Addressing the Eclipse over Sunrise Sectors in India

The Economic Times, December 20, 2020

By Pradeep S. Mehta and Sarthak Shukla

“We are furthering Government’s agenda by bringing hundreds of jobs here, despite which we are not getting the promised subsidy benefits on time”, said the owner of a biscuit manufacturing plant in North East Mega Food Park in Nalbari, Assam. He said this when asked about the main challenges faced by their enterprise, during our field visit for the study on Good and Better Jobs in India.

This concern highlights a dangerous development that the Indian economy is staring at. There is a trust deficit between the government and industry, and employment has become merely a number to showcase one’s efforts for job creation.

The Central government has renewed its push towards global competitiveness and enhanced efficiency in manufacturing through the production-linked incentives announced for 10 sectors. This includes food processing which is closely linked to our agriculture sector. Therefore, it is high time that we plan and execute our economic policies in a way that ensure a ‘win-for-all’ situation. Alas, what is happening is that a ‘winner-takes-all’ scenario seems to be taking shape. On the contrary, we need to enable an ecosystem of fair opportunities for enterprises of varying size and scale to grow and compete, while addressing structural issues in the supply-side dynamics and demand-side linkages.

In order to take a 360 degree-view, it becomes important to align efforts on the policy front, with the requirements or demand for such products. Unlike other manufacturing sectors, the shape, size and flavour of the sector’s products are widely diverse and directly impact the quality of the item. At the same time, in order to cater to global markets, certain levels of standards and certifications also come into play.

Accurate and timely market and demand signals are prime determinants for channeling resources, and planning investments in the food processing sector in a targeted way. Focused efforts are required to take such insights to prospective entrepreneurs on the ground.

Steps are being taken in this regard by Krishi Vigyan Kendras and certain institutions like Indian Institute of Food Processing Technology and the Indian Institute of Entrepreneurship in Assam and Meghalaya Institute of Entrepreneurship, in addition to businesses and their associations. However, these are not sufficient. Access to relevant information by prospective small entrepreneurs, mainly hailing from rural and marginalised sections, has been a major bottleneck which requires efforts on the outreach front, through frontline citizen-centric organisations and NGOs.

Another major paradigm that emerges from this sector is the need for targeted policy action. While the Agro Processing Cluster Scheme under the PM Kisan Sampada Yojana stresses on the need to establish processing centres close to the raw material source, yet the existing investment coming in this region for food processing, including ready to eat products, snacks, biscuits and other similar products, is mainly dependent on raw materials from other states. Such investments ride on the back of subsidies to compensate for challenges related to operational costs, connectivity and logistics.

In all this, the vast potential of local agricultural products like banana, king chilly and numerous other horticulture products remains unexploited. Usual factors like marginal land-holding size, traditional ways of farming and subsistence agriculture makes the quantity of production limited, which hampers the prospects of large-scale processing. Nevertheless, household-level food processing is flourishing across the north eastern states but its market is limited to either self-consumption or local community-level distribution, often as a gift. This is because awareness, branding, marketing, statutory and regulatory certification, cold storage infrastructure and forward logistics remain a crucial barrier for such household-entrepreneurs to formally get into the business of food processing. The Prime Minister’s Formalisation of Micro Food Processing Enterprises scheme is an effort to support such enterprises. However, it is more likely to fall short in a region which is culturally attached to unique ways of processing and consuming food items.

The larger picture that needs careful scrutiny is the difference between narratives of efficiency and resilience. Despite decades of efforts to enhance efficiency of production and manufacturing at scale, the nation was a pandemic away from witnessing the grave precariousness of the people engaged in such manufacturing activities. Generally speaking, investments are still low; infrastructure is evidently poor; market demand seems to be perennially down and workers are underpaid. This seems to be a normal scenario and continued efforts for achieving efficiency of production at minimal costs will only marginalise the workers further. Workers shift away from being contributors to any enterprise’s top line to being a cost burden. ‘Economies of scale’ is propounded to be a solution, but it runs the obvious risks of concentration and income inequality.

A low-hanging fruit, which can be a way out for this Catch-22 situation in the food processing sector, is the intellectual and physical skill of household entrepreneurs to make food products for consumers. Thus, efforts can be targeted to enable a thriving growth ecosystem for creating numerous potential entrepreneurs, rather than focusing only on food parks and few large-scale manufacturing units. The elements of such a thriving cluster will have to be entrepreneurship, knowledge ecosystem and economies of nurturance. In this, workers can be nurtured to become entrepreneurs, leaving the low-paying and hazardous jobs of mechanised food processing to automated machines only, a transition which is anyways bound to happen.

The authors work for CUTS International, a global public policy research and advocacy group. Amol Kulkarni of CUTS contributed to this article. 

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