View of IMPACT OF RECENT TECHNOLOGIES ON EXPORTS OF PROCESSED VEGETARIAN FOOD FROM MP TO US

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Vol.03, Issue 04, April 2018, Available Online: www.ajeee.co.in/index.php/AJEEE

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IMPACT OF RECENT TECHNOLOGIES ON EXPORTS OF PROCESSED VEGETARIAN FOOD FROM MP TO US

Abhay Jain,

Assistant Professor, PMB Gujrati Commerce College, Indore (M.P.) 1.1 INTRODUCTION

Madhya Pradesh is one of the fastest growing States of India in the field of agriculture. Since its formation in 1956, Madhya Pradesh has grown from being agriculture and mining based economy to an industry/services based economy.

With an area of more than 150 lakh hectares being under cultivation, agricultural crops such as soybean, wheat, paddy, jowar, maize, gram, masur, tuar and mustard are the main crops. The state has a well built infrastructure that has attracted investments in various sectors. The emergence of industrial goods among the top export items is an indication of the rise of the industrial sector in Madhya Pradesh.

Exports: Performance and Potential Exports is an area where the State has significant scope for improvement. As against its 11th position in terms of output1, the State ranked only 15th in terms of its share in India‟s total exports, with exports valued at US$ 4436.8 million in 2016-17. Other landlocked states like Haryana (3.9%) and Punjab (1.9%), which are much smaller in area, have contributed more to India‟s exports than Madhya Pradesh.

Export Target

With the Government of India providing a special thrust on pushing exports from the country, it becomes critical for Madhya Pradesh to contribute effectively to propel India to achieve the national export target of US$ 1 trillion over the next 5 to 7 years. Under a baseline scenario, which assumes that Madhya Pradesh continues to maintain its share in India‟s merchandise exports (at 1.6%), the State may end up achieving approximately US$ 10.6 billion of goods exports in seven years‟ time, i.e. by 2024- 25. However, with an enabling policy environment, Madhya Pradesh has the potential to perform far better on the export front. Under such an optimistic

scenario, the share of Madhya Pradesh in India‟s merchandise exports is projected to increase from the current level of 1.6%

to 2.0% by 2024-25. This would propel exports from the State to reach the US$

10 billion mark by 2021-22 and further increase to approximately US$ 13.3 billion by 2024-25. In the next 5 years, even if Madhya Pradesh is able to increase its share in India‟s exports by 0.2%, and at the same time, India progresses well in its export target of US$ 1 trillion by 2024 complemented by the reviving world demand, Madhya Pradesh can easily achieve a target of US$ 10 billion by 2021-222.

Investment Trends

According to the Centre for Monitoring Indian Economy (CMIE) States of India database, new investment projects worth INR 143.5 billion were announced in Madhya Pradesh in 2016-17. The new investment projects announced in 2014- 15 and 2015-16 were significantly higher at INR 728.3 billion and INR 680.9 billion, respectively. However, the number of new projects announced in 2016-17 was 109, which was the highest during the last 5 years (see below table 1.1). In case of investment projects completed, 2016-17 was a lukewarm year for Madhya Pradesh with only INR 113.1 billion worth of investment projects completed, which is INR 474.9 billion in 2014-15 and INR 315.1 billion in 2015-16. However, the state of Madhya Pradesh has performed well in some other aspects. The investment projects dropped in 2016-17 amounted to INR 321.0 billion, much lower than INR 828.4 billion in 2014-15 and INR 601.2 billion in 2015-16. In fact, an analysis of the count of projects that were dropped shows that, only 49 projects were dropped in 2016- 17, that is, 170 in 2014-15, and 97 in 2015-16. Additionally, projects worth INR 18.6 billion (11 projects) were revived in 2016-17, up from INR 12 billion (7 projects) in 2015-16 and INR 0.4 billion (3 projects) in 2014-15.

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Figure 1.1: Investment Trend in Madhya Pradesh (in INR billion)

Source: CMIE, Exim Bank Research Economic growth, especially exports,

driven by FDI provides a good opportunity for growth and development. States like Maharashtra, Karnataka, and Gujarat, have been among the highest recipients of foreign capital expenditure and have performed phenomenally well both in terms of production and contribution to India‟s foreign exchange through exports.

Madhya Pradesh, being proactive in its intent could devise a suitable mechanism which involves creation of an enabling ecosystem that attracts FDI into the State.

Connectivity Challenge

One of the biggest challenges for the State is connectivity, despite the massive marketing being done to invite the private investors in this sector. In terms of air connectivity, Madhya Pradesh has just 5 of the 125 airports in India, most of which are not well connected with the rest of India. In fact, even Bhopal (Administration Centre) and Indore (Commercial Centre) are not directly connected by air with each other.

Warehousing and Storage Capacity The logistics sector, comprising the transportation, storage and distribution components is a key driver of a State‟s competitiveness in the national and

international markets. Transportation accounts for nearly 60% of the logistics market in India, while warehousing accounts for 25%. The rest 15% is accounted by the freight forwarding and the value added logistics.

In the context of Madhya Pradesh, adequate transportation, storage and distribution services is a major constraint as sensitive products such as pharmaceuticals and perishable products account for a significant share of the State‟s exports. In fact, given these situation, in the near future, Devi Ahilyabai Airport, Indore is coming up with Centre for Perishable Cargo which is expected to enhance exports from the state of Madhya Pradesh.

Similarly, the State also needs substantial expansion of cold storage infrastructure as also multipurpose cold storage facilities, which are critical for ensuring quality and maintaining shelf life of different types of products such as potatoes and dairy products. Currently, the State has over 163 cold storage units, with capacity of over 709.2 thousand MT as per following table 1.2. There is need for more such units to meet the growing demand for safe handling of exports, given that fairly large quantities of onion and tomato crops get damaged in the State.

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Table 1.1: Cold Storage Infrastructure in Madhya Pradesh

Source: CMIE, Exim Bank Research Madhya Pradesh has 6 vital Inland

Container Depots. First is the ICD Pithampur (Indore), which is a rail cum road linked ICD and was commissioned in 1994, with a warehouse space of almost 2000 sq. mts. The catchment area for this ICD includes Central India including Nagda, Mandideep, Gwalior, Dewas, Ghatabilod, Indore, Pithampur Industrial Area, Ujjain, Shajapur, Mangliya, Rau, Bhopal, Mandsaur, Biaora, Maksi, Ratlam, Neemuch, Banswara, Dhamnod, Mehatwara, Khargone. Second ICD is at Ratlam which is a rail and road linked ICD and was commissioned in November 2009. It has a modern warehouse with a space of 800 sq. Mts and caters to the area of Mandsaur, Neemuch, Banswara, Chittorgarh, Bhilwara, Ujjain, Nagda, Meghnagar, Dewas, Dahod, Ghatabilod, Indore, Pithampur Industrial Area and surrounding areas of Rajasthan and Madhya Pradesh. Third is the ICD Mandideep, which covers Tamot, Hinotia, Mandideep, Satlapur, Pilukhedi, Govindpura (Bhopal), and Budhni. Fourth ICD Malanpur, situated in Morena district, covers industrial areas of Gwalior, Morena, Shivpuri, Banmore, Dholpur, Datia, Jhasi, Lalitpur, Guna and Tikamgarh. Fifth, Composite Logistics Hub at Pawarkheda covering an area of 88.3 acres, includes development of an entire range of logistics infrastructure including rail sidings for cargo and container movement, rail-side warehouses, ICD, cold storage, food grains warehouse and development of common facilities for putting up processing units. The first phase of the Hub was inaugurated in 2015. Sixth ICD is a rail linked multimodal Logistics Park also being developed at Tihi, Indore by the Container Corporation of India.

1.2 REVIEW OF LITERATURE

Van Hal, (2000)4 studied that appropriate processing systems have not yet been fully developed. There are various options

of washing, peeling, slicing, drying and grinding the dried sweet potato chips.

There are, however, still a number of questions regarding these processing techniques. Marsden et. al., (2000)5 observed a short food supply chain (SFSC) facilitates some form of connection between the food consumer and producer by providing clearer signals related to the origin of the food product. The most important feature of a SFSC is that the product reaches the consumer embedded with information, such as through package labelling or personal communication. Bhattacharya, (2002)6 observed that prospects of exports of a commodity depend upon the opportunities and challenges ahead to encash the opportunities in the international market. Those countries whose import content of consumption as well as the share of world imports is high provide market opportunities. Coote, Greenhalgh and Orchard, (2003)7 conclude that governments do have a facilitating role in the provision of cold chain and other infrastructure. A recurring theme in the literature is the need for infrastructural investment.

Mhazo et. al, (2003)8 suggest that small- scale fruit and vegetable processing has potential to provide improved returns to horticultural producers as long as appropriate processing equipment, processing skills, packaging materials and marketing information are made available.

Mehta and George, (2003)9 explained the processed food export of Indian food processing industry and it was disrupted by Sanitary and Phytosanitary (SPS is an international treaty of the World Trade Organization) measures of the developed countries. The SPS measures became too stringent resulting in contraction of the agricultural exports which would be a negative impact upon the processing of agricultural products. Fasoranti, (2006)10 observed that farmers are dependent on labour-intensive, low input- output

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4 technologies and often face high levels of post-harvest losses due to poor handling, inadequate development of agro- processing, as well as poor rural infrastructure, particularly rural roads and storage facilities and limited access to marketing opportunities. Adejoh, (2009)11 found that due to inadequate storage and marketing facilities, inadequate extension services, poorly organized rural input, output and financial markets and substandard rural infrastructure, many farmers report limited contact with extension agents and consequently receive no information on improved production technologies and practices.

Vishwanadham N., (2010)12 analyses the deficiencies in the Indian supply chain in the food retail. The most important problem associated with the Indian food industry is the inefficient supply chain as a result of which about 20% of the food produce worth Rs. 10,000 crore is wasted.

1.3 OBJECTIVES

The main objective of this study is to discuss the impact of recent technologies on Export of Processed Vegetarian Food from Madhya Pradesh to USA on exporters of Madhya Pradesh.

1.4 METHODOLOGY & APPROACH Author adopted a mixed approach i.e.

combination of secondary and primary research to achieve the desired objective of the study. The Secondary Research was based on qualitative/quantitative data, records, documents and information available in public domain. As a part of the primary research, author carried out indepth exporters‟ consultations and one to one interviews with identified exporters and officials through structured questionnaires and interview. The study has covered more than 16 active exporters across the value chain, including exporters across the categories under study, industry associations, APEDA, DGFT, IIP, ECGC, EIC, CONCOR, EXIM Bank, USDA and educational institutions.

1.5 ANALYSIS AND DISCUSSION

The below table 1.2 and graph 1.2 of obtained result revealed that 68.75% of the exporter responded positive for the implementation of new technology which boost their export rate of processed vegetarian food. 56.25% accepted that e- commerce platform is very helpful in finding buyers of overseas market.

The study found that the firms located in Madhya Pradesh are equipped with latest technology in their production process that results in high quality products and cost effective production.

Out of the total responses it was found

that 62.50% of studied exporter firms have installed new technology (Figure 1.2). The result revealed that there is a significant relation between new technology implemented and growth of export of processed vegetarian food.

Although the firms which uses Information, Communication and e- commerce technologies to improve business and marketing activity, has increased the export after the adaption of latest technology available. However technology increases the pace and save time used in production and increased output to meet the demand of US buyers.

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Table 1.2: Impact of Technology on the Firms of Madhya Pradesh

Figure 1.2: Impact of Technology on the Firms of Madhya Pradesh

Majority of the exporters accepted that adoption of modern technology has improved export of processed vegetarian food from Madhya Pradesh. Technology enabled innovations such as digital payments, hyper-local logistics, analytics driven customer engagement and digital advertisements have enabled the food processing industry in India to grow at a much faster rate.

e-Commerce is India‟s fastest growing and most exciting channel for commercial transactions. Indian e- Commerce is growing at an annual rate of 51%, the highest in the world, and is expected to jump from $30 billion in 2016 to $120 billion in 2020. The retail sector (which is one of the largest item in eCommerce) is also showing a promising trend of 11% CAGR and is expected to reach $1 trillion by 2020.

On November 8, 2016, the Government of India launched a major

„demonetization‟ effort to address counterfeiting and the black market cash supply. Effective overnight, 86% of India‟s currency was nullified, which completely

disrupted the social, political, and economic spheres of India‟s economy.

Demonetization saw varied reactions across verticals. Gross merchandise value fell by 40-50% and may remain bleak until 2017. However, online sellers of food and grocery reported increased sales and the boost to the digital payment mechanism are expected to help the sector in long run.

1.6 SUMMARY AND CONCLUSION The study found that the firms located in Madhya Pradesh are equipped with latest technology in their production process that results in high quality products and cost effective production. Majority of exporter firms have installed new technology in their firms. The result revealed that there is a significant relation between new technology implemented and growth of export of processed vegetarian food.

1.7 LIMITATIONS OF THE STUDY

• Logical assumptions have been made in cases where data was unavailable

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• Due diligence has been done to source data for the latest available years and from the most relevant websites. However, due to unavailability of the same, previous years‟ data has been used in some cases.

• The production and consumption numbers are generalized and may vary from time to time based on cyclicality and seasonality.

• No investments / business decisions are to be taken solely on the basis of information provided in the article.

REFERENCES

1. Net State Domestic Product

2. Export Strategy for Madhya Pradesh, EXIM Bank‟s Working Paper no. 78, 2018.

3. As per Infrastructure and Project Monitoring Division of Ministry of Statistics and

Programme Implementation.

http://www.cspm.gov.in/ocmstemp/

PROJ_SUMMARY?prcd=N22000427&stat=O 4. Van Hal, M. (2000), “Quality of Sweet Potato

Flour during Processing and Storage”, Food Reviews International, Vol.16, 1-37.

5. Marsden, T. K., Banks, J., Bristow, G., (2000),

“Food Supply Chain Approaches: Exploring their Role in Rural Development”, Sociologia Ruralis, Vol. 40, pp. 424- 438.

6. Bhattacharya, B. (2002), “EXIM Policy 2002- 07: Barricading trade through NonTariff Measures”, Konark Publishers, New Delhi.

7. Coote, C., P. Greenhalgh, and J. Orchard (2003), “High Value Horticulture and Organic Export Markets for Sub-Saharan Africa.”

Natural Resources Institute, U.K.

8. Mhazo, N., Hanyani-Mlambo BT, Proctor, S., Mupanda, K., Nazare, R. (2003), “Constraints to Small-Scale Production and Marketing of Processed Food Products in Zimbabwe: The Case of Fruits and Vegetables”, Paper presented at the Food Africa International Working Meeting, 5-9 May 2003, Palais des Congrès, Yaounde, Cameroon.

9. Mehta, Rajesh and J. George (2003),

“Processed Food Products Exports from India:

An Exploration with SPS Regime”, Project Report, Australian National University, University of Melbourne, Research and Information.

10. Fasoranti, M.M. (2006), “A Stochastic Frontier Analysis of Effectiveness of Cassava based Cropping

11. Adejoh, S.D. (2009), “Analysis of Production Efficiency and Profitability of Yambased Production Systems in Ijumu LGA of Kogi State”, Ahmadu-Bello University, Zaria, Nigeria 12. Vishwanadham, N. (2010), “From Farm to

Fork”, Retail Biz, July 2010.

13. Ministry of Food Processing Industries (MoFPI)

• Media reports and Press Releases

• Department of Industrial Policy and Promotion (DIPP)

• Press Information Bureau (PIB)

• APEDA, DGFT, IIP, ECGC, EIC, CONCOR, EXIM Bank, USDA