Food Processing Industries — UPSC Economy Notes

Overview

Food Processing means turning raw crops or livestock into usable food. It can be as simple as grinding wheat into flour, or as advanced as making instant noodles in factories.

The Ministry of Food Processing Industries governs this sector in India.

It plays a crucial role in India’s growth by reducing wastage of perishable goods, adding value to crops, generating jobs, and boosting farmers’ income.

Growth Rate: The sector grew by an average of 8.3% annually in the five years ending FY21, faster than agriculture alone.

Exports: In 2021-22, processed food made up about 10.9% of India’s total exports.

Role and Status in India

GDP Contribution: In 2020-21, food processing contributed 10.54% of India’s manufacturing GVA and 11.57% of agriculture GVA.

Employment: About 20.32 lakh people were employed in registered units, and 51.11 lakh in unregistered small units (2019-20). Together, 70+ lakh people depend on this sector.

Linkages: Provides a bridge between farmers (producers) and industries (processors, exporters).

Types of Food Processing Techniques

Primary Processing: First step – making raw items usable (e.g., drying grain, milling wheat into flour, shelling nuts, cutting meat).

Secondary Processing: Turning those items into familiar food products (e.g., baking bread, making cheese or curd, preparing wine/beer).

Tertiary Processing: Large-scale industrial making of packaged or ready-to-eat food (e.g., instant noodles, biscuits, frozen pizzas, airplane meals).

Importance

Reduces food wastage by preserving perishable crops.

Adds value: A raw mango (₹20) when processed into pickle can sell at ₹200.

Increases farmers’ income by linking agriculture with markets.

Generates employment in both rural and urban areas.

Supports exports and foreign exchange earnings.

Provides convenience and nutrition for consumers through fortified and ready-to-eat foods.

What is a Supply Chain?

A supply chain is a network that connects the origin of food to the final consumer.

It covers every step from raw material (farms) → processing (factories) → storage and transport → retail and export → consumers.

Stages of Food Processing Supply Chain

Suppliers (Farmers): Provide raw materials like grains, fruits, vegetables, milk, meat, etc.

Companies (Food Processors): Factories/industries that process raw food into packaged and value-added products (e.g., flour, biscuits, juice, pickles).

Distribution Network: Retail shops, supermarkets, wholesalers, e-commerce platforms, and exporters deliver products to customers.

Importance of Food Processing for India

Reducing Food Wastage: Processes surplus and imperfect crops to avoid wastage. Example: NITI Aayog estimated post-harvest losses of ₹90,000 crore annually.

Developing Infrastructure: Cold storages, warehouses, and transport facilities reduce spoilage at each level.

Food Preservation: Methods like freezing, canning, dehydration help increase shelf life of perishable goods.

Tackling Malnutrition: Processed foods can be fortified with vitamins and minerals to improve nutrition levels in India.

Boosting Exports: Processed food exports add to foreign exchange earnings and strengthen India's global trade.

Employment Generation: Creates jobs for farmers, factory workers, transporters, retailers, and exporters (both direct & indirect employment).

Encouraging Crop Diversification: Demand from food processing encourages farmers to grow different crops (fruits, vegetables, pulses, oilseeds).

1. Demographic Dividend Driving Demand

India has a young population – 65% are under the age of 35.

Rising incomes and urbanisation are changing food habits from home-cooked meals to processed and ready-to-eat options.

Example: The processed food market in India was worth USD 263 billion in 2019-20 and is expected to grow to USD 470 billion by 2025.

2. Digital Revolution – From Farm to Plate

Digitalisation is making the food supply chain more efficient by connecting farmers directly to processors and retailers.

Example: Ninjacart, a B2B platform, directly connects farmers with businesses, reducing middlemen and wastage.

Initiatives like Digital India are enabling real-time tracking, e-commerce, and transparent pricing.

3. Government Policies Driving Growth

Strong policy support has made food processing a priority sector.

Example: Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) launched in 2021 with ₹10,900 crore allocation to boost manufacturing and exports.

100% FDI (Foreign Direct Investment) through automatic route has attracted global companies to invest in India.

4. Innovation Fuels Success

Companies are launching new, healthier, and convenience-driven products to meet changing consumer demands.

Example: ITC’s ‘Farmland’ frozen foods offer preservative-free, minimally processed products, which gained popularity in FY 2023-24.

5. Agri-Tech Boosting Food Processing

Agri-tech startups are modernising agriculture through AI, IoT, and satellite monitoring.

Example: CropIn uses AI and satellite data to improve crop yield and quality, ensuring processors get consistent raw materials.

In 2023 alone, agri-tech startups raised over USD 706 million, reflecting huge growth potential.

Export Potential of Indian Processed Foods

India is the 18th largest exporter in the world with around 1.8% share in global merchandise exports.

Food and agricultural products contribute nearly 11% to India’s total exports, showcasing their critical role in foreign trade.

Agricultural exports were valued at 52.5 billion in 2022-23, up from 50.21 billion in 2021-22.

The government has set a target to almost double these exports to 100 billion by 2030.

Major export products: basmati & non-basmati rice, sugar, spices, oil meals (together 51.5% of total agri-exports).

Other exports: coffee, tea, tobacco, fruits, juices, vegetables, dairy, live animals, buffalo meat, marine products.

Challenges in Global Competitiveness

1. Fragmented Supply Chain

86% of Indian farmers are small and marginal, making aggregation difficult.

Farmers get only 30-35% of final value compared to 65-70% in developed economies.

2. Regulatory Labyrinth

Multiple regulators like FSSAI, APEDA, BIS, and state agencies cause overlaps and delays.

This complex regulatory system creates hurdles for exporters and small processors.

3. Infrastructure Deficit

Despite being 2nd largest fruit & vegetable producer, 25-30% produce is wasted annually.

Reason: inadequate cold chain, storage, and transportation facilities.

4. Skills Gap

Only 3% of the food processing workforce has formal training.

Lack of industry-academia collaboration causes shortage of skilled workers.

5. Quality Standards Issue

Inconsistent quality and weak enforcement of FSSAI standards hurt exports.

Small processors often cannot meet strict global quality benchmarks.

Way Forward

Leverage smart technologies (IoT, AI, robotics, automation) to boost efficiency and cut waste.

Focus on horticulture and animal products—India should aim to lead in at least 5 value chains (fruits & vegetables, fish & seafood, meat, dairy, poultry & eggs) by 2047.

Develop skilled manpower in food technology, safety, and processing methods.

Strengthen food packaging and labeling with clear health markers and enforce stronger safety standards.

Promote nutrient-rich grains like millets (declared International Year of Millets 2023) to tap into global health food demand.

National Mission on Food Processing (NMFP)

Launched in 2012 as a Centrally Sponsored Scheme (CSS) by Ministry of Food Processing Industries (MoFPI).

Aim: To decentralise implementation of food processing-related schemes by creating national, state, and district-level missions.

States and Union Territories were given larger roles in planning, monitoring, and executing policies.

Enhanced Ministry’s outreach for effective policy-making and oversight in food processing.

Foreign Direct Investment (FDI) Initiatives

100% FDI allowed in food marketing and processing through automatic route to attract foreign capital.

Focus: Strengthen supply chain infrastructure, logistics, and e-commerce in food sector.

FSSAI: Announced ₹482 crore investment to upgrade 59 existing food labs and establish 62 mobile testing labs to ensure safety and quality.

International Standards: Indian Council for Fertilizer and Nutrient Research (ICFNR) to adopt global best practices for ensuring quality fertilisers and food security.

Prime Minister’s Formalisation of Micro Food Processing Enterprises (PMFME) Scheme

Launched in 2020 under Atmanirbhar Bharat Abhiyan.

Objective: To formalise and strengthen the unorganised micro food processing enterprises.

Target: Upgrade/establish 2 lakh micro units by providing financial, technical, and business support.

ODOP (One District One Product) Approach: Promotes district-specific products, helping scale-up branding, marketing, and shared infrastructure.

Progress: By Dec 2022, 15,095 loans worth ₹1402.6 crore sanctioned; 713 districts and 137 products identified under ODOP.

Objectives of PMKSY

Create modern infrastructure for food processing and supply chain management.

Support farmers, cooperatives, entrepreneurs, and investors through facilities like cold storage, warehouses, and packaging units.

Encourage food processing plants near agricultural areas to reduce transport cost and post-harvest losses.

Provide government grants: 35% of approved project cost (50% in North-Eastern and Himalayan states).

Schemes under PMKSY

1. Mega Food Parks

Financial assistance up to ₹50 crore per project.

Provide plug-and-play infrastructure for food processors, entrepreneurs, and businesses.

Benefits: job creation, service improvement, and reduced processing costs.

2. Cold Chain and Value Addition Infrastructure

Aim: Create integrated cold chain from farm gate to consumer without any break.

Helps preserve perishable commodities like fruits, vegetables, dairy, fish, and meat.

3. Creation/Expansion of Food Processing/Preservation Capacities (Unit Scheme)

Supports new processing units and expansion of existing ones.

Encourages value addition, improves shelf life, and reduces wastage.

4. Infrastructure for Agro-Processing Clusters

Cluster-based approach near production areas.

Provides modern infrastructure and shared facilities to encourage group entrepreneurship.

5. Creation of Backward and Forward Linkages

Plug gaps in supply chain by integrating raw material availability with markets.

Strengthens connections between farmers and processors.

6. Food Safety and Quality Assurance Infrastructure

Establish quality surveillance and testing systems.

Ensures consumer safety and boosts export competitiveness.

7. Human Resources and Institutions

Supports R&D in food processing industry.

Focus on product and process development, efficient technologies, and better packaging.

Production Linked Incentive Scheme (PLISFPI)

Launched in March 2022 to incentivize investments and create global food champions.

Focus areas: Marine products, processed fruits & vegetables, Ready-to-Eat (RTE) / Ready-to-Cook (RTC) products.

Phase-I: 149 applications approved; Phase-II: 33 applications (organic and millet-based).

Special Millet PLI Scheme with ₹800 crore outlay was also introduced.

Objectives:

Create global food manufacturing champions.

Promote Indian brands internationally.

Generate employment in off-farm jobs.

Provide remunerative prices for farmers’ produce.

Operation Greens

Announced in Union Budget 2018-19; initially focused on Tomato, Onion, Potato (TOP).

Expanded in 2021-22 to 22 perishable products.

Two Components:

Long-term: Value Chain Development Projects (investment in logistics, storage, processing).

Short-term: Price Stabilisation Measures (50% subsidy on transport & storage of surplus produce).

Gram Samriddhi Yojana

A ₹3000 crore World Bank-supported scheme.

Aims to strengthen unorganised rural food processing sector.

Focus areas: Upgrading technology, capacity-building, skill development, entrepreneurship, and farm-to-market linkages.

Targets cottage industries, farmer producer organisations (FPOs), and rural food processors.

TRIFOOD Project

Joint initiative by TRIFED, Ministry of Food Processing Industries (MoFPI), and Ministry of Tribal Affairs.

Focuses on tribal communities to increase incomes of forest gatherers.

Helps value addition in Minor Forest Produce (MFP) through processing and better market access.

Food Processing Fund (by NABARD)

Set up with corpus of ₹2000 crore.

Provides affordable loans to units in Mega Food Parks & Designated Food Parks.

Supports setting up new units, expansion, modernization, and working capital needs.

Offers both term loans and working capital at concessional rates.

Draft National Food Processing Policy (2021)

Announced on 10th December 2021 by Ministry of Food Processing Industries.

Goal: Increase investments in food processing sector six-fold by 2035.

Key Objectives:

1. Attain higher growth through investment in supply chain infrastructure & perishables’ processing capacity.

2. Improve competitiveness via technology upgrades, R&D, branding, and leveraging India’s unique strengths.

3. Ensure sustainability through efficient use of water & energy, adoption of eco-friendly technologies, better storage & packaging, and waste utilisation.

Krishi UDAN 2.0 (October 2021)

Aimed at transporting perishable food products (horticulture, fisheries, livestock, processed food) from hilly, north-eastern, and tribal regions.

Pilot project launched for six months.

Airports Authority of India (AAI) provides full waiver on landing, parking, and navigational charges for Indian cargo aircrafts.

Helps farmers increase value realisation by improving connectivity to markets.

Role of NABARD in Food Processing & Storage

Food Processing Fund (FPF):

Launched in 2014–15.

Provides affordable credit to public & private investors for Designated Food Parks (DFPs).

Supports infrastructure development inside food parks like processing units, storage, cold chain, packaging, etc.

Warehouse Infrastructure Fund (WIF):

Provides financial support to state governments, agencies, and corporations to build scientific warehouses.

Later expanded to include storage infrastructure in APMCs as eligible projects.

Objective: reduce post-harvest losses, improve food security, and strengthen supply chain.

What is Food Fortification?

It means adding one or more essential nutrients to food, either naturally absent or lost during processing, to correct deficiencies.

Example: Adding iodine to salt to prevent goitre, or iron and folic acid to rice/wheat to reduce anaemia.

It is seen as a cost-effective and mass-scale intervention against 'hidden hunger' (micronutrient deficiency).

Advantages of Food Fortification

1. Improves Health: Reaches large population at once as it is added to staple foods (like salt, rice, wheat flour, edible oil, milk).

2. Safe & Regulated: Nutrient amounts are very small and strictly regulated by FSSAI standards.

3. Culturally Acceptable: Does not change taste, look, or eating habits; people consume fortified food without resistance.

4. Cost-Effective & Quick Results: According to the Copenhagen Consensus, every ₹1 spent on fortification gives ₹9 in economic benefits.

Need for Food Fortification in India

Nearly 70% of Indians consume less than half of their Recommended Dietary Allowance (RDA) of essential micronutrients.

Known as 'hidden hunger', this deficiency causes night blindness (Vitamin A), goitre (iodine deficiency), anaemia (iron deficiency), and birth defects (lack of folic acid).

NFHS-4 Data (2015-16):

58.4% of children (6–59 months) are anaemic.

53.1% of women (15–49 years) are anaemic.

35.7% of children under 5 are underweight.

50–70% of certain birth defects (like neural tube defects) are preventable through folic acid fortification.

Challenges to Food Fortification

1. Voluntary in Nature: Fortification is not mandatory; limited adoption by states and companies.

2. Weak State-Level Implementation: Lack of policy guidelines, budget, technology, and logistics has slowed large-scale adoption in ICDS, MDMS, and PDS.

3. Institutional Weakness: FSSAI lacks sufficient manpower and resources to enforce standards nationwide.

4. Public Awareness Gap: Misconceptions and low awareness among people about benefits of fortified food.

Way Forward

Make fortification mainstream in government schemes (ICDS, PDS, MDMS) to reach vulnerable groups.

Strengthen FSSAI’s institutional and monitoring capacity.

Increase awareness campaigns to build trust among consumers.

Encourage industry partnerships to scale up food fortification.

Over the long run, fortification will combat malnutrition, boost food processing industry, and improve consumer confidence.

What is Agricultural Price Support?

Imagine farmers grow a lot of wheat one year (bumper crop). With so much supply, the market price might crash, hurting the farmers even though they worked hard.

Agricultural Price Support is like a safety net provided by the government.

The government steps in to ensure that prices don't fall too low, protecting farmers from severe losses.

Goal: To ensure farmers get a minimum income, encourage production of essential crops, and maintain food security.

Common Methods

1. Minimum Support Price (MSP):

This is India's main price support mechanism.

Before the sowing season, the government announces a minimum price (MSP) for certain crops (currently 23 crops like wheat, rice, pulses, oilseeds).

If the market price for these crops falls below the MSP after harvest, government agencies (like FCI - Food Corporation of India) will buy the produce directly from farmers at the MSP.

This guarantees farmers a minimum return for their efforts.

MSP is recommended by the Commission for Agricultural Costs and Prices (CACP) and approved by the Cabinet Committee on Economic Affairs (CCEA).

2. Buffer Stocks:

The government buys and stores excess food grains (procured usually at MSP) during good harvest years.

These stocks are used during lean years or emergencies to stabilize prices and ensure food availability (e.g., through PDS - Public Distribution System).

3. Deficiency Payments:

Less common in India for major crops.

Here, farmers sell their produce in the open market at whatever price they get.

If the market price is below a pre-set support price, the government pays the farmer the difference (the 'deficiency'). Example: Price Support Scheme (PSS) for oilseeds & pulses uses this sometimes.

Benefits of Price Support (especially MSP)

Income Security: Protects farmers from price crashes due to overproduction or market fluctuations.

Production Incentive: Encourages farmers to grow essential crops needed for food security.

Food Security: Ensures adequate procurement for PDS and buffer stocks.

Investment Signal: Assured prices encourage farmers to invest in better seeds, fertilizers, and technology.

Challenges and Criticisms

Limited Coverage: MSP benefits are largely concentrated in certain regions (Punjab, Haryana, Western UP) and crops (mainly wheat and rice). Many small farmers and crops are left out.

Market Distortion: Guaranteed MSP can lead to overproduction of supported crops (like rice and wheat) while discouraging diversification into other needed crops (like pulses and oilseeds). It can also lead to artificial price levels not reflecting actual demand/supply.

Fiscal Burden: Government procurement, storage, and handling involve huge costs.

Inefficient Procurement & Storage: Issues like inadequate storage facilities (leading to wastage) and delays in payment to farmers.

WTO Concerns: Other countries argue that India's MSP constitutes trade-distorting subsidies.

Conclusion

Agricultural price support, primarily through MSP, is a vital tool for farmer income security and national food security in India. However, it faces challenges related to coverage, market distortion, and fiscal costs, requiring continuous reforms to make it more effective and sustainable.

1. How MSP Is Fixed

CACP (Commission for Agricultural Costs and Prices, 1965) recommends; the Cabinet Committee on Economic Affairs approves.

Crops: 14 kharif, 6 rabi and 2 commercial crops (jute, copra); sugarcane has a separate Fair and Remunerative Price (FRP).

Factors: Cost of production, demand-supply, domestic and international prices, inter-crop parity, terms of trade.

2. Cost Concepts

A2: Paid-out costs (seeds, fertiliser, hired labour, machinery, irrigation).

A2+FL: A2 plus imputed value of family labour—current MSP is at least 1.5 times this.

C2: Comprehensive cost including rent on owned land and interest on owned capital; the Swaminathan Commission (National Commission on Farmers, 2004–06) recommended MSP at C2 + 50%.

3. Procurement System

FCI and state agencies procure mainly wheat and paddy for the central pool, which feeds the PDS and buffer stocks.

Decentralised Procurement (since 1997-98): States procure and distribute themselves.

PM-AASHA (2018): Price Support Scheme for pulses and oilseeds, Price Deficiency Payment Scheme (pay the gap between MSP and market price), and private procurement pilot.

Reach: The Shanta Kumar Committee (2015), using NSSO data, noted that only about 6% of farmers sold to procurement agencies at MSP.

4. Problems

Regional skew: Procurement concentrated in Punjab, Haryana, Madhya Pradesh and a few others.

Crop bias: Paddy-wheat favoured over pulses, oilseeds and millets; drives groundwater depletion in the north-west.

Stocks: Central pool often far above buffer norms, raising storage costs and wastage.

Fiscal cost of the food subsidy; WTO limits on trade-distorting support.

5. The Legal Guarantee Debate

For: Income security, protection from distress sales, bargaining power for small farmers.

Against: Huge fiscal burden if the government must buy all produce; private traders may exit if forced to pay MSP; could lock in the cereal bias.

Middle path: Price deficiency payments, wider procurement of pulses and millets, better markets, and a committee (constituted in 2022) on MSP, crop diversification and natural farming.

1. The APMC System

Regulated markets (mandis) set up under state Agricultural Produce Market Committee Acts to protect farmers from exploitation by traders and moneylenders.

Problems: Licensing barriers that create trader cartels, high market fees and commissions, delayed payments, few mandis in many states, and political capture of committees.

Market density: The National Commission on Farmers suggested a regulated market within about 5 km of every farmer; actual coverage is far lower in most states.

2. Reform Attempts

Model APMC Act (2003): Private markets, direct marketing, contract farming.

Model Agricultural Produce and Livestock Marketing (APLM) Act (2017): Whole state as a single market, single trading licence, cap on fees.

Model Contract Farming Act (2018).

Farm laws (2020): Trade outside APMC yards, contract farming framework, amendment to the Essential Commodities Act—repealed in November 2021 after farmers' protests.

Bihar abolished its APMC Act in 2006; outcomes are debated.

3. e-NAM (2016)

Online trading portal linking APMC mandis, run by the Small Farmers' Agribusiness Consortium (SFAC); aims at transparent price discovery and inter-mandi trade.

Limits: Little inter-state trade, lack of assaying and grading facilities, poor internet in mandis.

4. Farmer Producer Organisations

Collectives of farmers registered as companies or cooperatives; aggregate produce, buy inputs in bulk, and negotiate better prices.

Scheme for formation of 10,000 FPOs (2020), implemented through SFAC, NABARD and NCDC.

5. Supporting Infrastructure

Agriculture Infrastructure Fund (2020): Financing for cold storage, warehouses and processing.

Warehouse receipts: Warehousing (Development and Regulation) Act, 2007 and WDRA enable loans against stored produce.

Gramin Agricultural Markets (GrAMs) upgrading rural haats.

6. Way Forward

Cooperative federalism to persuade states, more mandis and grading facilities, strong FPOs with working capital, and price information through digital tools.

1. Types of Subsidies

Fertiliser: Urea is sold at a statutorily fixed low price, with the government paying the rest; phosphatic and potassic (P&K) fertilisers get a fixed subsidy per nutrient under the Nutrient Based Subsidy (NBS) scheme (2010).

Power: Free or cheap electricity for farm pumps in many states.

Irrigation: Canal water charges far below cost.

Credit: Interest subvention on short-term crop loans through Kisan Credit Cards.

Insurance: PMFBY (2016)—farmers pay 2% of sum insured for kharif, 1.5% for rabi, 5% for commercial/horticulture crops; the rest is shared by governments.

Direct income support: PM-KISAN (2019)—₹6,000 a year in three instalments to landholding farmer families.

2. Problems

Fertiliser imbalance: Cheap urea leads to overuse of nitrogen; the recommended NPK ratio is about 4:2:1 but actual use is heavily skewed, damaging soil health.

Groundwater: Free power encourages over-pumping and water-intensive crops like paddy in Punjab.

Regressive benefits: Larger farmers and those with irrigation gain more; tenants often miss PM-KISAN.

Diversion: Subsidised urea diverted to industry or across borders.

Fiscal burden and pending dues to fertiliser companies and DISCOMs.

3. Reforms

Neem-coated urea (100% from 2015) to curb diversion and improve efficiency; Nano urea (liquid) introduced by IFFCO in 2021.

DBT in fertiliser (payment to companies after sale through PoS devices); One Nation One Fertiliser ('Bharat' brand, 2022).

Soil Health Cards (2015) for balanced nutrient use; PM-PRANAM to reward states that reduce chemical fertiliser use.

Solar pumps (PM-KUSUM) and metered power to reduce power subsidy.

4. WTO Agreement on Agriculture

Amber Box: Trade-distorting support (price support, input subsidies); limited by de minimis—10% of the value of production for developing countries.

Blue Box: Support linked to production-limiting programmes.

Green Box: Minimally distorting support (research, extension, income support not linked to production)—no limits.

Public stockholding: India's food security procurement is protected by the 'peace clause' agreed at the Bali Ministerial (2013) until a permanent solution is found.

1. Why Digital Agriculture

Information gaps on weather, prices and inputs; high cost of credit and insurance because of poor data; fragmented landholdings make personalised advice hard.

2. Digital Agriculture Mission (2024)

Agri Stack: (i) Farmers' Registry with a unique Farmer ID linked to land records; (ii) Crop Sown Registry through Digital Crop Survey; (iii) geo-referenced village maps.

Krishi Decision Support System: Combines remote sensing, weather, soil and crop data.

Soil profile mapping and digital crop yield estimation.

3. Key Tools and Schemes

e-NAM (2016): Online mandi trading.

Soil Health Card (2015): Nutrient status and fertiliser recommendations for each holding.

Kisan Call Centres (2004) and mKisan SMS advisories; AI chatbots in local languages.

Kisan drones: Spraying pesticides and nutrients, crop assessment; Namo Drone Didi (2023) gives drones to women's SHGs.

Remote sensing for PMFBY: Satellite and technology-based yield estimation (YES-TECH) to speed up claims.

Kisan Credit Card digitisation and the Kisan Rin portal; Digital Public Infrastructure enabling credit based on land and crop data.

Agri-tech start-ups: Input marketplaces, farm-gate procurement, precision irrigation, IoT sensors.

4. Benefits

Timely advisories reduce losses; transparent trade; faster insurance claims; targeted subsidies; lower transaction costs for lenders.

5. Challenges

Digital divide: Low smartphone ownership and digital literacy among women and older farmers; poor rural connectivity.

Land records: Outdated records exclude tenants and women cultivators from farmer IDs.

Data governance: Consent, ownership and privacy of farmer data; risk of exploitation by private platforms.

Affordability of drones and precision tools for small farmers.

6. Way Forward

Assisted access via FPOs, CSCs and Krishi Vigyan Kendras; voice-based tools in local languages; inclusion of tenants; strong data-protection rules aligned with the DPDP Act, 2023.

1. Classification of Holdings

Marginal: below 1 ha; Small: 1–2 ha; Semi-medium: 2–4 ha; Medium: 4–10 ha; Large: 10 ha and above.

Holdings keep shrinking through inheritance and population growth.

2. Challenges

Low income: The NSO Situation Assessment Survey (2019) found farming households depend heavily on wages and livestock, not just crops.

Credit: Many rely on moneylenders at high interest; tenants without land records cannot access KCC loans.

Mechanisation: Machines are uneconomical on tiny plots.

Market access: Small surplus, distant mandis, distress sale to local traders.

Risk: Rain-fed farming, climate shocks, low insurance awareness.

Tenancy: Informal leasing gives tenants no security or access to schemes.

3. Policy Support

Income support: PM-KISAN; state schemes like Rythu Bandhu (Telangana) and KALIA (Odisha).

Collectivisation: 10,000 FPO scheme; cooperatives; Ministry of Cooperation (2021).

Credit: KCC with interest subvention, priority-sector lending targets for small and marginal farmers, Joint Liability Groups for tenants.

Mechanisation: Custom Hiring Centres and farm machinery banks.

Risk: PMFBY, weather-based insurance.

Land leasing: NITI Aayog's Model Agricultural Land Leasing Act (2016) to legalise and protect tenancy.

Diversification: Horticulture, dairy, poultry, fisheries for higher value per acre.

4. Way Forward

Strong FPOs with market linkages; secure tenancy; non-farm jobs in rural areas to absorb surplus labour; climate-resilient practices and natural farming; better extension through KVKs and digital tools.