Agro-based Industries Scope & Opportunities in Rural India

Agro-based industries are being promoted by the government through several schemes. They are playing a crucial role in boosting the country’s economy. These industries are full of high potential as employment generators, especially in rural India. It also performs a number of crucial functions that support development and poverty alleviation.

Given the thrust on doubling farmer’s income, government agencies have been playing a key role in promoting agro-based industries across the country through the implementation of various schemes and policies. Which are ranging from providing collateral-free credit and access to incubation centers to providing better equipment and employment opportunities for entrepreneurs.

Around two-third of the population depends on agriculture and agro-based industries. The story of Indian agriculture is mixed in green reaction (characterized by mediocre growth, the stagnation of yields, and persistent instability of output) whereas agro-based industries can be looked upon to provide a mass of livelihoods.

Agro-based Industries

Agro-based industries consist of the processing, preservation, and preparation of agricultural production. The development of agro-based industries has the propensity to stabilize and make agriculture acceptable and lucrative. The agro-industries are getting even more important in recent years. It has larger scope for acceleration in the future given the thrust on doubling farmer’s income.

The corporate sector is keen on investing in agribusiness to harness emerging opportunities in domestic and global markets. It is time to opportune for reforms that would provide a healthy business environment for this sector.

Those industries which are involved in supplying the farm with agricultural inputs besides handling the product of the farm may be termed the agro-based industry.

Famine Enquiry Commission (India)

Agro-based Industries in India

• The Textile and Clothing Industry has the potential to grow significantly and contribute to the Government’s ambitious target of achieving a 5 trillion dollar economy by 2024-25. It is shifting surplus labor from the agriculture sector to more productive industrial activities.
• The Dairy industry in the country which includes milk production, collection, processing, and marketing has come a long way over the years and the present government is taking many steps to promote this sector.
• The National Bamboo Mission (NBM) provides a new impetus and direction to enable the realization of bamboo’s considerable potential. With its multidisciplinary and multidimensional approach, NBM is trying to promote Bamboo production, handicrafts, marketing, export, and establish a bamboo wholesale and retail market.
• The Indian Jute industry is also expanding fast. The industry supports around 40 lakh farm families and provides direct employment to 2.6 lakh industrial workers and 1.4 lakh in the tertiary sector.
• Agro-food processing industries have the potential to generate directly significant employment in production activities and also indirect employment through their forward and backward linkages. Turning the agro and food-processing industry into a major export industry can also create vast employment opportunities for workers since it is a labor-intensive industry.

Linkages Between Agriculture and Agro-Based Industries

Around two-thirds of the population depends on agriculture and agro-based industries. The story of Indian agriculture is mixed in ‘green reaction’. Whereas agro-based industries can be looked upon to provide a mass of livelihoods.

Agro-forestry in the Indian farming system is practiced as a complementary and supplementary enterprise to enhance well being of farmers. Since it causes diversification and commercialization of agriculture, it not only enhances the incomes of farmers but also creates a food surplus.

It is a well-recognized fact across the world, particularly in the context of industrial development that the importance of the economy develops. It should be emphasized that food is not just produced but also encompasses a wide variety of processed products. It is in this sense that the agro-industry is an important and vital part of the manufacturing sector in developing countries and the means for building industrial capacities.

Why promote Agro-Based Industries?

India has the world’s 10 largest arable land, 20 agro-climatic regions, and 15 major climates. Census data indicates that the total number of cultivators in the country has decreased from 127.3 million in 2001 to 118.8 million in 2011. This may be due to the excessive product orientation of Indian agriculture with inadequate focus on value addition, wastage reduction, and incremental income through Agri processing and manufacturing.

Agro-Based Industries promote employment in rural areas. Where these industries have to be located near the source of raw materials, especially perishable agricultural products. Agro-based industries have high potential as employment generators and foreign exchange-earners. Agri-based industries provide a competitive advantage both within and outside the country.

They absorb surplus rural labor and address the problem of large-scale unemployment/disguised employment in rural areas. Agri-based industries provide promotional occupation and activity diversification in villages. Which ensures all-around industrial growth in rural areas. It is high time that policymakers and industry leaders recognize agriculture in connection with industry.

Perhaps this needs larger debate as it is easy to distinguish between production and the first stage of processing but becomes rather complex afterward. The development of agro-based industries should be viewed as the industrialization of agriculture and a joint process leading to a new industrial sector.

The International Standard Industrial Classification (ISIC) included agro-industrial production under the manufacture of food, beverages, tobacco, textiles, wearing apparel, leather industries, manufacturing of wood and wood products, manufacturing of paper and paper products, printing and publishing, and manufacturing of rubber products.

Scope and Importance of Agro-based Industries

Agro-industry consists of the processing, preservation, and preparation of agricultural production for intermediate and final consumption. It performs a number of crucial functions that support development and poverty alleviation. Policymakers and industry leaders should recognize agriculture in connection with industry as a competitive, value-adding business sector that has a positive development impact and significant contribution to economic growth.

Before discussing the role of Government Agencies in promoting agro-based industries and products in India, it would be pertinent to understand the concept itself. Agro-industry consists of the processing, preservation, and preparation of agricultural production for intermediate and final consumption. It performs a number of crucial functions that support development and poverty alleviation.

So, it is high time that rather than focusing on agricultural production and productivity alone, the policymakers and industry leaders recognize agriculture in connection with industry as a competitive, value-adding business sector that has a positive development impact and significant contribution to economic growth. A comprehensive approach could include supporting small agro producers and SMEs, enabling market access, and developing a supportive institutional environment.

They derive their raw materials from agriculture, therefore are called agro-based industries. Today, however, the impact of innovation processes and new technologies suggest a widening range of agro-industry inputs that could be considered, including biotechnological and synthetic products, for example. This implies that currently, the agro-industry continues to process simple agricultural goods while also transforming highly sophisticated industrial inputs that are often the result of considerable investments in research, technology, and innovation.

Unfair Trade Practices in Agro-based industries

Agro-based industries are vital to the growth of the economy. Given that most agro-based industries are micro, small or medium enterprises and may not have the wherewithal to stand competition from cheaper or subsidized imports, the role of Government becomes all the more important. The Government needs to ensure a level playing field for agro-based industries vis-à-vis unfair trade practices adopted by exporters of other countries.

Agro-based industries are a perfect example of mutually beneficial dependence between the primary and secondary sectors of an economy. It is well-established that in India agro-based industries address important issues of poverty and unemployment by utilizing local resources. The competitive edge of these industries is, however, eroded by cheap and often low quality imports. These industries are also subjected to trade barriers in destination countries. This article discusses a few trade-related issues faced by these industries.

Agro-based industries lose their competitive edge due to unfair trade practices adopted by exporters of other countries. Such practices manifest in the following two forms:

• Dumping: It is observed that exporters from other countries often dump their products in Indian markets at rates cheaper than those at which they sell their products in their domestic markets.
• Subsidies: Governments of those countries from where imports are sourced by India, are observed to be providing subsidies to their exporters.

In both cases, the competitive scenario is distorted and the domestic industry is at a loss. The World Trade Organization (WTO) categorizes these cases under unfair trade practices in the Anti-Dumping Agreement and in the Agreement on Subsidies and Countervailing Measures Agreement. WTO member countries that are at the receiving end of such practices may impose anti-dumping duties (ADD) and countervailing duties (CVD), respectively, if dumping and subsidies cause injury to their domestic industry.

Indian planners and policymakers have always encouraged rural and agri-industrialization. The inherent advantages of agri-industries are optimal utilization of local agri-resources, mobilization of investment on a large scale, creation of job opportunities, prevention of distress rural-urban migration, and reduction of disparity across sectors and regions. These industries have the capability of offering a wide, reliable and sustainable model for promotional/profitable occupation and activity diversification in villages.