Agro Based Industry in India

In the previous post we learned about Partnership in Rural Development The objectives of this post is To comprehend the concept and significance of agricultural-based industries To comprehend the relationship between agro-based industries and rural development. To know the challenges of promoting agro-based industries agriculture-based industries.

Content

Introduction
Rural Economy and Agriculture
Agro Based Industry
Agro-Produce Processing Units
Agro-Produce Manufacturing Units
Significance of Agro-based Industry
Agro-based industry and Women
Problems of rural Agro based Industries
Conclusion

Introduction

The potential for agriculture and related industries to contribute to national growth is enormous. Due to the low productivity of the agricultural sector, the majority of the rural workforce anticipates diversifying their employment from the low-productive agricultural sector to the service sector. Many farmers still rely on traditional agricultural practices despite an increase in the use of modern farming techniques, including the use of irrigation, high-yielding seed varieties, and increasing fertilizer use. Despite the fact that the nation is now self-sufficient in terms of food production, the farmers have yet to reap the rewards. Human capital can be improved through diversification by raising their skill levels. Agro-based enterprises require both agricultural growth and businesses that may increase the profitability of agricultural output, which can help rural farmers escape poverty. If the government meets their basic needs and fosters an environment where rural residents in general, and the poor in particular, can find a sustainable livelihood, the development of agro-industry can also have a significant impact on the local agricultural sector and the livelihoods of small-holder farmers.

Rural Economy and Agriculture

India's extremely high percentage of people who live in rural areas reflects the country's economic nature as a rural-based economy. More than 800 million people live in rural India, spread across 6 lakh villages. The agricultural and non-agricultural subsectors make up India's rural economy's two primary sectors. The agricultural subsector includes farming and related industries like forestry (floriculture), animal husbandry, dairying, fishing, poultry, and crop production. The non-agricultural subsector includes business, industrial, and service-related economic activity. Cottage and village industries, such as Khadi, handloom, handicraft, etc., are all considered to be industries.

Since the agricultural sector accounts for two thirds of India's rural economies, it is important to the country's economy. According to National Account Statistics (2011), the service sector accounted for approximately 57.3 percent of total output, while agriculture accounted for only 14.6%. It is clear that agricultural output has declined over the years, but this has not necessarily resulted in a reduction in the workforce that is dependent on agriculture. Agriculture and related industries employed 51.76 percent of all workers in 2009-10, but contributed 14.6% of GDP. Compared to the growth in GDP, there has not been a matching increase in job possibilities. Due to the low productivity of the agricultural industry, the majority of rural labor looks forward to a career change into the service sector. However, since the majority of people in rural areas are uneducated and illiterate, it is impossible for them to participate in formal organizations. According to the 66th NSS, 51 percent of respondents were self-employed, 33.5% used casual labor, and only 15.6% were traditional wage or paid workers. However, it should be noted that the majority of independent contractors relocate to cities to supplement their incomes from agriculture back home. People's only other option is to switch from low-productivity agriculture to low-productivity informal service sector jobs. Because of this, India's high-income service industries, such as business services, communication, IT, financial services, real estate services, etc., only employ a very small number of people. However, migrant workers who abandon their usual jobs can only operate in the informal service sectors, such as petty retail trade (Santosh Mehrotra, Ankita Gandhi, and Bimal Kishore Sahoo, 2012).

Furthermore, a sizable portion of farmers continued to practice traditional farming methods despite an increase in the adoption of modern agricultural practices, including the use of irrigation, high-yielding varieties of seeds, and increasing fertilizer use. Even though the nation is now self-sufficient in terms of food production, the farmers have yet to reap the rewards. As a result, farmers urgently need to diversify their sources of income. People who have multiple resources and activities tend to be less sensitive since they are not dependent on just one resource or activity during severe shocks (Ellis F., 2000). Diversification is a response to declining returns from a source of income and risk mitigation (Oystein Jull Nielsen, Santosh Rayamajhi, Patricia Uberhuaga, Henrik Meilby, and Carsten Smith Hall, 2013). The skills of human capital can be improved through diversification. Additionally, it helps to produce the financial resources needed to upgrade other livable asset types. The early occupations are not given less priority as a result of diversification (Edward Allison and Frank Ellis, 2004). It is important to realize that diversification can offer extra revenue without compromising the main line of work.

Agro Based Industry

Agriculture and industry can be combined to form an agro-based industry. Agro-based businesses require both agricultural development and industries that can increase the profitability of agricultural production, even though agriculture and industry are generally seen as two distinct sectors in terms of their nature and contribution to economic growth. "Those industries that are engaged in either the processing of products of raw materials or manufacturing them into completed products on the basis of primary and secondary products of agriculture and forest" is one definition of agro-based industries. Therefore, agro-based industries have a huge potential to impact favorable economic development by enhancing farmers' livelihoods. An agro-based industry is a subgroup of manufacturing that works with agriculturally produced raw materials and intermediate products. Thus, agro-based industry refers to the transformation of goods obtained from forestry, agriculture, and fisheries. There are two categories of agro-based industries. These are agricultural produce manufacturing and processing facilities.

Agro-Produce Processing Unit

These businesses merely refine the agricultural output. They don't produce any new goods. The result is less clumsy overall. Simply said, they prepare the raw material so that it may be transported or maintained. Dall mills, G.N. decorticating units, and rice mills are a few examples. The raw material or finished product can be used to categorize the agroprocessing sector. These include industries based on cereals, pulses, oil seeds, fruits, vegetables, spices, dairy, floriculture, fisheries, livestock, poultry, medical herbs, cotton, jute, plantation crops, etc.

Agro-Produce Manufacturing Units

These factories create wholly new goods using agricultural products as their primary raw materials. When compared to the raw material, the completed product will be completely different. factories that make sugar, textiles, paper, etc. The agro-industry is comprised of food and drink, tobacco goods, paper and wood products, textiles, footwear and clothing, leather products, and rubber products, according to the International Standard 4 Industrial Classification (ISIC).

Significance of Agro-based Industry

Traditional production and distribution techniques are being replaced by more carefully planned and coordinated linkages between agribusiness companies, farmers, merchants, and other parties in the supply chains. This is what the agro-based sector is supposed to do. Farmers in rural areas who work in agro-based industries may be able to escape poverty. Due to its poor productivity, agriculture cannot offer a sufficient and secure source of revenue. Therefore, by diversifying, the agro-based sector can support agricultural wages and act as a household risk reduction method. If small-holder farmers are able to produce consistently, delivering both quantity and quality on a regular basis, the growth of the agro-industry can also have a significant impact on the local agricultural sector and the farmers' livelihoods. Additionally, the agro-based industry indirectly contributes to job creation by promoting other economic activities like trade, building, manufacturing of equipment, transportation, and logistics. High and rising levels of female participation, particularly in the non-traditional, high-value agro-chains, highlight the importance of the agro industry for employment (i.e., horticulture, fruits, and fish products).

The availability of raw resources is what drives the majority of agro-based industries. The growth of the agro-based sector will depend on the availability of the raw materials. In turn, this will help the rural population's economic situation. By giving rural residents job possibilities, they address the issues of underemployment and covert unemployment. The exploitation of middlemen can be limited by rural agriculture-based industries. It finally results in an increase in the overall production of agricultural commodities since it may offer better raw material prices by raising demand for it. By processing agricultural products close to where they are produced, transportation costs can be decreased. It aids in enhancing community members' employment status. Rural areas can have their infrastructure facilities enhanced, which opens up the possibility of other industries being established there. As a result, it can fend off rural-to-urban migration. Through the creation of income, it serves to increase the purchasing power of rural residents. This raises the standard of living for rural residents and generates opportunities for demand-based companies. It is well recognized that urbanization and industrialization are closely associated. Urban areas are where industries are primarily based. Agro-based industries make sure that industries are spread out evenly, so that both rural and urban areas can do well.

The expansion of the agricultural sector can be explained by the shift in Indians' eating preferences, the expansion of the middle class, and the rise in popularity of packaged and ready-to-eat goods. Additionally, the availability of inputs like labor, technology, raw materials, a sizable consumer base, etc., makes its growth predictable. By adding value to the available raw resources, the industry provides a wealth of opportunities for generating money and employment. Integration of the agro-industrial sector is crucial to advancing the agro-based industry. This calls for the creation of a natural connection between agriculture and the industries that use agricultural products as inputs, on the one hand, and the industries that produce agricultural inputs and the agriculture that uses them, on the other.

Agro-based industry and Women

In India, where women make up approximately half of the population, their involvement in economic development is seen as substantially lower than that of their male counterparts. People frequently believe that a woman should work outside the home when their family is struggling financially. However, doing so is seen as slightly incorrect, subtly wrong, and unquestionably perilous to the lady's chastity and womanly virtue. Women may be kept at home as a sign of the family's morality and as a representation of its financial security when a family seeks to improve its situation or recovers from a financial crisis. In addition, women lack equal pay and are prohibited from working in labor-intensive jobs. Therefore, agro-based industry can make use of those population groups, ensuring the household's subsistence.

Agro-based businesses are relatively simple to start up and can generate income in rural regions with little investment because of their effective and efficient use of local agricultural byproducts. Farmers in general and women in particular would have access to employment opportunities thanks to mechanization in agro-based sectors.

Women play a significant role in the agricultural sector, particularly in the food processing sector. The women in the family spend the majority of the day working in the food processing business, while the male family members are engaged in farm and non-farm activities. The food processing sector is one of the very few possibilities available to women who live in patriarchal societies to support their families financially. They are permitted on the grounds that the ladies could productively use their downtime at home. Women have turned to informal survival techniques in recent decades as finding a regular job has grown more difficult, in part owing to macroeconomic policies and in part due to a lack of education and skills. Women, regardless of their status, are constrained by socially constructed notions that place them primarily in the domestic domain. As a result, there are extremely few possibilities for women to participate in the economy.

Diversifying sources at the household level can be viewed as a key approach for securing a livelihood for members of rural households with limited resources.People who have multiple resources and activities tend to be less sensitive since they are not dependent on just one resource or activity during severe shocks (Ellis F. , 2000). Diversification is a response to declining returns from a source of income and risk mitigation (Oystein Jull Nielsen, Santosh Rayamajhi, Patricia Uberhuaga, Henrik Meilby, and Carsten Smith Hall, 2013). It is important to realize that diversification can offer extra revenue without compromising the main line of work. Therefore, if the family's male members are involved in other forms of employment, the women can supplement their income by working in agro-based enterprises.

While formal education, training, and skills are not prerequisites for employment in home-based businesses, This makes it easier for women to engage in home-based businesses. However, in order to fulfill the needs of the modern world, it is necessary to improve the knowledge and abilities of home-based female agricultural workers. However, due to socioeconomic and other infrastructural constraints, women in India are denied access to these. It is important to realize that a woman's assets are her education, her training, and any other elements that assist her in generating a living. Those with strong personal and social capital can diversify by expanding their possibilities. Diversification can also result in increased social and human capital. For instance, if someone has a strong social network, is in excellent health, and is educated or skilled, they have the opportunity to engage in a variety of activities (diversification). They can expand their network by meeting new people and can invest time and money in their health and education while diversifying their interests. The skills of human capital can be improved through diversification. It also assists in generating financial resources that, in turn, can enhance other assets required for sustaining life (Edward Allison and Frank Ellis, 2004).

However, in order for women to work in the agro-based economy, they require a variety of resources, including money and social acceptance. However, it has been discovered that a lack of resources prevents the impoverished from starting their own businesses. As a result, it can be shown that home-based businesses can pay women because they don't need to work outside the home. Women's involvement in agro-based enterprises can be a crucial component of a family's income diversification plan. But in order for women to participate in agro-based sectors, they need a variety of resources and money, which they may lack due to their gender, infrastructure limitations, and general household poverty.

Problems of rural Agro based Industries

Various problems which hinder the growth and development of agro based industry in India are discussed below.

Decline in Crop Production: The lack of crop yield is one of the main issues facing the agro-based business. It is clear that agricultural productivity greatly influences the agro-based industries. Its absence will have a direct impact on the growth of agriculturally oriented industries as a whole. There has been a fall in India's output of important crops in recent years. The production of sugarcane has declined, from 355.2 tons in 2006–2007 to 259 tons in 2009–2010, according to Yojana August, 2010. Similar to this, rice production dropped from 93.4 in 2006–2007 to 80 in 2009–2010. Industries that depend on agricultural products are affected when there are no crops. The overall health of the agriculture sector is crucial to the future of the agro-processing industry. Numerous factors contribute to India's low crop production, including declining land holdings, a failure by farmers to use high-yielding seeds, a lack of irrigation facilities, a lack of technology and machinery, inadequate marketing, a lack of capital, and a failure to provide farmers with access to manures, fertilizers, and bio-codes.

Unavailability of Infrastructural Facilities: Infrastructure is crucial in boosting people's alternatives for a living. The main issues impeding proper development of the agro-based business are a lack of adequate road connectivity, electricity, transportation, cold storage, capital, and warehouses. India's agro-based businesses are underdeveloped as a result of a lack of infrastructure. Financial support is vital for the growth of any agro-based enterprise. Both wealthy and less wealthy people can build an agriculture-based enterprise. Those who are in good financial standing virtually always struggle to get the money necessary to develop an agricultural-based enterprise. However, the majority of rural residents are struggling financially. They lack the resources to develop any agriculture-based industries and lack access to established banking institutions. However, the majority of farmers that raise fruits and vegetables are small and marginal farmers, and the food processing business is largely a small-scale, unorganized industry. Even though agriculture and food processing are priority lending areas, for them, the issue is a lack of access to credit. The lack of reliable energy generation is a significant infrastructure obstacle for any rural agroprocessing company. In every industry, power outages are a severe issue that results in workers' spending a lot of time idle. The lack of accessible, affordable transportation services raises the cost of manufacturing industrial goods, which in turn makes them less competitive in the world market.

Lack of Requisite Skills: Another key issue in any industry based on agriculture is a lack of skills. Agro-based industries encounter a number of issues as a result of poor management. Any business's human capital is its most valuable resource. Industries' profitability and productivity greatly increase if they have the appropriate number and quality of workers. Lack of training is a significant barrier to the growth of agro-based companies. The necessity for them to develop these through participating in training and seminars extends from design to management. Unfortunately, rural India today lacks the requisite infrastructure to provide instruction to huge rural populations. It is regrettable that the rural Indian community lacks access to sufficient information regarding training programs. The community must examine its employment needs in order to understand the type of training necessary for survival. There is no adequate guidance for the development of entrepreneurs. The continuous involvement of numerous organizations in the growth of the agro-industry is necessary for farmers to receive input and sound agricultural advice. They can engage in activities that foster the development of rural residents' and farmers' skills, in particular in fields like food processing, beverage production, food and fruit preservation, pesticide formulation, etc.

Lack of Proper Rural Marketing of Agro Based Industries: Effective marketing and a rural finance system are crucial. The availability of a market is crucial for both the distribution of agriculturally based finished goods and the supply of agriculturally based raw materials. Agro-based businesses have relatively few opportunities to sell their goods in the neighborhood and are therefore forced to rely on supplying government organizations like the Food Supply Corporation of India and other organizations. The marketing system is a key relationship between non-farm, industrial, and urban economies and farm production. Agricultural products are transferred from producers to consumers through a variety of price additions. Asarya (2006)

Kaplinsky and Morris (2001) defined the value chain as "the full range of activities required to bring a product or service from conception to final delivery to its customers, passing through intermediary phases of production which involve physical transformation of the product and input from many producer services and its final disposal after use." This is how Kaplinsky and Morris (2001) defined the value chain (Raphael Kaplinsky and Mike Morris, 2001). Value Chain Analysis is crucial because it shows how artisans fit into the overall value chain structure. It can identify the parties holding back the biggest profits and control the entire food, feed, and fiber value chain. According to this concept, agricultural development strategies should target not only farmers but also others involved in marketing, trade, processing, and agribusiness. An effective marketing strategy aids in the control of output, the expansion of markets, the growth of the agro-based industry, the enhancement of national income through value addition, and the creation of jobs (Acharya, 2006). Since a large portion of the agricultural industry's output in developing nations is consumed domestically, export markets may present additional opportunities for the sector's growth.

Lack of Financial Inclusion: The lack of established financial institutions in rural India is the biggest obstacle to financial inclusion there. Even though some agro-based enterprises require a lot of money, they have a difficult time getting financial support. A sizable section of the population in rural India still lacks access to any official banking institutions. They have little choice but to take credit from dealers or other informal sources at hefty rates of interest. It is understandable that since the majority of Indian farmers are unable to obtain credit for their farming endeavors, it is inconceivable that they would have access to finance for expanding their economic operations into non-agricultural sectors.

Rural families are still receiving credit from local money lenders since institutional agencies' access to the weaker sections of society has remained limited. Since most rural families lack sufficient funds to fund their farming and other economic activities, rural financial loans are crucial. Due to the very small income-to-expenditure gap and the inability to purchase any fixed investments, borrowing is more vital for people to generate money (Acharya, 2006). However, because there are no banking institutions in the remote areas, taking out a loan with a higher interest rate is the most practical choice. Furthermore, a significant issue is the delay in loan processing. Going to any formal institution for credit is a challenging alternative for the large majority of rural Indians who are landless and uneducated. NGOs, PRIs, and volunteer organizations can take an active role in the institutional credit distribution process since the poor need the assistance of informal institutions to negotiate with credit institutions.

Conclusion

Despite having a severely underdeveloped industrial sector and high geopolitical unrest, rural India has abundant agricultural and horticultural resources that present enormous economic opportunities for agro-food processing and related enterprises. Agro-based industries rely on raw materials, which are their most valuable assets. It is regarded as the initial prerequisite for the growth of an agro-based industry. However, raw materials are not always available. Farmers occasionally alter the agricultural products' cropping patterns, which complicates production. It's because many farmers in India lack access to adequate irrigation systems. The monsoon continues to be their main source of dependence, and its failure could affect the raw material supply. The production unit may need to diversify to use different crops to make different products in order to keep up with the farmers' shifting cropping patterns.

Agro-industries will need to expand the use of current technologies and create new ones that maximize the utilization of inputs from raw materials. It is possible to transfer and adapt a number of useful technologies that are already widely used in the agro industries of high income countries, such as packaging, farm-level preprocessing, traceability technologies, cold stores and chains, as well as the ICTs that support inter-firm logistics and business planning. In addition, a lot of information is required for them to generate a living, such as data on the availability of raw materials, the market, the price of the product on the market, training, etc. Additionally, government departments' promotional efforts are significant. But this is not present in rural India. The growth of agro-based industries is made more challenging by the lack of adequate integration between various Government and Non Government entities.

Reference

Acharya, S. S. (2006). Agricultural Marketing and Rural Credit for Strengthening Indian Agriculture. New Delhi: Asian Development Bank.
Edward Allison and Frank Ellis. (2004). Livelihood diversification and natural resource access. Food and Agricultural Organisation of The United Nations, Livelihood Support Programme.
Ellis, F. (2000). Rural Livelihoods and Diversity in Developing Countries. New York: Oxford University Press.
Oystein Jull Nielsen, Santosh Rayamajhi, Patricia Uberhuaga, Henrik Meilby, Carsten Smith Hall. (2013). Quantifying rural livelihood strategies in developing countries using an activity choice approach. Agricultural Economics, 57-71.
Raphael Kaplinsky and Mike Morris. (2001). A Handbook For Value Chain Research. IDRC.
Santosh Mehrotra, Ankita Gandhi, Bimal Kishore Sahoo (2012). Organised and Unorganised Employment in Non Agricultural Sectors in 2000s. Indian Journal of Labour Economics, 55.