Food-processing SMEs key to job creation in large agrarian states

CRISIL’s analysis of more than 750 small and medium enterprises (SMEs) in the food processing sector shows that large agrarian states are yet to tap their full potential in terms of employment creation.

CRISIL-rated food processing SMEs in most agrarian states have fewer than 21 employees per unit, versus more than 27 for others.
 

Food-processing SMEs typically include grain mills, manufacturers of fruit juice, sauces and pulp, cashew processing units, and oil mills.

Agrarian states have a higher percentage of working age population, a chunk of it based in rural areas. SMEs here face challenges such as small operations and limited access to storage, transportation and warehousing.

Additionally, low specialisation and undifferentiated products constrain their ability to increase market share. They also lack access to skilled labour relevant to thefood processing industry.
 

As a result, SMEs struggle to scale up and expand their employee base.
 

In the past decade, Uttar Pradesh and Madhya Pradesh have been able to attract investments from large food processing companies, but investments in food-processing SMEs have been limited. 
 

Targeted investments through sector-specific infrastructure development assistance, awareness workshops and skilling programmes for manpower in food processing units can have long-term benefits. 

Such initiatives will improve their ability to attract skilled manpower and also address the rural-urban employment gap to some extent.
 

A policy to attract investments into food-processing SMEs is thus imperative.