The agricultural sector makes a major contribution to the economy of India. In recent years, many agriculture-based industries have developed, contributing to almost 17% of the country's total GDP. Most importantly, this sector employs nearly 60% of India’s population. Agro based products are essentially derived from the raw materials of agricultural products and include paper, textiles, sugar, and vegetable oil.
If you are interested in learning about the agro based industries in India or want to start a business in this sector, read the following article. Let’s first briefly go through some facts and figures about agriculture and allied industries before listing the top agro based industries in India 2023.
Interesting Facts About Agriculture and Agro Based Industries
- Food is among the most important needs of human beings, and it is a well-known fact that food security harbours economic growth.
- Food security is one of the essential pillars of the economy. Since independence, India has strived for food security through self-sufficiency using various popular government schemes and subsidies. This led to the now-infamous Green Revolution (Harit Kranti) in the 1960s. Even in the present generation, the government has set food grain production targets to obtain better yield year after year.
- Today, India is among the top 15 exporters of agricultural products across the globe. Agricultural exports from India to the USA in FY20 increased by 17.34%.
- Agriculture as an industry has taken a backseat in recent years because of climate change, trade issues etc., but still contributes 17% of the country's GDP.
- With an estimated 60% of India’s working population employed in this sector, this is by far the largest sector providing employment and livelihood. Agriculture has produced various allied industries, also known as agro based industries.
- Agro based industries are those industries that rely on agricultural produce for raw materials to produce new products. In India, agro-based products include textiles, paper, sugar, vegetable oil, among others.
- The textile industry is the largest in India, accounting for almost 20% of the country's industrial output.
- Over decades, the agro-based industry has evolved into various types depending on the profitability of the market.
Types of Agro-based Industries
One of the first agro-based industries, the processing industry, does not manufacture a new product from agricultural produce. Instead, this industry places itself in the supply chain to sustain agricultural products for longer periods by adequately packaging with appropriate preservatives. The products coming out of these industries are designed to make their transport, handling and storage easier down the supply chain. For example, the textile or sugar industries are part of the agro-based industries.
Agro-products manufacturing industries
In agro-products manufacturing industries, a completely new product is produced using agricultural produce. Most agricultural produce is not suitable for immediate consumption by consumers. These industries produce a new product after processing agricultural produce. Sugar factories are a great example of agro-produce manufacturing units.
Agro-input manufacturing industries
Units in this industry facilitate improvement in agricultural production. Fertiliser production units and agriculture machine production units are good examples of such industries.
Agro-service industries are one of the essential sectors in the agriculture industries in India. It comprises agricultural consultation, research, equipment repair/supply and educational services, etc.
List of agro-based industries
After a quick brief on agriculture and allied industries, let's focus our attention back on the list of major agro-based industries in India.
The textile industry is the largest agro-based industry and happens to be the largest industry in India, accounting for around 20% of industrial output. It offers employment for over 20 million individuals and contributes nearly 33% to the total exports. The Indian textile industry contributes 5% of the global trade in textiles.
It is also important to note that the textile industry is not entirely dependent on agriculture; a significant part of it also depends on synthetic material. Most of the agricultural contribution to the textile industry comes from cotton, silk, wool and jute.
It will come as no surprise that India is the largest producer of cotton (agro based products), accounting for approximately 360 Lakh bales in FY21 till May. The cotton market touched a whopping 12,267,850 INR in FY19-20. The Cotton Textile industry involves the production of woven fabric using wholly partially spun cotton yarn. The textile industry in India has seen a significant jump in investment, including FDI worth INR 4,163 billion in 2020. The readymade garments sector is booming in this bracket, registering a substantial rate of exports from April 2020 to Mar 2021.
India isn’t far behind in this trade too. India is the 2nd largest producer of natural silk after China. India’s silk textile industry, categorised under agro based industry, is mostly based out of Karnataka, with over 7 Lakh farm families enrolled. India is the only country where all 5 kinds of silk, namely Mulberry, Muga, Tropical and Temperate Tasar, are produced and woven. Silk products produced and exported include yarns, silk fabrics, readymade silk garments, made-ups, silk carpets and silk waste.
Readymade garments make up the bulk of exports, accounting for 4 Billion INR between April 2020 and November 2020. The government of India has played a vital role in the promotion of silk and silk-based textiles, with the Indian Silk Promotion Council initiating several promotional programs for further growth and development of this industry.
Food Processing Industry
With the world's 2nd largest population, India has one of the biggest food processing industries in the world. The food processing industry in India makes up almost 32% of the food industry here. It is still growing rapidly with the advent of technology at various stages of the supply chain. According to CII (Confederation of India Industries), the food processing sector has shown the potential to attract an estimated INR 53,435,52 billion by FY 2024.
The government of India has run several initiatives such as National Mission on Food Processing, Cold Chain etc., to further the development of food processing in India. India now allows 100% FDI (foreign direct investment) in India's marketing of food products. A significant portion of the food budget is allocated to food processing industries like dairy with ₹3,289 crores in 2020-21.
The dairy industry in India has the potential to expand further with limited players in the market. Milk in India is the largest single product accounting for approximately 4% of the share in the economy. India happens to be the largest consumer of milk and milk-based products globally with the production of over 81,000 thousand metric tons per year, almost 3 times the second-largest consumer, which is the European Union.
The industry owes its growth to the Indian government's initiative started in the 1970s code-named “Operation Flood”. This turned out to be the world’s largest dairy development program. It is also important to note that the milk sector in India is a much more organized sector with strict adherence to FSSAI (Food Safety and Standards Authority of India) guidelines.
It is estimated that by the year 2025, milk production in India will grow to 108 million tonnes. The milk processing and milk products manufacturing sector has huge potential to expand in the coming 4-5 yrs.
India is the world's largest producer of sugar with over 25 million metric tonnes per year, way ahead of Brazil, which is at a distance of 18.11 million metric tonnes. Indian Sugar Mills Association (ISMA) has declared that sugar production in India has seen an increase of 14.4% and stood at 30.4 million tonnes between October 2020 and May 2021.
This agro based industry employs a good number of people. The sugar industry is a source of livelihood for over 50 million farmers and workers employed in sugar mills. One less known fact about the sugar industry is that it also helps produce power and contributes almost 1300 MW of power in India.
The Sugar industry also feeds the paper industry with its by-product called Bagasse. With incentives and export subsidies, along with a favourable weather forecast, sugar production in the country is estimated to reach 310 lakh tonnes in 20-21 compared to 274 lakh tonnes the previous year.
Vegetable Oil Industry
Vegetable Oil Industry is one of the significant agro based industries in India. Despite not being one of the largest producers of vegetable oil globally, India still stands 5th on the world map. India is, in fact, a heavy consumer of edible oil, with the country ending up importing oil worth INR 70,000 crores annually. This shows a considerable demand for edible oils driven by growth in the food processing sector and changing dietary habits.
The edible oil market is estimated to grow over 60% by 2025. Among the most popular oils is Soya oil, accounting for more than 1/3rd of the market, followed by Mustard oil, Palm oil and Sunflower oil.
India is the largest consumer of tea globally and almost 2/3rd of its total production is consumed locally. India is the 2nd largest tea producer globally, producing nearly 1.340 million kgs in the year 2019. Between April 2020 and Mar 2021, total tea exports of this agro based industry reached ₹265.69 crores from ₹175.45 crores in 2020. The tea industry also employs nearly a million people directly and another 10 million in related activities.
India is also one of the preferred destinations for speciality tea like Darjeeling, Assam and Nilgiris. The government body, Tea Board of India, set up in 1954, undertakes promotional activities that help increase tea production and improve the quality of its produce. It also facilitates participation in international tea fairs, exhibitions, buyer and seller meets, trade delegations.
India is the 3rd largest coffee producer and exporter of coffee in the world. This agro based industry accounts for almost 3.2% of the global production. Coffee, unlike tea, is not heavily consumed in India. Most of its produce, almost 70%, is exported. The total value of coffee exported between April 2020 and Mar 2021 was pegged at INR 58 billion. The top importers of coffee from India are Italy, Germany, Russia, Belgium and Turkey.
Leather Goods Industry
The leather goods industry in India employs close to 4.4 million people. With a revenue of Rs 67,000 crore, this agro based industry stands 5th in the global leather trade. India is the 2nd largest producer of leather footwear and the 2nd in exporting leather garments. With over 20% of the world’s cattle and buffalo share, India currently produces close to 3 billion sq. feet of leather annually. It is considered among the top 10 foreign exchange earning streams for India.
The leather industry in India comprises sub-industries like footwear, garments, saddlery and harness. In the Indian market, it has recorded a positive growth during April 2021 relative to April 2020. With over 40% of the population in India expected to live in cities by the year 2030, leather goods consumption is expected to increase proportionally. It is expected to grow by 8 times by 2030.
The jute industry in India is one the oldest agro based industries in India, employing over 4 million people. The Jute industry produces goods like gunny bags, carpets, strings and ropes, packaging material, etc. West Bengal in India is the hub of jute production, with over 90% of mills located there. India is the largest producer of jute globally, accounting for over 50% of global production. With the urban population liking jute-based fashion powered by both aesthetic properties and ethical attributes, the jute industry in India is expected to grow significantly in the coming years.
The bamboo industry may seem to be an unlikely contender in the top agro based industries list, but it consists of a significant potential for future growth in India. Bamboo has a heavy demand in the construction sector. It is also seen as a good alternative to coal. With a growing demand for eco-friendly products, bamboo has seen an increase in demand in recent years.
The bamboo industry also fuels the paper industry like sugar cane. Being a fast-growing product, bamboo extracted cellulose fibre is a major raw material used in paper production.
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Agro-based industries will see a positive swing as agricultural production increases. With the sops and subsidies provided by the government, the agricultural produce will continue to grow over the years, also fuelling growth in agro-based industries. With the present dispensation open to increased participation from the private sector, there is tremendous scope for investment in these industries in the coming decade. So, if you want to start a business in one of these agro-based industries, conduct thorough research and develop a business plan before embarking on the journey.
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