Rising Capital Intensity and Employment Potential of Indian Food Processing Industry

• Published in: The Indian journal of agricultural economics 2020-10, Vol.75 (4), p.518-533
• Main Authors: Nithyashree, M L, Pal, Suresh
• Format: Article
• Language: English
• Subjects: Acid test ratios; Agricultural Finance; Capital intensity; Crop Production/Industries; Current liabilities; Elasticity; Employment; Financial performance; Food industry; Food processing; Food processing industry; Growth rate; Interest rates; Inventory; Labor and Human Capital; Labor force; Manufacturing; Processing industry; Profits; Rural areas; Sales; Value added; Wage rates; Wholesale Price Index-US
• ISSN: 0019-5014
• DOI: 10.22004/ag.econ.345149

In this paper, we have examined the capital intensity, financial performance and employment potential of the Indian food processing industry (FPI) using the industry-level data for 1980-2018. During the past three decades, capital intensity in FPI increased from Rs.0.07 to Rs.1.04 million per person. The employment growth is not appreciable as compared with the output growth in the food industry as a whole. However, in the recent period (2004-05 to 2017-18), the high growth rate of investment (11.64 per cent) coupled with an increasing trend in employment with the growth rate of 2.23 per cent per annum was noted. Despite increased capital investment, financial performance of the FPI in certain standard business parameters was found to be low, which may set back the investors. Employment pattern in the industry witnessed contractualisation of the labour force with rising demand for skill-oriented managerial and supervisory employees. This reorientation in the pattern of employment is also reflected in the wage distribution, where workers’ wage share reduced to 52.55 per cent from 60.80 per cent, whereas it increased for the supervisory and managerial category from 16.54 per cent to 30.29 per cent in the total emolument. The results of estimated employment function showed the rising potential of FPI in generating employment alongwith rising capital intensity. Efforts are therefore need to be focused on the high-value commodities such as meat, fish, fruits and vegetables and feed industry to improve the output level which has more potential. Further, being a large contributor to the employment, grain industry can be expanded to the nutri-rich cereals, to absorb surplus labour in the country.