The agro processing sector continues to be at a nascent stage, and its challenges need to be addressed on several fronts for the industry’s revival and crucial market benefits.
One of the main challenges to this sector is access to credit. Though, credit disbursed by banks for this industry has risen over the years, a deeper look at the numbers has revealed that the government share of credit disbursed to FPI as a % of the total credit deployed for all the industries, stands at a mediocre 6%. It has been more or less the same over the years. Over the year, while there has been a consistent rise in planned expenditure, the actual expenditure in FY14 fell from last year. Statistically, the growth rate of the credit deployed has declined from 47.8% in 2010 to 18.4% in 2012.
An erratic FDI trend in this industry has added to the challenges. Despite 100% FDI permitted under the automatic route for food processing industries, statistics show that the movement has been inconsistent and it is not possible to establish a positive trend. The sudden rise in FDI in FY02 was a result of the Indian government providing a transparent and investor friendly climate for foreign investors. However, underdeveloped infrastructural facilities, acted as a deterrent for foreign investors to further invest in Indian food processing industry.
The opportunity, therefore, lies in the development of warehousing and cold storages. Not only will it ensure timely delivery and quality supply of raw materials for processing, but also help lower the prices of processed foods.
The government is taking a few measures to revive the sector. There has been a steady 6.05% growth in direct employment in FPI from FY11 to FY12. Around 2.23 lakh micro, small and medium food processing enterprises have been registered officially. 42 mega food parks have been set up in public-private partnership model, with an investment of INR 98 billion. Out of those, 25 projects have been accorded final approval.
Food processing has a promising future, provided adequate government support is given. The sector needs a fillip in the form of better logistics, technology and access to credit for attracting foreign and domestic investments. India needs to attain self-sufficiency in these areas to lead the growth of the industry in a holistic manner.