How small businesses form the backbone of the Indian food industry

Have you ever wondered about the origin story of the chapati on your plate? How did it evolve from a humble grain of wheat on a farm to a wholesome meal on your table? Behind every meal, there is a complex network of supply chain from farmers, who grow the crop, to small businesses that process it, and then the setups which sell it to us. This ecosystem of small and medium enterprises (SMEs) and food processing units form the backbone of the Indian food industry. This ecosystem not only ensures domestic food supply domestically, but also facilitates the food export ecosystem.

Beyond employment generation

SMEs employ almost a fifth of the country’s population, according to government estimates. But the role of SMEs and processing units goes much beyond employment generation. In a country as varied as ours, accessibility to food is of prime importance. SMEs play a major role in ensuring that nutritious food is available at an affordable price.

Small businesses are also a source of communication between consumers and producers. Processors and handlers can translate market demands back to the growers. In simple terms, these business acts like an informal feedback look and help small businesses democratise food produce.

Everything we eat, including food grains, fruits, vegetables and animal-source foods, are grown, processed, traded and retailed by small businesses. While there are many large players in the food industry, they are also dependent on the smaller businesses growing, processing and retailing food. Experts project that almost 72 to 83 per cent of all food consumed in India is handled by SMEs. Moreover, most of our food exports are handled by SME growers and retailers.

Adapting to meet new challenges

It is difficult to predict exactly how big the Indian SME food industry is, since a large number of food processing units and SMEs are unregistered and work in the unorganised sector. According to a survey by the Ministry of Food Processing Industries, there were more than 40,579 registered food processing units across the country in as of 2018-19. The actual number is deemed to be much higher.

Incidentally, the SMEs and processing units have been very agile and every innovating to strive and grow. Thinking on their feet, this industry has been able to adapt to these changing habits and demands.

The Covid-19 pandemic was a pivotal moment for SMEs and processing units. With supply chain disruptions and fluctuating demand, the food industry had to quickly adapt to survive. They were quick to adopt technology to address challenges. The pandemic has, in fact, made these SMEs and processing units more resilient.

That said, food habits and demand among consumers are changing faster than before. Sustainability is the keyword of this decade. Growing in an environmentally conscious way, consuming responsibly and reducing wastage is the future of the food industry. This change is already afoot.

To stay abreast of these changes, small businesses and processing units need to innovate new ways of growing and selling food. For those of us working in the agri-tech sector, it is imperative we build solutions and robust ecosystems that help small businesses address these challenges and innovate new products and processes.

Emerging technologies such as Artificial Intelligence and Machine Learning will be key in unlocking the potential of SMEs. Analytical business insights can help prepare for demand surges or fluctuations. These insights will be crucial in reducing wastage and creating a food value chain that is environment conscious.

Onus on policymakers

Technology can help streamline the entire supply chain of the food industry by removing redundancies. Technology tools can help connect the consumer to the producer and initiate a healthy dialogue between the two stakeholders. These tools will also help growers and traders expand to new markets. They will have the resources and knowledge to buy and sell produce at the best prices.

However, the onus for this change and transformation will lie with the policymakers and the private sector to create awareness and education about these technologies among small businesses, particularly those in rural areas.

The next time you sit down for a meal, spare a thought for an industry that has kept the food on our plates. The agri-tech sector must strive to strengthen these SMEs that form the backbone of the food industry.

(The author is co-founder of Poshn)