Agro-based Industries in India: The agricultural industry is made up of industries that use plant- and animal-based agricultural products as their raw materials. Additionally, they produce marketable and usable products from agricultural output. There are a number of agro-based industries in India, including textiles, sugar, vegetable oil, tea, coffee, and leather goods.
The importance of agro-based industries in India
It is important to have agro-based industries in all branches for the following reasons:
(i) increase industrial production.
(ii) provide job opportunities to landless agricultural laborers and tribal population from rural and remote areas.
(iii) Diversify the rural economy and reduce agriculture’s dependence to ensure its development and stability.
(iv) provide steady incomes and livelihoods to alleviate poverty.
(v) generate foreign exchange that the country needs.
(vi) make rural areas more prosperous.
(vii) reduce wealth and income inequalities to a greater extent.
(viii) are simple to establish.
(ix) promote agriculture and industry growth in balance, and
(x) help prevent perishable agricultural products from being wasted.
The Indian agro-based industry scenario and scope
As an agricultural-based country, India has a large scope for agro-based industries. Approximately 42% of the Indian population is employed in the agricultural sector alone, according to the latest statistics for the year 2020. As a result of a variety of factors, the number of people employed in the agriculture sector has been declining year after year. The majority of people are still employed in this sector, however.
In the Indian economy, agriculture is considered the sunrise sector because of its high growth potential, socioeconomic impact specific to employment and income generation, and ability to weather recessions. Agro-based industries and agriculture contribute to 70% of the nation’s economy. Agro-based industries in India grew consistently during the period 2009-10 to 2013-14, according to the Central Statistical Office economic survey 2014-15. According to some estimates, approximately 14% of the workforce in developed economies is engaged in the agro-processing industry directly or indirectly, while 3% of the workforce in India works in this field. This sector has a great deal of potential for growth, despite its underdeveloped state.
Industry types in India that are based on agriculture
India’s agro-based industries can be broadly divided into the following categories:
1. Processors of agroproducts : It primarily deals with preserving perishable products and utilizing by-products for other purposes. These units do not manufacture products. A perfect example of this type of unit is a rice and dal mill.
2. Manufacturing units for agro-produce: The units manufacture new products using raw materials that are entirely different from the finished goods. There are many examples of these kinds of units, including sugar factories, solvent extraction units, and textile mills.
3. Manufacturers of agro-inputs : Producing agricultural mechanization or increasing crop productivity is the purpose of these units. In addition to agricultural implements and seeds, fertilizers and pesticides are also manufactured in these units.
4. Centres for agro-services : Pump sets, diesel engines, tractors, and other farm equipment are repaired and serviced at agro service centers.
Top 6 Agro-based Industries in India: Overview
Based on the nature of the work performed by agro-based industries, we broadly classified them as agro-produce processing units, agro-produce manufacturing units, agro-inputs manufacturing units, and agro service centers. As we proceed through this section, we will learn about some of India’s most important agro-based industries.
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1. The textile industry
In the textile industry, yarn, fabrics, or ready-made clothing are designed, produced, distributed, or marketed. The company manufactures cotton textiles, woollen textiles, silk textiles, synthetic fibers, and jute textiles. Due to its position as the country’s second largest employer after agriculture, the industry plays an important role in India’s economy. A total of 10.5 crore people are employed directly and indirectly by it. The country exports 5% of its total global trade in textiles and clothing, making it the second-largest manufacturer and exporter in the world. India exported 12% of its total goods in 2018-19. Various Asian and Middle Eastern countries are among the largest markets for Indian textile exporters. Welspun India Ltd, Raymond Ltd, Trident Ltd and Arvind Ltd are among the biggest textile companies in India.
During 2009-2023, India’s textile and apparel market is expected to grow by 8.7% at a CAGR of 8.7%, reaching USD 226 billion per year. Several policy initiatives and programs have been implemented by the Government of India in order to develop the textile industry, including (i) the integrated textile parks scheme, (ii) the National Handicraft Development Program, (iii) the North Eastern Region Textile Promotion Scheme (NERTPS), and (iv) the Comprehensive Handicraft Cluster Development Scheme.
2. The sugar industry
Among the components of the human diet is sugar, which comes from the sugar industry. Over the course of 2019-20, India dropped to second place in sugar production, losing to Brazil by a narrow margin. The world’s total sugar production is 166.18 million metric tonnes, which is about 17% of India’s 28.9 million metric tonnes. There are approximately 80,000 crores worth of sugar produced every year in the world today. 2020-21 will see a 17% increase in sugar production, with domestic consumption predicted to reach a new record of 28 million tonnes.
To improve the financial health of the sugar industry, the GOI has taken several initiatives, including (i) deregulating the sugar industry, (ii) introducing ethanol blended petrol (EBP), (iii) launching the Scheme to extend financial assistance to sugar undertakings (SEFASU-2014), (iv) providing soft loans to sugar mills in order to clear arrears on cane prices, (v) introducing Minimum indicative Export Quotas (MIEQ), (vi) providing subsidies to sugar mills, and (vii) imposing a limit on stockholdings.
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3. The vegetable oil industry
The Indian vegetable oil industry produces about 5% of all vegetable oil in the world. Globally, India consumes the most edible oils. Vegetable oil imports account for over 23 million tonnes of the domestic demand. With 15 million tonnes of edible oils imported annually, India is the second biggest importer of edible oils in the world. It imports 14% of the world’s total vegetable oil. Providing job opportunities to millions of people, generating an average domestic turnover of USD 10 billion and generating USD 90 million in foreign exchange, this industry occupies a unique position in the Indian economy. Indian edible oil brands include Fortune by Adani Group, Saffola by Marico, Sundrop by Agro Tech Foods, Dhara by Mother Dairy, and Dalda by Bunge Limited.
An exponential increase in domestic demand and exports will keep vegetable oil processing one of India’s largest industrial segments. It has proposed/introduced several measures to increase edible oil production and decrease import dependence. Some of these measures include (i) tax concessions for companies involved in oilseed farming, (ii) promoting oil palm cultivation under the National Mission on Oilseeds and Oil Palms (NMOOP), and (iii) developing plans to import zero edible oil.
4. The tea industry
Water is the world’s most consumed liquid, followed by tea. There was an increase in global tea production of 2.97% between 2014 and 2018. A total of 1,339.70 million kg of tea were produced in India in 2019, making it the world’s second largest tea producer. About three-fourths of the total production of tea is consumed locally in India, making it one of the world’s largest consumers. It employs over 2 million people, which gives it a special place in the Indian economy. Exports of USD 826.47 million in FY 2020 and USD 830.90 million in FY 2019 provide much-needed foreign exchange for the country.
It has always been remarkable to see the growth of the Indian tea industry. According to current production levels, the global tea production is expected to increase at a CAGR of 2.65% between 2019-25. During the period 2019-25, India’s tea consumption and production are expected to increase at 2.98% and 2.25%, respectively. During the period 2019-25, tea revenues are also forecast to grow at a CAGR of 6.23%. For the Indian tea industry to receive relief from rising costs and stagnated prices, the Indian Tea Association requested the government to take over PF contributions for three years and introduce other measures.
5. The coffee industry
We have always been tea-loving in India, but over the last two decades, we have witnessed a massive increase in coffee lovers thanks to a number of factors, including (i) increase in disposable incomes (coffee is more expensive than tea), (ii) global exposure, (iii) digital media penetrations, and (iv) lifestyle changes. Cafe Coffee Day, Costa Coffee, Starbucks, and other major brands set up outlets throughout the country as a result of a rise in coffee consumption in India.
Among global coffee producers and exporters, India ranks sixth. In 2019-20, coffee production reached 2,99,300 million tonnes, or 3.14% of global coffee production. In 2019-20, India exported USD 738.90 million of its domestic coffee production. Over the past year, the top 5 importers of Indian coffee have been Italy (21.63%), Germany (9%), Russia (6.3%), Belgium (5.24%), and Turkey (4.17%). Over a million people are employed directly and indirectly in the coffee industry in India, which generates over 4,000 crores in foreign exchange each year. In India, you can find Blue Tokai, Davidoff, Starbucks, Nescafe, and Cafe Coffee Day among the best coffee brands.
Domestic consumption of coffee has created a huge opportunity for the coffee industry. There is a great deal of progress taking place in rural India today. The coffee industry stands to benefit exponentially if brands are able to penetrate and create a connection with rural India.
6. The leather goods industry
A major commodity traded worldwide is leather. There is a strong demand for leather from the fashion, furniture, interior design, and automobile industries. Indian leather is responsible for around 12.93% of world leather production. In 2019-20, India exported USD 5.07 billion worth of leather and leather products. There were 17.22% of Indian exports to the USA, 11.98% to Germany, 10.43% to the UK, 6.33% to Italy, and 5.94% to France. There are 4.42 million people employed by the industry in the Indian economy. The country also earns foreign exchange from it. One of the top leather exporters in India is Tata International Ltd, another is Florind Shoes Ltd, another is Mirza Tanners Ltd, and another is Hindustan Lever Ltd.
Developing nations are taking over the manufacturing bases of the global leather industry. Foreign direct investment and employment opportunities in India increase as a result. Due to its growth potential, the government has identified this industry as a priority sector. The government has taken several initiatives to assist the Indian leather goods industry. Among them are:
(i) Train unemployed youth for placement-related skills.
(ii) Supporting the establishment of two new FDDI branches at Banur (Punjab) and Ankleshwar (Gujrat) in order to enhance institutional infrastructure in both locations.
(iii) approving the Mega Leather Cluster (MLC) in Nellore, Andhra Pradesh, and
(iv) Importing hides and skins duty free from anywhere in the world.
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The problems faced by India’s agro-based industries
Agro-based industries in India face the same challenges as any other industry. Constrictions and problems include:
A small landholding: In small landholdings, farmers are limited to subsistence farming due to the difficulty of achieving economies of scale.
Nature of seasons: Therefore, farmers only have a short time to reap the benefits of their hard work. Agricultural production has been adversely affected by climate change because it has altered weather patterns.
Products are perishable: It is because agricultural products are perishable in nature that they need a great deal of infrastructure, including cold storage and excellent roads. The forward and backward linkages of India are both problematic.
A variable : Raw materials in agro-based industries are variable in quantity and quality. Weather and soil conditions affect the quantity of raw materials. Lack of standardization leads to a reduction in quality. Producing, scheduling, and maintaining quality control are all factors that put additional pressure on agro-based industries.
Knowledge Limitations : As well as lack of information, limited awareness and limited knowledge about opportunities, technologies, and production systems, there is a lack of knowledge about opportunities and production systems.
The competition: As a result of low labor costs and fertile soil, India is becoming increasingly competitive with other countries in the region, including Bangladesh.
It is good to hear that the Indian Government is taking these constraints seriously. Indian Agro-based industries have been promoted through a variety of policy measures.
Here is a comprehensive list of Indian agriculture-based industries. Keep an eye on Aarug Agro for more updates on agriculture, tractors, farm implements, and more.
What do I need to do in order to start an agro-based business or agricultural enterprise in India?
A major revolution is at hand in the agribusiness sector in India today due to the modernisation of the agri-chain, equipment and infrastructure, the growth of production, increased investment, and increased exports, all of which are expected to take place within the next decade. Agricultural businesses are lucrative because of these factors.
Agribusiness ventures require clear business objectives, a business plan, and an understanding of the available resources. Follow the steps below to get started:
(A). Analyses of markets
Identify the specific market you plan to enter and do thorough research on it. It will help you decide whether to proceed at the entry level. You can gain valuable insights by seeking out relevant and credible sources of information. The following questions must be answered clearly:
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How does the market look today and in the future?
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Consumer and competitor problems?
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What are the major bottlenecks?
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What is your market positioning?
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What is the level of difficulty of the legal requirements?
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Do you plan to operate locally, regionally, nationally, or internationally?
Analyze the prospects and look for the window of opportunity once you have all the answers in place.
(B). Planning a business venture
The business plan is an essential part of a business because it connects all its aspects. Essentially, it outlines the business goals and plans for achieving them. Financial, marketing, and operational aspects of a business should all be addressed in a good business plan. A business plan should answer the following questions:
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What are your USPs (Unique Selling Points)?
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Can you tell me about your strategy (Financial, Marketing, and Operational)?
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What is your business management plan?
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Initial cost required to start the business and the regular costs and expenses involved?
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How will you arrange for the funds?
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What are the targeted markets and competitor analysis?
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S.W.O.T analysis (Strengths, Weaknesses, Opportunities and Threats).
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A 1000-day financial projection of expenses and expected revenue.
(C). Organise funds
There are many options available if you are looking for funding, including bank loans, crowd-funding, incubators, accelerators, and microfinance. Your business model and your funding requirements will determine the best option.
(D). Laws and regulations to be aware of
Different business sectors in India are governed by different central and state laws and regulations. Due to the potential impact that they may have on your business, it is very important that you understand them completely. Regulations include the following:
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The Indian Contract Act of 1872
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Factories Act, 1948
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Minimum Wages Act, 1948
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The Companies Act, 1956
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Monopolies and Restrictive Trade Practices (MRTP) Act, 1969
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Consumer Protection Act, 1986
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Taxation laws covering corporate tax, GST and indirect taxes such as excise, customs, sales and wealth tax.
(E). Get your business licensed and registered
Several types of companies can be registered, including sole proprietorships, partnerships, limited liability companies, public limited companies, and private limited companies. Among the major steps in registering a company are:
(i) acquiring a ‘Digital Signature Certificate (DSC).
(ii) acquiring ‘Director Identification Number (DIN).
(iii) filling an ‘e-form’ or ‘new user registration’, and
(iv) incorporating the company.
The process can be assisted by a number of legal firms and individuals. The Registrar of Companies can also assist you.
To get started, you must also obtain all the necessary licenses. As you move into different segments, you will need different licenses. In order to obtain the relevant licenses, you can hire specialized firms or visit government websites.
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