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Agro-Based Industries: Meaning, Constraints and Suggestions


In this essay we will discuss about:- 1. Meaning of Agro-Based Industries 2. Constraints of Agro-Based Industries 3. Suggestions.

Meaning of Agro-Based Industries:

Agro-based industries need a special mention since their importance in the Indian context gets further enhanced because of the following factors:

(a) Agro-based industries are comparatively easy to establish and provide income in the rural areas with less investment.


(b) These industries facilitate effective and efficient utilisation of agricultural raw materials.

(c) Agro-based industries transmit an industrial – culture in rural areas thus bringing about modernisation and innovation in agriculture itself.

(d) Some of the agro-based industries like processed food and food preparations have tremendous export potential.

(e) Agro-based industries can be set up on co-operative basis ensuring participation of the people in the development process.


In view of the above, and further in view of the fact that the agriculture is mixed in what has been called a ‘green reaction’ (characterised by mediocre growth, the stagnation of yields and persistent instability of output), agro-industries can be looked upon to provide a mass of livelihoods.

However, the economy is yet to realise the full potential of these industries. The domestic as well as global market is enormous. Only with mass production aided by modem technology and intensive marketing can the domestic market as well as the export market be exploited to the fullest extent.

Constraints of Agro-Based Industries:

We can identify a number of constraints which have inhibited agro-industrial growth.

(a) The concern for backward area development overshadowed the efficiency consideration and we evolved policies for industrial dispersal which created sick units. Agglomeration has a logic of its own and the industrial location policy has to keep this dynamism in view.


(b) The absence of information, lack of awareness about opportunities and limited knowledge about technology, and production systems is a major entry barrier for rural entrepreneurs.

(c) The productivity of the rural labour is conditioned by the rural culture, the available skills and training and capital intensity of the projects. Under the prevailing conditions, the productivity of rural labour is low and the marginally lower wage rates in rural areas do not compensate for this low productivity. Under the circumstances the subsidies and incentives on capital investment have promoted capital intensity even in agro-industries and has had detrimental impact on labour intensive manufacturing.

(d) It is the organisational institutional mechanism that translates policies and programmes into reality. Unfortunately, the rural entrepreneur is left without support systems of any significance.

(e) The investment in agricultural sector was aimed primarily towards providing wage goods for the urban industrial sector. Rural employment generation strategy should have taken cognizance of the agro-industrial linkages and paid greater attention to dynamic efficiency in the rural sector. But the policies towards the village and small industries neglected promotion of such industries in rural areas by denying dynamic comparative advantage in the rural sector.

(f) The policy bias against wage-employment was further accentuated by the insistence on promoting self-employment in all development programmes.

(g) No positive effort was made to involve the rural elite, those who possess capital and human resources to catalyse the developmental process.

Suggestions for the Development of Agro-Based Industries:

A strategy of development of agro-based industries should consist of the following ingredients:

(a) The growth and expansion of agro-based industries should form an inseparable part of the overall programme of economic and industrial development of the country.

(b) The related groups of agro-based industries should be set up in a coordinated manner so that the utilisation of by-products is simultaneously possible.


(c) The new institutional framework must enable a large number of small farmers to participate in and benefit from agro-processing. This underlines the need to develop a co-operative network with a view to harmonizing the interests of the producers, processors and consumers and to avoiding excessive dependence on private corporations and multinationals.

(d) Advanced management and marketing methods should be introduced in agro-based industries which cater to the export demand.

(e) Both backward and forward linkages should be ensured in respect of agro-based industries so that maximum growth impulses are generated.

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