Economic Highlights
New Delhi, 1 September 2005
India’s Goldmine
PUSH
PROCCESSED FOOD INDUSTRY
By Dr Vinod
Mehta
The Indian agricultural sector has been performing
relatively better for the past ten years, notwithstanding the bad monsoon years
when the sector recorded a negative or very low rate of growth. In other words,
the sector can be said to have achieved relative stability and can contribute
more to the economy. The path can be said to have been laid for the growth of
agro-based industries.
In fact, India can claim to be sitting almost
on a goldmine of processed food, which can become a top foreign exchange earner
provided we follow appropriate policies and capture foreign market. The effort
is totally indigenous, does not involve any import of any inputs and with a little
investment one can earn a large amount of hard currency. The world processed
food business runs into billions of dollars but India's share is not even one per
cent.
India, as a signatory to the WTO,
has to open up its economy to imports of agricultural products from all over
the world within a few years time. When the WTO agreement was signed it was
said that the country stands to gain by the opening of the farm sector as its
products will be relatively cheaper than similar agricultural products produced
elsewhere. The reasoning was that other
countries, especially the developed ones, will be forced to eliminate or lower
down their subsidies on products while the subsidies on these products in India are already much lower than
allowed by the WTO.
This is true to a very large extent. The WTO has
opened opportunities to be exploited by us. However, whether India will be
able to exploit this advantage will depend upon a large number of factors. The relatively lower prices, on their own,
will not be of any help unless we make a sustained attack on the international
markets and produce goods which are in demand in those countries. This implies
increasing the productivities of various agricultural products, improving
quality, tastes, etc., application of highly-efficient processing technologies
and improving the packaging.
It has been almost nine years since India signed
the WTO Agreement and still there are no indications that the country is doing
anything in this direction. Lack of any agricultural policy is the weakest link
in our economic reforms. Even though one has been hearing for the past decade
that a new policy is on the anvil no such policy has been announced so
far.
Both developed and developing countries have now
increased their pressure on India
to open up its economy to their agricultural products sooner as India has
comfortable foreign exchange position.
For instance, Malaysia
is keen to increase its export of palm oil while Mexico
is keen to increase its export of soya bean oil to India. Australia
and New Zealand are looking
for opportunities to export milk and milk products as well as kiwi fruit to India. The US is looking for exporting its almonds and
orange juice to India.
India has allowed import of
agricultural products but these countries expect much more from India.
It must be understood that India will have to open up
its economy to imports of agricultural products from these countries sooner or
later for the country cannot afford to ban their entry for a long as India is itself
an exporter of agricultural products (though not up to their level) like
basmati rice, fruit and vegetables, milk and milk products, tea, coffee, spices
and so on. But India is not
yet a major player in these products in the international market even though it
has the potential. Its record of
consistency in quality, adherence to supply schedules is very bad which puts
off the foreign importer.
This is a minus point with our exporters which comes
in our way of tapping export market. Thailand and the Philippines
are exporting Pineapple juice on a large scale for the past several years,
while India
is unable to do so on any significant scale because of non-professionalism of
our business community. How can we enter the international markets with this
kind of attitude?
We should seize the current opportunity of record
harvest and initiate steps for the all- round development of food processing
industry.
A study carried out by the Food Processing Ministry a
few years ago indicated that India is the largest or the second largest
producer in the world of tea, milk, cattle, fruit and vegetables, eggs, rice
and wheat. However, not much has been done to develop international markets for
these products. It is true that most of
these items are being exported to West Asia but there is very large
international market for these products outside West Asia.
Though incentives have been provided in the past to
encourage the growth of food processing industry, yet it is still lagging
behind by international standards. The
excise duty on some of the inputs like packaging is very high. The food preservation technology in most of
the cases is more than two decades old.
Similarly, packaging of the products is much below the international
standards. On the top of it, no attempt
has ever been made to develop brand names in foreign countries.
It is only for the past few years that some of the
companies have started marketing their products in the international markets
under their brand names. For instance,
till recently the Indian tea was being auctioned in bulk to foreign buyers
rather than selling them in a packaged form.
The Tatas have now started selling the Tea in a packaged form in the
international market under its own brand names.
Similarly, the cooperative sector producer of milk
and milk products Amul has also started marketing its product in the
international market under its own brand name.
But these are only few exercises in brand building and cannot be said to
establish markets for Indian agricultural products in a very big way.
Therefore what the country needs to do immediately is
to chalk out a concrete programme for the development of processed food
products industry so that India
can become a major player in the international market in the next three to four
years.
As a first step India should concentrate on
increasing the productivity of those agricultural products in which it has a
comparative advantage. It could be
Bansmati rice or tea or coffee or it could be mangoes or bananas. Some of the energies of our agricultural
research centres should be concentrated on developing high yielding varieties
of these products. In fact, Indian
agricultural scientists have successfully developed a new strain of Basmati
rice which provides 25 to 30% more yield per hectare without any compromise on
quality or aroma.
Second step should be the development of new
preservative technologies of international standard and can prolong the shelf
life of those products without any much refrigeration. For instance, we are producing large number
of oranges including Kino, yet 30 per cent of this fruit goes waste as we have
not been able to develop any technology to preserve its juice. Therefore, before bottled orange juice from Florida, the US
enters the Indian market we must perfect the technology to preserve the citrus
fruit juice in India so that
we can compete effectively the US
producers not only in our own domestic market but also in the international
market.
Third step needs to be to improve the food processing
technology and bring it up to international standards. One public sector organization is engaged in
the development of such technologies but it has had very little impact till
date.
Finally, the food processing industry will have to
pay attention on packaging of the processed food
products. At the moment the packaging of
most of the processed food products is so repulsive such that even if we have
very good product to offer it will not sell in the international market because
of its poor packaging.
India has a comparative
advantage in selling its agricultural products at competitive prices in the
international market but it will not be able to capture by itself the vast
international market for various products without first improving the quality
of its products and its packaging in every aspect. We have a lot to learn in this respect from
countries like Thailand, the
Philippines and Malaysia which
have well-established food processing industries.
Successive Governments at the Centre have recognized
the importance of processed food industry, but are not moving fast enough to
take advantage of our comparative advantage in the agricultural sector. –INFA
(Copyright,
India News & Feature Alliance)
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