujarat, Maharashtra and Rajasthan states. India’s growing food demand and changing consumption lifestyles make a strong case for the long overdue reform of the food processing industry a top priority for policymakers
The setting: no electricity, little water and the archetypal feudal structure in the heartland of rural India with trampled village folk struggling to prolong their quotidian existence. The introduction: “500 thousand farmers of Gujarat present...” and the collective might of rural India is unleashed. For the uninitiated, the above is a true story recreated on celluloid by veteran cinema icon Shyam Benegal. It’s none other than Manthan (The Churning), the 1976 National Award winning docu-drama that paid tribute to the White Revolution which overhauled the milk-processing and production practice in Gujarat and opened the gates of good fortune for these underprivileged millions forever. Today, yet another ‘Manthan’ is required for a sector, which, if given wings, can not only create millions of blue-collar jobs but prove the catalyst for the Second Green Revolution in India. For, if all the mills start running at top speed, India’s food processing sector can prove to be the new dark horse of India Inc.
Consider this. India is the second largest producer of food in the world just after China. India’s food consumption has grown at a CAGR of over 6% over the last decade, while its population has increased at the rate of 1.6% per annum.
Better news for those willing to delight the Indian food-lovers is the fact that expenditure on food items account for the largest chunk of expenditure for Indian households; they spend 31% of their incomes on it. By 2015, the Indian food industry is expected to clock turnover figures of $258 billion, from $181 billion registered in 2008. In India, increase in food consumption has happened more due to an increase in per capita expenditure, rather than an increase in the number of mouths being fed. And the urban-rural divide is visible here too. Economic liberalization causing a growth in the urban middle class and their disposable incomes has taken urban food consumption far ahead of rural India.
But, in stark contrast to the developed world and even some of our developing counterparts, India’s total food processing output is estimated at $70-75 billion – just 40% of value of the entire food industry. It is presently growing at a CAGR of 15%, but is predicted to leapfrog at 35% per annum in the future. From mind crunching numbers to headcount, the sector employs an estimated 15 million people. According to an analysis by Dr. J. S. Bedi, “without any replacement of labour, the employment intensity in the organised food processing sector per million rupees of investment currently stands at 1.8 directly and 6.4 indirectly.” As far as the unorganised section of the food processing industry is concerned, there the employment intensity is estimated to be approximately 10 for both direct and indirect employment per million rupees of investment. However, there are concerns as whenever Indian agriculture goes into a state of disarray, farm processing runs into a rough patch. A sneak peak into the economics & dynamics of the sector, and you realise that it scores just a tad better than agriculture, which in India, still remains largely subjected to the vagaries of the weather!
What are the roadblocks and challenges going ahead? Currently, the food processing industry is both nascent and highly fragmented. In sharp contrast to developed countries and even China where food retailers are much larger than food processors and producers, India’s packaged and processed food makers are much larger than food retailers, largely because of the 100% level of FDI allowed (as compared to zero FDI allowed in food retailing where many brands are sold).
Read more......
Norman E. Borlaug, a Nobel laureate once said, “If you desire peace, cultivate justice, but at the same time cultivate the fields to produce more bread; otherwise there will be no peace.” Will a poorly managed and much ignored India’s food processing sector bring a peaceful smile on the country’s face?
<< Indian workers package ice cream at the Havmor ice cream plant in Ahmedabad. The ice cream factory, established in 1944 supplies ice cream to India’s Gujarat, Maharashtra and Rajasthan states. India’s growing food demand and changing consumption lifestyles make a strong case for the long overdue reform of the food processing industry a top priority for policymakers
The setting: no electricity, little water and the archetypal feudal structure in the heartland of rural India with trampled village folk struggling to prolong their quotidian existence. The introduction: “500 thousand farmers of Gujarat present...” and the collective might of rural India is unleashed. For the uninitiated, the above is a true story recreated on celluloid by veteran cinema icon Shyam Benegal. It’s none other than Manthan (The Churning), the 1976 National Award winning docu-drama that paid tribute to the White Revolution which overhauled the milk-processing and production practice in Gujarat and opened the gates of good fortune for these underprivileged millions forever. Today, yet another ‘Manthan’ is required for a sector, which, if given wings, can not only create millions of blue-collar jobs but prove the catalyst for the Second Green Revolution in India. For, if all the mills start running at top speed, India’s food processing sector can prove to be the new dark horse of India Inc.
Consider this. India is the second largest producer of food in the world just after China. India’s food consumption has grown at a CAGR of over 6% over the last decade, while its population has increased at the rate of 1.6% per annum.
Better news for those willing to delight the Indian food-lovers is the fact that expenditure on food items account for the largest chunk of expenditure for Indian households; they spend 31% of their incomes on it. By 2015, the Indian food industry is expected to clock turnover figures of $258 billion, from $181 billion registered in 2008. In India, increase in food consumption has happened more due to an increase in per capita expenditure, rather than an increase in the number of mouths being fed. And the urban-rural divide is visible here too. Economic liberalization causing a growth in the urban middle class and their disposable incomes has taken urban food consumption far ahead of rural India.
But, in stark contrast to the developed world and even some of our developing counterparts, India’s total food processing output is estimated at $70-75 billion – just 40% of value of the entire food industry. It is presently growing at a CAGR of 15%, but is predicted to leapfrog at 35% per annum in the future. From mind crunching numbers to headcount, the sector employs an estimated 15 million people. According to an analysis by Dr. J. S. Bedi, “without any replacement of labour, the employment intensity in the organised food processing sector per million rupees of investment currently stands at 1.8 directly and 6.4 indirectly.” As far as the unorganised section of the food processing industry is concerned, there the employment intensity is estimated to be approximately 10 for both direct and indirect employment per million rupees of investment. However, there are concerns as whenever Indian agriculture goes into a state of disarray, farm processing runs into a rough patch. A sneak peak into the economics & dynamics of the sector, and you realise that it scores just a tad better than agriculture, which in India, still remains largely subjected to the vagaries of the weather!
What are the roadblocks and challenges going ahead? Currently, the food processing industry is both nascent and highly fragmented. In sharp contrast to developed countries and even China where food retailers are much larger than food processors and producers, India’s packaged and processed food makers are much larger than food retailers, largely because of the 100% level of FDI allowed (as compared to zero FDI allowed in food retailing where many brands are sold).
Read more......
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Prof. Rajita Chaudhuri's Website
domain-b.com : IIPM ranked ahead of IIMs
Arindam Chaudhuri's Portfolio - he is at his candid best by Society Magazine
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Prof. Rajita Chaudhuri's Website
domain-b.com : IIPM ranked ahead of IIMs
Arindam Chaudhuri's Portfolio - he is at his candid best by Society Magazine
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
IIPM B-School Detail
