Economics

Pharma Sector (in India and World)

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Last Updated: July 2025 (Pharma Sector (in India and World))

Pharma Sector (in India and World)

Pharma Sector (in India and World)

This article deals with the ‘Semi-Conductor Industry (in India and World).’ This is part of our series on ‘Geography’, which is an important pillar of the GS-1 syllabus. For more articles, you can click here.

Link with UPSC Syllabus

  • Geography (GS1): Industrial location factors, resource distribution
  • Economy (GS3): Manufacturing, exports, employment
  • Sci-Tech (GS3): Biotech, IP, pharma innovation
  • International Relations (GS2): Health diplomacy, soft power

Introduction

Every morning, when millions of Indians swallow a pill for blood pressure, diabetes, or fever, they rarely stop to wonder—where was this medicine made? How did a factory in Baddi (Himachal) or Hyderabad (Telangana) become a global hub for life-saving drugs?

The answer lies in a complex interplay of geographical, economic, and policy factors that make India the ‘Pharmacy of the World’.

Why Do Pharma Industries Locate Where They Do?

1. Proximity to R&D 

  • Pharmaceutical manufacturing is science-intensive. R&D is crucial for developing new drugs, vaccines, and biosimilars.
  • For instance
    • Indian companies like Sun Pharma, Dr. Reddy’s, Biocon invest in in-house R&D, often in Hyderabad, Bengaluru, and Pune.
    • Switzerland (Basel) thrives due to investment in biotech and R&D (Novartis, Roche HQs).

2. Availability of Raw Materials and APIs

  • Pharmaceutical production requires a large number of Active Pharmaceutical Ingredients (APIs) and chemical intermediates. Active Pharmaceutical Ingredients (APIs) are the “active” part of any medicine.
  • China’s Hebei and Jiangsu provinces dominate global API production due to cheap chemical inputs and scale.
  • Earlier, India imported ~70% of APIs, mostly from China. But now, India is shifting to self-reliance in API manufacturing, e.g.,:
    • Vizag (Andhra Pradesh) → API cluster under PLI scheme
    • Solan (Himachal Pradesh) → Bulk drug park

3. Availability of Skilled Manpower

  • Pharma requires chemists, biotechnologists, clinical researchers, and data analysts.
  • For instance
    • Boston (USA) and Cambridge (UK) excel due to presence of world-class universities (Harvard, MIT, Oxford).
    • India has 20% of the world’s pharma engineers, with institutes like NIPER, BITS Pilani, and IITs producing talent.

4. Transport and Export Facilities

  • Pharma requires:
    • Quick supply to hospitals, chemists
    • Cold chain for vaccines and sensitive drugs
    • Ports and airports for export
  • Preferred Zones:
    • Mumbai-Pune-Navi Mumbai belt – Access to JNPT port
    • Ahmedabad – Linked to Kandla port and roadways
    • New Jersey (USA) and Hamburg (Germany) have port access for global exports.

5. Regulatory Environment and Government Policy

  • Pharma industry is tightly regulated. Ease of approvals, IP laws, and export-import policies matter.
  • For Example
    • Ireland and Netherlands attract pharma MNCs due to low taxes and business-friendly laws.
    • Belgium is known for its rapid drug approval systems.
    • Baddi (Himachal) – low land cost + tax holidays
    • In India, schemes like Pharma PLI Scheme, Bulk Drug Parks and 100% FDI via Automatic Route are aimed at promoting pharma sector.

6. Cluster Effect

  • Presence of supporting industries like packaging, chemicals, logistics, and contract research creates economies of scale.
  • Examples include
    • Silicon Valley model applied to pharma in Boston and Basel.
    • Hyderabad Pharma City: World’s largest integrated pharma cluster under development.

7. Water and Power Requirements

  • Pharma plants require ultra-clean water and uninterrupted electricity for chemical processing, sterilization, and cleanroom operations.
  • Example:
    • Many API parks are located in coastal Andhra Pradesh (e.g., Vizag) due to water availability.
    • Singapore: Biopolis cluster provides reliable utilities with centralized wastewater treatment

8. Market Access & Proximity to Healthcare Hubs

  • Pharma industries tend to locate near urban health ecosystems to supply to hospitals, get real-world data, and conduct clinical trials.
  • Example:
    • Mumbai, Hyderabad, and Delhi-NCR — access to super-specialty hospitals, diagnostic labs, and testing infrastructure.
    • New Jersey/NYC corridor — world’s densest hospital-Pharma-R&D ecosystem

Global Pharma Industry

Global Pharma Industry

United States – World Leader

  • Presence of global pharma giants like Pfizer, Johnson & Johnson, Merck
  • Ivy League and top research universities (Harvard, MIT)
  • Strong IP protection and venture capital ecosystem
  • Note: The US leads in new drug discovery and biotech research, not just generics

Switzerland – Precision Pharma

  • Presence of global pharma giants like Novartis and Roche
  • Swiss pharma is highly innovation and research-intensive—often setting global standards.
  • Strict quality control and regulatory standards

Germany – Europe’s Pharma Powerhouse

  • Companies: Bayer, Boehringer Ingelheim
  • Germany focuses on both bulk drug production and high-end medical research.

United Kingdom – Research and Exports

  • Companies: GlaxoSmithKline (GSK), AstraZeneca
  • Presence of Prestigious research institutions like Oxford
  • UK played a major role during COVID-19 with Oxford vaccine collaboration

China – Global Leader in Bulk Drugs

  • Dominates bulk drug and API manufacturing with large-scale, low-cost production
  • Backed by strong government support under the “Made in China 2025” initiative
  • Limitation: Still lags behind countries like the USA in original patent drug innovation

India – Generic Medicine Leader

  • Major hubs: Hyderabad, Ahmedabad, Mumbai, Baddi, Sikkim, Vizag
  • Known as the “Pharmacy of the Global South”
  • Focus on generics, vaccines, and bulk drugs

India- Pharmacy of the Global South

India’s Position in Global Pharma

  • Third largest producer of pharmaceuticals by volume
  • Supplies over 60% of global demand for vaccines
  • Accounts for 20% of global generic drug exports
  • Major destinations: USA, Africa, EU
  • Pharma exports: $25+ billion annually
  • Employs over 3 million people (direct + indirect)

Pharma Industry Location in India

India is home to both global and domestic pharmaceutical giants such as Sun Pharma, Dr. Reddy’s, Cipla, Lupin, Biocon, Aurobindo Pharma, and Zydus Lifesciences. 

Region/CityHighlights
Hyderabad
(Telangana)		– Known as the Bulk Drug Capital of India.
– Also hosts R&D centres and global pharma companies like Dr. Reddy’s, Aurobindo, Divi’s, and Natco Pharma.
– Home to the upcoming Hyderabad Pharma City, world’s largest integrated pharma cluster.
Ahmedabad-Baroda
(Gujarat)		– Companies like Zydus, Cadila, and Torrent Pharma operate here. 
Mumbai-Pune Belt
(Maharashtra)		– Headquarters of several major companies like Cipla, Glenmark, and Lupin.
– Strategic location with access to ports and international airports for exports.
Baddi
(Himachal)		– Hosts the largest number of pharmaceutical units in India.
– Grew rapidly due to tax holidays and industrial incentives.
– Contract manufacturing of pharmaceuticals happen here.
Bengaluru
(Karnataka)		– Biotech and pharma R&D hub. Home to Biocon and multiple biotech startups. 
Visakhapatnam
(Andhra)		– Emerging API and bulk drug cluster.
– Hosts Ramky Pharma City and upcoming Bulk Drug Park under PLI scheme.
Sikkim– Hub for formulation plants due to tax exemptions. Many companies shifted facilities here in 2000s.
Indore, Nagpur
(Central India)		– New pharma SEZs and industrial parks coming up. 

Why Is India Called the “Pharmacy of the Global South”?

India is globally recognized as the “Pharmacy of the Global South” — a title earned through its high-volume, low-cost production of generic medicines, crucial for public health systems in developing countries.

  • Largest provider of generic drugs globally — exporting to over 200 countries, including Africa, Latin America, and Southeast Asia.
  • Supplies over 60% of global vaccine demand (e.g., via Serum Institute of India).
  • Plays a critical role in affordable access to life-saving medicines like antiretrovirals (HIV/AIDS), TB drugs, and malaria treatments.
  • Supported countries through initiatives like Vaccine Maitri during COVID-19.

India supplying low-cost drugs to developing countries (Africa, LATAM) improves its image as a “Vishwaguru” and strategic partner.

Side Topic: What Are Generic Drugs?

Generic drugs are bioequivalent versions of branded medicines whose patents have expired. They have the same dosage, safety, strength, quality, and efficacy as the original, but are:

  • Far cheaper
  • Made without repeating expensive R&D
  • Widely accepted under WHO and FDA standards

India’s pharma sector thrives on these, making healthcare accessible and affordable, especially in the Global South.

Government Initiatives to Promote Pharma Industry

1. Production-Linked Incentive (PLI) Scheme

  • Under the PLI Scheme, companies get financial incentives for increasing their production over a set base year. Higher production compared to previous years = more incentive.
  • In the pharma sector, this means: If a company manufactures important raw materials for medicines — like Active Pharmaceutical Ingredients (APIs) — in India instead of importing them, the government gives them a financial reward. This encourages companies to set up factories in India, create jobs, and reduce our dependence on countries like China for raw materials used in life-saving drugs.

2. Bulk Drug Parks

  • Special zones in Himachal Pradesh, Tamil Nadu, and Andhra Pradesh for API manufacturing
  • They benefit from state/central subsidies

3. 100% FDI via Automatic Route

  • Attracts foreign capital and technology transfer

4. Jan Aushadhi Scheme

  • Government initiative to provide low-cost generic drugs through Pradhan Mantri Bhartiya Jan Aushadhi Kendras
  • Helps achieve universal health coverage

Challenges Faced by Indian Pharma Sector

  1. Overdependence on API Imports: India imports ~70% of its Active Pharmaceutical Ingredients (APIs), mainly from China. It creates vulnerability to global supply shocks and geopolitical tensions.
  2. Low Innovation Focus: Majority of Indian pharma companies rely on generic drug production. There is minimal investment in original drug discovery and patented molecules.
  3. Quality and Safety Concerns: Some small and medium manufacturers face criticism for inconsistent quality. Frequent inspections by USFDA and EU regulators, warning letters and import bans affect credibility and exports.
  4. Government Pricing Controls: The National Pharmaceutical Pricing Authority (NPPA) caps prices of essential drugs. It reduces profit margins and may discourage investment in R&D.

Food Processing Industry in India

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Last Updated: July 2025 (Food Processing Industry in India )

Food Processing Industry in India

This article deals with ‘Food Processing Industry in India – UPSC GS3 Notes.’ This is part of our series on ‘Economics’, which is an important pillar of the GS-3 syllabus. For more articles, you can click here.

Introduction – From Farm to Fork

Food Processing Industry in India

Imagine a farmer named Ramesh from Maharashtra. He grows tomatoes. After harvesting, if Ramesh doesn’t sell them quickly, they will rot. He will lose money, and consumers will pay more for tomatoes in the market.

Now imagine, instead of selling raw tomatoes, Ramesh sells them to a food processing unit that converts them into packaged tomato puree, ketchup, or sun-dried tomatoes. Not only does Ramesh get a better price, but these products reach far-off consumers with a longer shelf life.

This is the power of Food Processing Industry—it acts as a bridge between farmers and consumers, between agriculture and industry.

What is Food Processing?

In simple terms:

  • It means adding value to harvested crops, dairy, fish, meat, or poultry using various techniques.
  • The goal is to make them longer-lasting, more convenient, market-ready, and consumer-friendly.
  • For example:
    • Wheat → Flour → Bread/Biscuits
    • Milk → Cheese / Paneer / Flavored Milk
    • Mango → Mango Juice / Aam Papad
What is Food Processing?
  • Food processing is a sunrise industry, i.e. it has
    1. High growth potential 
    2. High employment potential
  • Food Processing Sector is a Sunrise Sector contributing
    • 1.8% to the total GVA to the country (FY 2021-22)
    • Employing 20 lakh people
    • AAGR of 7.25% (from 2014 to 2022)
    • Estimated market size to touch $535 billion by 2025

How can the Food Processing Industry benefit India

Food processing is crucial because it acts as a linkage between agriculture and industry.

Employment

  • The Food Processing Industry can generate direct & indirect employment.
  • For example: A new milk processing plant in Punjab creates jobs for dairy farmers, transporters, machine operators, and marketers.

Addressing Agriculture Stress

  • Food Processing can help increase farmers’ income and act as the central pillar of doubling farmers’ income.

Curb Food Inflation

  • Food Processing helps increase the shelf life of products and contain food inflation during the lean season. 
How can the Food Processing Industry benefit India

Crop Diversification

  • In the absence of the food processing industry, farmers are left with no choice but to grow wheat and rice. The development of the Food Processing Industry will lead to crop diversification as it will generate a market for fruits, vegetables, milk, fish, meat, poultry, grain, etc.

Increase in Value Addition

  • The gross value addition will increase. E.g., exporting processed mushrooms or fish will fetch more in monetary terms than exporting raw fish or mushrooms.

Reducing Malnutrition

  • Processed food can be fortified with minerals and vitamins to fight the issue of malnutrition in the population. 

Reduce Food Wastage

  • According to UN Report, 40% of food is wasted due to post-harvest losses. However, this loss can be contained with the help of food processing close to the farm-gate.

Preserve Nutritional  Value

  • Modern techniques like flash freezing, vacuum packaging and dehydration help retain nutrients.

Increases Consumer’s Choices

  • It increases the food choices available to the consumer. For example, with the help of the food processing industry, consumers can enjoy a meal of carrot (a winter vegetable) even in the summers.

Increase Foreign Earnings

  • India can export agricultural products to other countries and earn substantial foreign reserves. E.g., Indian Basmati has massive demand in the Middle East, Indian wheat has high demand in Iran, Spices are considered exotic produce in the EU and North America. 

For India, it is a strategic sector that connects the farm to the fork, and the village to the global market.

Evolution of FPI in India

Phase 1: Before the 1960s – Ignored Agriculture and Industry-Centric Approach 

  • After Independence, India’s focus was on building a self-reliant industrial base (especially capital goods industries).
  • Despite agriculture contributing 48% of GDP in 1950-51, agriculture and food processing remained neglected.
  • Food Processing Industry was virtually non-existent, except for basic flour mills, oil mills, and small-scale cottage industries.

Phase 2: 1960–1990 – Agricultural Focus, Green Revolution & Food Buffer Building

  • 1960s food crisis forced the government to shift focus towards agriculture and self-sufficiency in food production.
  • Major developments included Green Revolution (1966 onwards, creation of Buffer Stock, land reforms etc. But government’s focus was not on Food Processing Industry.

1991 Onwards – LPG Reforms and Opening up of Food Processing Sector

  • The 1991 Economic Reforms (Liberalization, Privatization, Globalization – LPG) became a watershed moment for all industries, including food processing.
  • Food processing identified as a “Sunrise Sector” due to its high growth potential, employment creation ability, and export opportunities. Major Government initiatives started (like Mega Food Parks, Agro-Processing Clusters, etc.).

Scope /Potential of Food Processing Industry 

The Food Processing Industry (FPI) in India holds tremendous potential but remains underdeveloped compared to other countries like the USA and China.

1. Abundant Raw Material

Due to the well-developed agriculture sector and diverse agro-climatic conditions, India has abundant raw materials required for Food Processing Industry. E.g., India is

Ranked 1Milk, Banana, Guava, Papaya, etc.
Ranked 2Rice, Wheat, Potato, Green Peas, Sugarcane, Tea etc.
Among top fiveCoffee, Tobacco, Spices etc.

2. Geographical Advantage –  Diversity of Soil, Climate, Coastline  & Animals

India’s diverse natural endowments support year-round agricultural production.

  • 46 types of soils (e.g., alluvial, black, red soil) are present in India.
  • More than 26 types of climatic conditions are present in India (from tropical to temperate). Hence, India can cultivate a large variety of fruits, vegetables etc.
  • India has a large coastline suitable for the development of the fishing and seafood processing industries.
  • A variety of animals like cows, goats, chickens, lambs etc., are found in India.

3. New Demand

The demand for processed food in India is high because of the following reasons 

  • India has a growing youth population that doesn’t shy away from trying new products.
  • The number of nuclear families has been increasing, and as a result, they have less cooking time.
  • Due to rising income and the creation of the middle class, a large population can afford processed foods.
  • Media penetration can help to create demand for processed food.

4. Government Initiatives for FPI

  • Many food processing sectors earlier reserved for small scale industries have been de-reserved.
  • FDI limit has been relaxed.
  • The government is promoting the FPI sector with various schemes like Pradhan Mantri SAMPADA Yojana. 
  • Many states have overhauled their APMC Acts and allowed contract farming to promote Food Processing Industry.

Obstacles to FPI

The Food Processing Industry is less developed in India, corroborated by the following stats

Country%age food processed
India6%
China~20%
USA~70%

1. Dis-economies of Scale

  • Most of the Food Processing Industry in India is in unorganised sector. Food Processing Units are small in size. As a result, they can’t reap the benefit of economies of scale, like negotiating the price with the supplier, bulk purchase inputs, or invest in large-scale infrastructure.

2. Lack of Testing Facilities

  • The number of HACCP or Codex certified laboratories in the country is insufficient. The Indian labs aren’t equipped to test antibiotic residues and toxic contaminants, due to which Indian products face frequent rejections from the US and EU.
Obstacles to FPI in India

3. Preference For Fresh

  • Due to cultural factors and the traditional mentality that fresh means nutritious, Indians prefer freshly cooked products compared to packaged products. It negatively impacts Food Processing Industry.

4. Packaging

In India, Packaging cost is very high, which discourages the food processing industry. E.g.

Processed FoodPackaging cost as %age of total cost
Potato Chips20%
Fruit Juice19%

High packaging cost increases the final retail price, making processed foods less affordable for lower-income groups.

5. Difficulty in doing Contract Farming

  • Legal barriers (like restrictive APMC Acts) in many states prevent easy procurement of raw materials directly from farmers. This increases procurement costs, middlemen dependency, and supply uncertainties for processors.

6. Logistics

  • Logistics cost in India is around 12% of the total product price, much higher than developed countries (6–8%).
  • Poor last-mile connectivity, high fuel costs, and overburdened road networks add to the problem. Indian National Highways, though forming only 2% of total road length, carry 40% of cargo, causing severe congestion. This delays transport of perishables, leading to spoilage and wastage.

7. Inadequate Infrastructure – Especially Cold Chain

  • India suffers from a chronic shortage of cold chain and post-harvest management infrastructure.
  • Additionally, cold storages are mostly concentrated in a few states (like UP, Punjab, Maharashtra) and are largely used for single commodities like potatoes, neglecting other perishables.

What is Cold Chain Infrastructure?

Cold Chain Infrastructure
  • A Cold Chain refers to a temperature-controlled supply chain system that ensures the storage, transportation, and distribution of perishable products (like fruits, vegetables, dairy, fish, meat) at specific temperature ranges, from farm to fork.
  • It includes:
    • Pack-houses near farm gates
    • Cold storage warehouses
    • Refrigerated trucks and containers

8. Taxation

  • In India, the tax on processed food is disproportionately high. It has to be noted except India; no country distinguishes between branded and unbranded food sectors as far as taxation is concerned.
Wrong Taxation of Processed Food in India
  • This discourages branding, packaging, and organized sector growth.

9. Inspector Raj

  • The Food Inspectors cause harassment and demand bribes under the provisions of outdated acts.
  • Result: Fear of inspections keeps small processors in the unorganized and informal sector.

10. Lack of Manpower

  • There is a lack of a trained workforce in the Food Processing Industry as few universities offer special courses for food processing. Hence, there is a shortage of food technologists, quality control experts, cold chain managers, etc.

11. Post Harvest Losses

  • Post Harvest losses in India are between 10-25% of the produce, which is significantly higher than first-world nations.

India’s Food Processing Industry is a classic case of “High Potential but Low Performance”. While the agricultural base, market demand, and government focus are strong enablers, the structural, logistical, regulatory, and infrastructural obstacles hold it back.

Issue: Food Safety & Laws in India

Food Safety and Standards Authority of India

  • FSSAI (Food Safety and Standards Authority of India) was established as a statutory body under FSSAI Act, 2006.
  • FSSAI Act replaced outdated food laws like the Prevention of Food Adulteration Act (PFA) and other old food-related “Orders”.
  • FSSAI is responsible for:
    • Guidelines: Frame and enforce scientific food standards + Set guidelines for food lab accreditation
    • Advisory Role: Provide scientific advice and technical support to Central and State Governments.
    • Survey: Collect data on food consumption, contamination, biological risks, etc.
    • Human Resource Development: Conduct training for food business operators and other stakeholders

Why FSSAI Became an Obstacle for FPI Growth?

The ‘Maggi Row’ (2015) highlighted serious gaps in both regulatory oversight and unnecessary red tape.

  • Approval Delays: Slow clearance of new food products discourages investors
  • Arbitrary Norms:  FSSAI’s packaging and labelling rules differ from global standards, leading to product rejections
  • Discretionary Rejections: Clearances often withheld for petty reasons, increasing costs and time for companies
  • Regulatory Failure: Example: Maggi was initially FSSAI-approved, but later failed safety checks, raising doubts about FSSAI’s testing processes

Codex Standards

  • Set up in 1960s by FAO (Food & Agriculture Organization) and WHO (World Health Organization).
  • Governing Body: Codex Alimentarius Commission (CAC)
  • Headquarters: Rome, Italy
  • Members: 189 countries including India
  • When India exports food items like fruits, groundnuts, or seafood to countries like the USA or European Union, these countries check if the food meets international safety and quality standards made under Codex Standards.
  • HACCP
    • Full Form: Hazard Analysis and Critical Control Points
    • It is an international food safety certification system adopted by the Codex Alimentarius Commission (under FAO & WHO).
  • Many Indian food exports fail these tests. Common reasons include
    • Shrimps : Found with Antibiotic Residues
    • Groundnuts : Contain Aflatoxins (harmful natural toxins from fungi)
    • Fruits: Contaminated with Fruitflies (major pest concern abroad)
Indian Food Exports Rejected - Codex- HACCP

Government & Food Processing Industry

Recognizing the gaps mentioned above, the Government of India has taken several steps over the years to boost the Food Processing Industry (FPI)—an important bridge between agriculture and industry.

Ministry: Ministry of Food Processing Industry (MoFPI)

  • The key government department responsible for the food processing sector is the Ministry of Food Processing Industries (MoFPI).
  • It runs various schemes to promote food processing industry in India.

Scheme: PM Kisan Sampada Yojana

  • The full form of SAMPADA is: Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters
  • Year of Launch: Launched in 2017
  • Budget Allocation: ₹6,000 crore was allocated for the scheme

Why was SAMPADA launched?

  • India produces huge amounts of fruits, vegetables, grains, dairy, and marine products. But according to estimates, 30-40% of this is wasted due to lack of storage, cold chains, and processing facilities.
  • SAMPADA was designed to solve this problem by creating infrastructure, reducing wastage, generating jobs, and promoting value addition.

Major Schemes under SAMPADA (Umbrella Scheme)

SAMPADA combines and integrates all major schemes run by the Ministry of Food Processing Industries (MoFPI).

Sub-schemeFocus Area
Mega Food ParksCreating large industrial zones for food processing with facilities like cold storage, testing labs, and logistics support (dealt in detail below)
Integrated Cold Chain and Value Addition InfrastructureSetting up modern cold storage chains, reefer vans (refrigerated trucks), and packaging centers to prevent spoilage of perishable items.
Food Safety and Quality Assurance InfrastructureBuilding food testing labs and quality control facilities to meet domestic and international food standards 
Infrastructure for Agro-Processing ClustersDeveloping small-scale food processing clusters in rural areas to encourage local entrepreneurship and rural employment.
Creation of Backward and Forward LinkagesConnecting farmers (producers) with food processors and linking processors with retailers/exporters.
Creation of Food Processing and Preservation CapacitiesEncouraging private companies and cooperatives to set up new food processing units or expand existing ones.
Operation Greens (TOP Scheme)Launched specially to tackle price volatility in Tomato, Onion, and Potato (TOP) crops by building storage, transportation, and processing facilities.

Objectives of PM Kisan SAMPADA Yojana 

The government aims to achieve multiple goals through this single umbrella scheme:

  • Reduce Food Wastage: India loses food worth thousands of crores annually due to lack of storage and processing. SAMPADA focuses on creating infrastructure to minimize this loss.
  • Employment Generation: SAMPADA creates direct employment in factories, logistics, and storage units, and indirect employment for farmers, transporters, and packaging industries.
  • Increase Farmer Incomes: By offering farmers better prices for their produce and creating new markets for processed goods, SAMPADA aligns with the goal of doubling farmers’ income.
  • Encourage Private Investment: The scheme offers financial assistance to private companies, farmer groups, and cooperatives to invest in food processing infrastructure

Scheme: Mega Food Parks

  • Mega Food Parks are large, well-equipped industrial zones where farm produce is collected, processed, tested, packaged, stored, and transported—all in one integrated facility.
  • Launched under the Ministry of Food Processing Industries (MoFPI), MFPs aim to provide modern infrastructure for food processing close to the production areas (farm gates).

How does a Mega Food Park work? (The Hub-and-Spoke Model)

Think of it like this: Imagine a big hub (Central Processing Centre – CPC) surrounded by many small satellite points (Collection Centres and Primary Processing Centres

ComponentRole
Collection Centres (CCs)Small hubs in villages where farmers deliver their produce for initial aggregation.
Primary Processing Centres (PPCs)Early-stage processing happens here—like cleaning, sorting, grading, and packing. Facilities like refrigerated trucks also start from here to transport goods further.
Central Processing Centre (CPC)The main industrial unit with modern facilities for full-scale food processing, quality testing, value addition, packaging, cold storage, and dispatch to markets.
  • This Hub-and-Spoke Model ensures minimal time delay and prevents spoilage at every stage.

Financial Provisions

ProvisionDetails
Project Cost Sharing– General Areas: 50% of project cost covered by Government (excluding land cost) – North Eastern States: 75% covered
Maximum Government Grant₹50 crore per project
Minimum Land Requirement50 acres (Land cost excluded from project grant)
Execution ModelImplemented by a Special Purpose Vehicle (SPV) which can include farmers’ associations, private investors, financial institutions, and state government agencies as equity partners.

Challenges / Problems 

Despite the good intentions, implementation hasn’t been easy.

  • Land Acquisition Issues:  Acquiring a continuous 50-acre plot, especially near production areas, is tough. Also, changing land use from agriculture to industrial takes time.
  • Attracting Stakeholders:  SPVs struggle to attract Primary Processing Centres (PPCs) and Collection Centres (CCs), making the network incomplete.
  • Power Shortages: Some MFPs (especially in UP) shut down due to inadequate electricity supply.
  • Finance and Credit Bottlenecks: Banks hesitate to fund MFP projects as the concept is new and many projects struggle to achieve financial closure.
  • Quality of Raw Materials: Lack of uniform quality in farm produce affects food processing units inside MFPs, which need consistency for mass production.
  • APMC and Contract Farming Restrictions: Many states haven’t reformed APMC Acts, making direct purchase from farmers difficult. First sale often still has to happen in APMC Mandis.
  • Export Connectivity Weakness: Limited focus on global value chains. Poor logistics and infrastructure limit India’s food export potential.

Way Forward 

To make Mega Food Parks successful:

  • Flexibility in Land Requirements Reduce rigid 50-acre requirement or allow phased land acquisition.
  • Land Use Reforms: Fast-track the process to convert agricultural land for industrial use.
  • Encouraging Contract Farming: Promote legally binding agreements to ensure consistent supply and quality from farmers.
  • Private Sector Financing: Allow SPVs to raise capital more easily from private investors and international partners.
  • Power Infrastructure Development: Ensure uninterrupted power supply in rural areas where MFPs are located.
  • Link to Global Value Chains: Upgrade quality standards, logistics, and infrastructure to attract foreign investors and boost exports.

Scheme: Production Linked Incentive (PLI) Scheme for Food Processing Industry

  • Launched: March 2022
  • Ministry Involved: Ministry of Food Processing Industries (MoFPI)

How does the PLI Scheme work?

  • The government gives financial incentives (cash back/subsidy) to companies based on how much they increase their production and sales of eligible food products every year over a base year.
  • This reward (incentive) is linked to actual output performance, not just promises or paperwork.

Target Sectors under PLI  Scheme for Food Processing Industry

The scheme focuses on sectors where India can become a world leader:

High Growth Potential SegmentsExamples
Marine ProductsFrozen seafood, prawns, fish fillets
Processed Fruits & VegetablesPackaged mango pulp, tomato puree, frozen peas
Ready-to-Eat / Ready-to-Cook ProductsPackaged curries, instant mixes, frozen parathas
Others (Indian Brands for Global Promotion)Indian snacks, ethnic food products

Scheme: Krishi UDAN 2.0

  • Full Form: Krishi UDAN = Krishi Ude Desh ka Aam Nagrik
  • Launched: October 2021
  • Aim: Boost air transportation of perishable agricultural products (like fruits, vegetables, fish, meat, dairy, processed foods, etc.)
  • Focus Regions:
    1. Hilly Areas
    2. North Eastern States
    3. Tribal Areas
    4. Other remote locations

Scheme: Operation Greens

  • Budget 2018: Operation Greens announced  under Ministry of Food Processing Industries 
  • It is modelled on the lines of Operation Flood (for milk) for enhancing production & reducing price volatility of fruits & vegetables. 
  • It was started with Tomatoes, Onion and Potatoes (TOP). But the scope of the scheme has been increased to 22 perishables , including mango, apple, garlic, ginger, etc.

Finance in Food Processing Industry

One of the biggest hurdles the Indian Food Processing Industry faces – Shortage of Funds and Investment.

FDI100% FDI is allowed in Food Processing Industry
NABARDOffers refinance facilities for food processing, agri infrastructure, development
SIDBIGives loan to Micro Small and Medium Enterprises (MSMEs) in the country
MoFPIProvides capital grants and financial assistance under schemes like Mega Food Park Scheme (up to ₹50 crore per project) and PM Kisan SAMPADA Yojana.
Venture Funds/Angel investorsNon-existent for food processing sector.

Despite these measures, finance is still a major bottleneck for the Food Processing Sector.

Supply Chain Management of Food Processing Industry

  • A farmer in Punjab grows tomatoes. A ketchup company in Delhi needs tomatoes. A grocery store in Bangalore wants to sell that ketchup. What connects all three? The Supply Chain.
  • Supply Chain = system that links company with suppliers & customers

Understanding “Upstream” and “Downstream” (Simple Terms)

Think of a river 

  • Upstream = Where the water (inputs) comes from
  • Downstream = Where the water (output) goes
Point of ReferenceUpstream (Who gives input)Downstream (Who buys output)
FarmerSeed companies, fertilizer suppliersMiddlemen, mandis, food companies
Food Processing CompanyFarmers, mandi agents, packaging suppliersDistributors, wholesalers, retailers, customers

So, Upstream = Input Side, Downstream = Output Side.

Supply Chain Management of Food Processing Industry

Forward and Backward Integration

TypeMeaningWhy?Real Example
Backward IntegrationCompany expands towards raw material sourceTo get cheap, steady, uniform-quality supplyAmul creating village milk cooperatives
Forward IntegrationCompany expands towards final customerTo control sales and customer experienceAmul opening own ice cream parlours and pizza outlets
Both (Vertical Integration)When a company controls both upstream and downstreamFull control from farm to customerShell Oil owning oil wells + refineries + petrol pumps

Why Vertical Integration is Difficult in Indian FPI

Unlike giant oil companies or global food chains, India’s food entrepreneurs are mostly small players.

ReasonExplanation
Lack of FundsVertical integration needs huge capital investment, which small units don’t have.
APMC LawsOutdated Agricultural Produce Market Committee (APMC) Acts in many states force farmers to sell only via mandis. Companies can’t buy directly from farmers easily.
Infrastructure GapsLack of cold chains, warehouses, and transport facilities makes managing the whole chain difficult.

Approach for Food Processing Industry Questions

Whenever there is a question on the Food Processing Industry (FPI) in Mains (GS3), ALWAYS structure your answer by covering these three stages:

1. Upstream Issues (Before Processing Stage)

Think of everything before raw material reaches the factory, like:

  • Agricultural inputs
  • Crop variety
  • Contract farming challenges
  • Post-harvest losses
  • Storage and transport issues
  • Farmer-level problems

2. Processing Stage Issues (Inside the Factory)

Think of what happens inside the food processing units, like:

  • Infrastructure gaps (Cold chain, Mega Food Parks etc.)
  • Financial issues (FDI, NABARD, SIDBI etc.)
  • Regulatory hurdles (FSSAI, Codex, HACCP)
  • Technology, skill gap, and R&D
  • High packaging and logistics cost
  • Quality control and certification

3. Downstream Issues (After Processing till Final Customer)

Think of everything that happens after food is processed, like:

  • Supply chain and distribution network problems
  • Export barriers (like SPS, Codex issues, rejections in EU/US)
  • Cold chain gap in retail
  • Consumer awareness and preference for fresh over processed food
  • High logistics and retailing cost
  • Marketing and branding challenges

Way Forward / Solutions

After covering the three stages, always conclude with:

  • Infrastructure improvement
  • Policy reforms (APMC, FDI, contract farming, etc.)
  • Cold chain and logistics investment
  • FSSAI and quality standard reforms
  • Promoting exports and integration with the global value chain
  • Consumer awareness and retail ecosystem strengthening

Case Study: Fruits & Veggies

India is the world’s second-largest producer of fruits and vegetables. Despite this, the share of processing remains below 2%, leading to significant post-harvest losses, farmer distress, and missed export opportunities. The problems can be analyzed at three levels – upstream, processing, and downstream stages.

Food Processing Industry Case Study )UPSC Economics)

Upstream Issues

Before any fruit or vegetable reaches a food processing factory, it goes through multiple stages like cultivation, harvesting, collection, and transportation. These stages are collectively called the “Upstream” part of the supply chain.

Simply put: Upstream = Everything that happens before raw materials (fruits/vegetables) reach the processing company.

1. Wrong Varieties for Processing

  • Most of the fruits and vegetables grown by Indian farmers are not suitable for industrial processing.
  • For example:
    • Indian oranges are often too bitter to make packaged orange juice.
    • Indian potatoes are not of uniform size and have high sugar content, making them unsuitable for making chips or French fries like you see from brands like Lay’s or McCain.
  • The government and food companies need to promote new crop varieties that meet industry standards.

2. Lack of Direct Link Between Farmers and Companies (Contract Farming Issues)

  • In most parts of India, food companies can’t directly sign contracts with farmers to grow specific quality or varieties of crops because of old APMC (Agricultural Produce Market Committee) laws, farmers are forced to sell their produce in government mandis. This prevents food processing companies from supplying uniform seeds, giving inputs, and buying produce directly.
  • Impact:
    • No control over quality
    • No steady supply
    • Farmers don’t get long-term price assurance
    • Companies can’t plan production smoothly
  • States should relax APMC rules and allow contract farming. This way, companies can partner with farmers for better, uniform quality raw material.

3. Inadequate Cold Storage Facilities

  • Fruits and vegetables are perishable by nature. Without proper cold storage, they start rotting within a few days. India faces a severe shortage of cold storage infrastructure.
  • This leads to:
    • High post-harvest losses
    • Distress sales during harvest season
    • Seasonal price fluctuations

Solution:

  • Provide subsidized loans, tax benefits, and affordable electricity rates for cold storage units.
  • Encourage private sector participation.

4. Poor Transport Infrastructure

  • Even after harvest, the transportation from farm to processing unit is full of hurdles owing to
    • Poor village roads
    • Lack of refrigerated vans (called Reefer Vans)
    • Railways don’t run enough special freight trains for horticulture products
  • Solutions:
    • Improve rural road network
    • Offer easy loans to buy reefer trucks
    • Indian Railways should run more horticulture trains on priority routes.

Unless we fix these upstream issues, food processing companies will continue to struggle with poor quality inputs and erratic supply, leading to low capacity utilization and higher costs.

Processing Stage Challenges

Once the fruits and vegetables leave the farm and reach the food processing company, the next stage is “Processing”. This includes steps like cleaning, grading, cutting, freezing, juicing, preserving, and packaging. But the Indian Food Processing Industry (FPI), especially for fruits and vegetables, faces many challenges at this stage too.

1. Underutilized Processing Units

  • Many food processing factories are running at less than full capacity. For example: A juice processing plant designed to process 100 tons per day may end up processing only 40-50 tons.
  • Why? Because raw material doesn’t arrive in required quantity or quality at the right time.

2. Inconsistent Quality of Raw Material

  • Even when raw material comes, quality is inconsistent. For example:
    • Tomatoes may have different water content
    • Potatoes may differ in size
    • Oranges may vary in taste and acidity
  •  Why does this matter? Inconsistent quality makes it difficult to produce a uniform final product. For industries like chips, juices, or frozen vegetables, standardization is critical to meet consumer expectations and export standards.

3. Outdated Technology

  • Many small and medium-sized food processing units use old machines, manual handling, and low-tech preservation techniques.

4. Food Safety Compliance Issues

  • For food exports, companies need certifications like HACCP (Hazard Analysis and Critical Control Points). But most Indian processing units lack such certifications.
  • Why?
    • Lack of trained manpower
    • Poor awareness
    • Expensive certification process
    • Lack of accredited testing labs nearby

Downstream Challenges

Once the fruits and vegetables are processed (like cut, frozen, juiced, packaged), the next challenge is getting them to the market or to the final consumer. This is called the “Downstream” stage. But in India, the downstream supply chain for processed fruits and vegetables faces several issues.

1. High Transportation and Export Costs

  • For perishable fruits and vegetables like strawberries or mangoes, air transport is preferred for exports. However, in India:
    • Air cargo costs are very high
    • There are extra charges like fuel surcharge, handling fees, and terminal charges
  • Even when the product is suitable for sea transport (like potatoes or onions), India’s port handling charges are very high compared to other countries.
  • Result: Indian fruits become more expensive in foreign markets, reducing their demand.

2. Rejection in Foreign Markets due to Quality Issues

  • Developed countries like EU and USA follow strict quality standards (Codex standards) for imported food products.
  • Indian fruits and vegetables face frequent rejection in international markets due to non-compliance with Codex standards and WTO SPS measures.

3. Poor Domestic Marketing Channels

  • Consumer Awareness is low:
    • Most Indian consumers still prefer fresh, unpackaged produce
    • There is lack of trust in packaged food, especially for fruits and vegetables
  • Retail infrastructure for processed food is weak:
    • Few dedicated outlets for selling frozen peas, ready-to-cook veggies, or fruit pulps
    • Rural areas are still untapped markets for processed food

4. Limited Export Branding

  • India has not built strong global brands for processed fruits and vegetables, like Del Monte or Dole from other countries.

Land Ceiling

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Last Updated: June 2025 (Land Ceiling)

Land Ceiling

This article deals with ‘Land Ceiling.’ This is part of our series on ‘Economics’, which is an important pillar of the GS-3 syllabus. For more articles, you can click here.

Introduction

Land Ceiling

Imagine this…

A small village called Sundarpur. Here, one landlord owns most of the village land — fields, orchards, and even wastelands. Most villagers work on his land, but don’t own even an inch of it. They grow crops but give away half their produce as rent. Now imagine what happens if the landlord is limited in how much land he can own — and the rest is given to the poor farmers.

This is exactly what India tried to do through Land Ceiling Laws.

What is Land Ceiling?

Land Ceiling means putting a legal cap on the amount of land an individual or a family can own. Any land above that limit is considered “surplus” and can be redistributed.

Surplus land can be used in following ways

  • Distributed among small farmers, tenants or landless labourers
  • Handed over to Village Panchayat
  • Given to Cooperative Farming Societies

The idea of land ceiling was not a sudden move — it was the result of years of policy discussions, expert committees, and planning documents post-independence.

Year Development
1947Economic Program Committee, chaired by Jawaharlal Nehru, recommended that: “The maximum size of holdings should be fixed. Surplus land must be acquired and placed at the disposal of the village.”
1949Congress Agrarian Reforms Committee, chaired by J.C. Kumarappa, suggested: Land ceiling should be 3 times the size of an ‘economic holding’
1951First Five-Year Plan endorsed the concept. States to fix their own limits based on local conditions.
1959The Swatantra Party was formed by leaders like C. Rajagopalachari and N.G. Ranga. They oppose land ceiling and nationalisation of private property, viewing them as anti-growth and against individual rights.
By 1961All states had passed Land Ceiling Acts, though implementation was slow and varied in effectiveness.

Arguments for Ceiling on Land Holding

Constitutional Provisions

Indian Constitution says

  • Article 38: Reduce inequalities in wealth, status, facilities.
  • Article 39(b)(c): Prevent concentration of wealth & resources.

Land ceiling minimise inequality in land ownership, income and prevents concentration of wealth.

Providing Cover fire to Zamindari Abolition

  • After Zamindari Abolition, landlords found ways to bypass reforms by showing all the land as their personal land. Land Ceiling was the second layer of reform — a “cover fire” to prevent this phenomenon.

Avoid Misuse of Tax Exemption on Agricultural Income

  • Since agricultural income was (and still is) exempted from income tax, many wealthy individuals from cities began buying large farmlands — not to cultivate, but to avoid taxes and park their black money. Land ceiling laws aimed to prevent farmland from becoming a tax shelter for the rich.

Lack of Industrial Jobs at That Time

  • In the early decades after independence, India didn’t have a strong industrial base. So, there weren’t enough jobs in factories to absorb surplus rural labour. It was important to keep villagers self-employed on land, even if the holdings were small.

Reduce Naxalism

  • Land inequality was a major reason behind rural unrest. Ceiling helped reduce class tensions.

Arguments Against Land Ceiling

While the Land Ceiling policy had noble intentions, several economists, policymakers, and political groups raised concerns about its economic practicality and long-term impact.

Hinders Capitalist Farming & Investment

  • Large landholdings allow for the development of capitalist agriculture, where modern technologies, irrigation systems, fertilizers, and research-based practices can be deployed at scale. Profits from such farming can be reinvested in agriculture — improving productivity, storage, and market access. Land ceilings discourage large-scale investment

Small Farms = Less Mechanisation & Efficiency

  • Small farms are not productive because they hinder mechanised farming.
  • Smaller fields lead to lower economies of scale, higher per-unit costs, and more wastage

Disguised Unemployment

  • Simply distributing land doesn’t guarantee meaningful employment. On marginal farms, many people are underemployed, doing work that doesn’t match their potential productivity. This leads to disguised unemployment — more people working than needed.

Administrative Challenges & Corruption

Implementation of ceiling laws often led to:

  • False land transfers to avoid surplus declaration
  • Benami holdings (land in name of relatives)
  • Disputes & litigation, clogging revenue courts

This created a parallel system of corruption and inefficiency in land records management.

Limitations of Land Ceiling in India

While the idea behind land ceiling was revolutionary, its implementation faced several serious challenges. As a result, the expected social justice and land redistribution were not fully achieved.

Very Little Land Was Actually Redistributed

Even though most states passed land ceiling laws by 1961, the ground reality was disappointing:

  • By 1970, only 3% of total cultivated land was declared surplus.
  • In states like Bihar and Rajasthan, not even a single hectare was declared surplus during that period.

This shows that the impact was more on paper than on the ground.

Ceiling Applied to Individuals, Not Families

  • The laws were designed to limit land per individual, not family. Wealthy landlords exploited this loophole by transferring land to the names of their: Wives, children, extended relatives, or even fake family members (benami transfers)
  • This way, they broke up large holdings on paper but retained control in reality.

Ceiling Limits Were Too Generous

  • States were allowed to set their own ceiling limits — and many set them too high, defeating the purpose:
    • Andhra Pradesh: Up to 312 acres
    • Maharashtra: Up to 216 acres
    • Punjab: 60 acres
  • At a time when the average landholding was just 5 acres in the 1970s!

Too Many Exemptions

  • The Second Five-Year Plan allowed exemptions for:
    1. Tea, coffee, and rubber plantations
    2. Farms used for cattle breeding or dairying
    3. “Efficiently managed farms” with high investment
  • These categories were vague and loosely defined, making it easy for rich landowners to claim exemption, even if the land wasn’t being used productively.

Delays Helped Landowners Escape

  • State governments took lot of time to pass laws & in this  big farmers got enough time to sell their lands or transfer to relatives etc .

Zamindari Abolition in India

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Last Updated: June 2025 (Zamindari Abolition in India)

Zamindari Abolition in India

This article deals with ‘Zamindari Abolition in India.’ This is part of our series on ‘Economics’, which is an important pillar of the GS-3 syllabus. For more articles, you can click here.

Introduction

Imagine this: You’re a hardworking farmer, toiling in the sun all day, but at the end of the harvest, most of your grain goes to a man who neither ploughed the field nor watered the crops. That man was the Zamindar.

Under British rule, especially in Bengal, Bihar, and Orissa, the colonial government outsourced land revenue collection to these Zamindars. But they weren’t just tax collectors — they were given proprietary rights over land, turning them into mini-landlords who owned vast stretches of land and ruled over the lives of tenant farmers.

Zamindari Abolition in India

These intermediaries often:

  • Forced free labour (called Begari) from farmers.
  • Evicted tenants at will — farmers had no security of tenure.
  • Lived lavish lives but invested nothing to improve agricultural productivity.

The result? High rent, stagnant productivity, and widespread rural poverty.

Constitutional Backing for Abolition

After Independence, the Constitution laid a clear path to end such exploitation:

  • Article 23: Prohibited Begari (forced labour).
  • Article 38: Called for reducing inequality.
  • Article 39(b): Urged equitable distribution of resources.
  • Article 48: Suggested modernizing agriculture and animal husbandry.

Even the First Five-Year Plan (1951–56) prioritized removal of intermediaries to unlock rural growth.

1st Constitutional Amendment (1951)

  • Initially, when states like UP, Bihar, and Bombay introduced Zamindari Abolition Bills, Zamindars approached courts, arguing violation of Right to Property.
  • In response, the 1st Amendment added Article 31B and Schedule 9. It states that any law listed in Schedule 9 became immune from judicial review, even if it violated Fundamental Rights. This helped shield Zamindari Abolition Acts from legal hurdles.

Timeline: Zamindari Abolition by states

1948 to 50sMadras, Bombay and Hyderabad states
1951Bihar, Uttar Pradesh, Madhya Pradesh and Assam
1952Orissa, Punjab, Swarashtra and Rajasthan
1953Vindhya Pradesh and Bhopal
1954West Bengal, Himachal Pradesh and Delhi.

Note: Land is a State Subject, hence each state passed its own law.

Salient Features of Zamindari Abolition Acts

Land is a State Subject, hence each state passed its own law. But there were some general similarities in them .

Side Topic: Zamindar has two type of lands

  • Zamindari Lands: He was the owner of lands in whole Zamindari. Even those he wasn’t cultivating. He got rent from these land from the tenants. 
  • Personal Land: His personal land which he was cultivating (either himself or by some sharecroppers) .

Compensation

  • Ownership of Zamindari lands & revenue related rights were abolished and land was transferred to tenants.
  • Compensation paid was paid to the zamindars which totalled ₹680 crore across states. But different states used different criteria to. For Example:
    • In UP, Small Zamindars got 20x their annual income; large ones got 2–4x.
    • In Jammu and Kashmir, no compensation was paid.

Common Land Restoration

  • Zamindars earlier charged villagers for using ponds, forests, and grazing lands.
  • These were restored as village commons under Panchayat control.

Personal Cultivation Exemption

  • Land personally cultivated by Zamindars was not seized — it was used as a major loophole.

Obstacles in Zamindari Abolition

While the idea of abolishing Zamindari was revolutionary, its implementation faced serious roadblocks. The reform, although strong on paper, stumbled on the ground due to a mix of legal, administrative, and social hurdles:

1. Legal Delays and Resistance by Zamindars

  • After the laws were passed, Zamindars quickly approached the High Courts and Supreme Court to stall the process.
  • Even after the 1st Constitutional Amendment tried to shield these laws, many Zamindars simply refused to cooperate.
  • Worse, some revenue officials sided with them, either out of old loyalties or in exchange for bribes — making enforcement weak and selective.

2. Loophole of ‘Personal Cultivation’

  • The laws exempted land that was under ‘personal cultivation’ by Zamindars. But this term was vaguely defined, and many Zamindars falsely claimed large chunks of land as personally cultivated. This allowed them to evict genuine tenant farmers and retain control over most of their estates — defeating the very purpose of the reform.

3. Rise of New Intermediaries

  • In many regions, the reform simply replaced one set of landlords with another. Instead of the original Zamindars, occupancy tenants or ‘superior tenants’ got the land titles. These new owners started leasing the land again to poorer tenants, creating a new form of Zamindari under different names.

4. No Transformation in Agriculture

Zamindari abolition only changed who owned the land, not how the land was used.

  • There was no push for modern farming, no land consolidation, and no improvement in agricultural methods.
  • The structure of small, fragmented landholdings remained the same.

So, while the intermediaries were legally removed, agriculture itself remained backward and inefficient in many areas

Benefits of Zamindari Abolition in India

Despite many challenges, Zamindari Abolition had some important positive outcomes, especially in terms of social justice, economic empowerment, and rural transformation.

Boost in Agricultural Productivity

In many cases, absentee landlords who earlier lived off rent began to cultivate their lands directly after losing revenue rights. With access to capital, they invested in:

  • High-Yielding Variety (HYV) seeds
  • Fertilizers and Pesticides
  • Tractors and Irrigation

This shift from rent-collection to direct, capital-intensive farming led to increased agricultural productivity in several regions.

Emancipation of the Rural Poor

With the removal of forced labour (begar) and eviction threats, farm labourers and tenants gained bargaining power.

  • They could now demand fair wages, reducing exploitation.
  • Incomes rose modestly, helping many escape chronic poverty.

This reform laid the groundwork for greater dignity and voice for the rural working class.

Shift in Rural Power Structures

Zamindars earlier controlled common village resources like:

  • Grazing lands
  • Ponds and water bodies
  • Forest patches

After abolition, these lands were declared community property and brought under Panchayat control. This weakened the economic dominance of Zamindars and restored villagers’ collective access to vital resources.

Rise of a Rural Middle Class

Perhaps the most far-reaching outcome was the emergence of a new farming class.

  • Former tenants who became landowners no longer paid heavy rents.
  • With direct control over their produce and income, many could save, invest in education, and improve their standard of living.

Over time, these families formed the backbone of India’s rural middle class, contributing to local leadership, education, and entrepreneurship.

Reforms in India – UPSC GS3 Notes

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Last Updated: June 2025 (Reforms in India – UPSC GS3 Notes )

Land Reforms in India

This article deals with ‘Reforms in India – UPSC GS3 Notes | Economic Justice Explained.’ This is part of our series on ‘Economics’, which is an important pillar of the GS-3 syllabus. For more articles, you can click here.

Introduction: Why Land Matters

Imagine a village where one rich landlord owns most of the farmland, and dozens of poor farmers work on his land. These farmers grow food, work hard from dawn to dusk, yet remain hungry themselves. They have no rights, no land, no say.

Reforms in India – UPSC GS3 Notes | Economic Justice Explained

Now imagine the same village after reform: the landlord owns only a limited area, and the rest is given to the farmers who work the land. They are no longer tenants, but owners. They are not just laborers, but decision-makers.

This is the promise of land reforms – to make agriculture fair, productive, and dignified.

What Are Land Reforms?

In simple terms, land reforms refer to changes in laws and policies to improve the ownership and usage of agricultural land.

They address the institutional factors affecting agriculture:

  • Who owns the land?
  • How is land distributed?
  • Are farmers secure on the land they till?

According to Nobel Laureate Gunnar Myrdal, land reforms are even more important than technological improvements in ensuring agricultural progress in India.

Objectives of Land Reforms

Agricultural Development

  • A tenant who has no ownership has no incentive to invest in land improvement.
  • Ownership ensures motivation to boost productivity.

Social Justice

  • Zamindari abolition ended forced labour (begari).
  • Land ceilings gave land to landless farmers.
  • Tenancy reforms ensured fair rent and security from evictions.

Economic Development

  • Abolishing middlemen brought the state in direct contact with cultivators.
  • Increased equity meant more balanced rural development.

Improved Standard of Living

  • Better production + better rights = better lives for millions of rural Indians.

Major Steps in Indian Land Reforms

Zamindari Abolition

  • Removed intermediaries (zamindars) between state and farmers.
  • Motto: “Land to the tiller”.
  • Implemented in almost all states during the 1950s–70s.

Tenancy Reforms

  • Protected tenants from arbitrary eviction.
  • Fixed ceilings on rents (usually around 25-33% of produce).
  • In many cases, allowed tenants to become landowners.

Land Ceiling Acts

  • Fixed the maximum landholding for a family (e.g., 10-18 acres).
  • Surplus land redistributed to landless farmers.
  • Faced challenges like benami (fake name) ownership and loopholes.

Consolidation of Land Holdings

  • Clubbed fragmented land parcels into one for each farmer.
  • Encouraged mechanization and efficient farming.

Cooperative Farming

  • Encouraged pooling of land, resources, and profits.
  • Mostly unsuccessful due to lack of trust and local leadership.

Updating Land Records

  • Essential to determine ownership and redistribute land.
  • National Land Records Modernization Programme (2008) digitized records, integrated maps and made data public-friendly.

Forest Rights Act, 2006

  • Gave ‘pattas’ (land titles) to tribal families cultivating forest land for 75+ years.

We will look into these steps in detail in separate articles.

Conclusion

Land reforms in India were a bold step towards creating a fair and productive rural economy. From abolishing zamindari to digitizing land records, the journey has been long and uneven—but deeply transformative.

Barter System

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Last Updated: March 2025 (Barter System )

Barter System

This article deals with ‘Money.’ This is part of our series on ‘Economics’, which is an important pillar of the GS-2 syllabus. For more articles, you can click here.

Introduction

Imagine a world without cash, credit cards, or digital payments. Long before money existed, people relied on the barter system—a simple way to trade goods or services directly. E.g., 

  • A farmer might swap 1 kg of rice for 200 grams of tomatoes.
  • A gardener could trade 1 kg of tomatoes for 50 grams of almonds.

Problems with Barter System

  • Double-Coincidence of Wants: It can happen only with a ’Double-Coincidence of Wants’ i.e. both people want exactly what the other has. For example, If you grow apples and want oranges, you must find someone with oranges who also wants apples. If they want bananas instead, no deal!
  • Search Cost or the Cost of Transaction is High: Finding the right trading partner could take hours, days, or even weeks. For example, a potter wanting bread might roam the village searching for a baker who needs pots. 
  • Don’t favour Division of Labour / Specialization: Due to the above problems, all persons will try to become Jack of all trades but master of  none. 
  • Don’t favour Industrialization: Industrialists will have to find a large supply line with every person having a double coincidence of wants.  
  • Don’t favour Concentration of Wealth: Since all the wealth is perishable. E.g., one can’t store tomatoes for an extended period.
  • The Problem of Divisibility of Value: In Barter System, you cannot always divide the value to buy whatever you want. 
  • Not always Fungible: In Fungible items, division & mutual substitution is possible, e.g. Gold Bars, Currency Notes & Coins. But barter goods are not always fungible. E.g., if a diamond is cut into smaller pieces, the summation of all the smaller parts will not be equal to one bigger diamond. Hence, diamond isn’t fungible.

Concept of Fungible
Barter System

Benefits of Barter System

  • Barter System promotes Joint Family 
  • Food Inflation is  lower in Barter Economy compared to Money Economy.

Demographic Dividend

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Last Updated: Feb 2025 (Demographic Dividend)

Demographic Dividend

This article deals with ‘Demographic Dividend.’ This article is part of our series on ‘Economics’ which is an important pillar of the GS-3. For more articles, you can click here.

What is Demographic Dividend?

A country is said to be in the Demographic dividend phase WHEN

  • The majority of its population is in the working-age group.
  • The dependency ratio is minimum, i.e. very few people below 15 & above 64.
  • The age pyramid shows a bulge in the middle.
Demographic Dividend
  • As East Asian countries in the past, and Ireland today, India is supposed to benefit from a ‘demographic dividend.’ This dividend results from large working-age people with a relatively small percentage of older people to support.
  • As of 2024, the median age of Indian is  28 years old, compared with 43 in China and the 38 in the United States and 48 in Japan. It implies a large and growing labour force, which can deliver unexpected benefits in terms of growth and prosperity.
  • But to reap the Demographic Dividend, the government have to
    • Invest in education & skill development of the young generation.
    • Produce enough good jobs to absorb them in employment (78.5 lakh non-farm jobs needs to be created annually until 2030).

Otherwise, this huge population would become burden onerous to handle instead of becoming an asset.

What to do to achieve Demographic Dividend?

Gig Economy (in India)

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Last Updated: Feb 2025 (Gig Economy (in India))

Gig Economy (in India)

This article deals with ‘Gig Economy (in India) – UPSC Notes.’ This article is part of our series on ‘Economics’ which is an important pillar of the GS-3. For more articles, you can click here.

Introduction

Gig Economy is the economy in which organizations work with independent workers for a short duration. Companies like Uber, Ola etc., don’t treat the workers as employees of the company. Instead, they are treated as freelance contractors, and traditional employee rights like minimum wages, pension, provident fund, insurance etc., aren’t given to them by the company.

Features of Gig Economy

  • Gig Economy has two sets of agents (i.e. Buyer and Seller), which interact through intermediaries or aggregators.
  • Gig Worker is not an employee on the company’s payroll. Instead, they are treated as Independent Service Contractors. 
  • They are paid in terms of ‘piece rate’ (depend on gigs completed) and ‘rewards’ (dependent on the rating given). The company doesn’t pay them a fixed salary.
  • Gig Workers (or contractors) aren’t eligible for social security incentives such as provident fund, insurance, pension etc., provided by the company. 
Gig Economy (in India)

Case Studies

  • Uber: It is the most famous company that employs the gig economy. It has re-defined the gig economy. 
UBER case study (working)
  • Udemy: In Udemy, instructors develop courses and sell them on the platform to those who want to learn that skill. Udemy is just the host of the content and pays the instructors according to the sale of their courses after cutting their share.
Udemy case study (working)
  • Airbnb: Airbnb provides a platform to the house owners with extra space to rent their space to the travellers. Airbnb provides the platform to connect buyers and sellers and take the commission in return for services. 
AirBnB case study (working)

Status of Gig Economy in India

Status of Gig Economy in India

Reasons for increase in Gig Economy in India

  • Widespread Access to the Internet: The gig economy has boomed due to affordable data plans and digital connectivity, even in remote and rural areas.
  • Government Initiatives: Rapid increase in the Start-Up ecosystem in India owing to various government initiatives (like Start-Up India). 
  • Changing Work approach: Remote and flexible employment is becoming mainstream post-Covid, attracting youth and professionals to gig platforms like Upwork and UrbanClap.
  • Rise in demand for Contractual Employees: Sectors like e-commerce and logistics prefer contractual gig workers to meet seasonal demand (e.g., Amazon and Flipkart hiring during festive seasons).
  • Cost Optimization by Businesses: Companies increasingly outsource tasks to gig workers to reduce operational costs.
  • Women Empowerment: Gig work offers flexibility, encouraging women in rural and urban areas to join the workforce (e.g., Meesho for home-based entrepreneurs).

Benefits of Gig Economy

For Workers

  • Job Creation: The gig economy generates a large number of jobs.
  • Flexibility: The gig economy provides flexibility in terms of working hours.
  • Independence: Gig workers operate as independent contractors and aren’t answerable to any boss (because they are their boss)

For Consumers

  • Lower Cost of Service: The gig companies can provide the same service at a lower cost due to economies of scale and efficient use of resources.
  • Quality of Service: The quality of service is higher as the Aggregator companies ensure quality of service and compliance.

For Companies

  • Optimization of Resource Utilization: It provides an easy way to monetize resources like vacant spaces in homes (Airbnb) and ordinary vehicles (Uber and Ola).
  • Cost Efficiency: It guards companies against fluctuations in demand as they don’t have to pay workers if there is a lack of demand.

Issues with Gig Economy

  • The gig workers don’t have the cover of social security such as provident fund, pension etc.
  • There is no security of a job in the gig economy.
  • The income of the gig workers is not fixed, and companies enjoy large powers vis-a-vis workers enabling them to exploit workers. 
  • The gig economy is not adequately regulated and gives a lot of opportunity to the companies to evade taxes and harass workers.
  • Stress on the gig-workers due to pressure from algorithmic management practices and performance evaluation on the basis of ratings. E.g., monitoring of Ola and Uber employees. 
  • Limited opportunities for skill up-gradation and career progression that are attached to traditional jobs.
  • Potential exploitation of workers due to the individualistic nature of gig work, gig workers cannot form unions and bargain collectively.

Steps taken wrt protection of workers in the Gig Economy

Steps taken by Indian Government

  1. Budget 2021-22: The Government has announced that the law on minimum wages act and Employee State Insurance Corporation will apply to all firms. 
  2. Regulation: Central Government has announced that Taxi-hailing apps can’t charge more than 20% commission from driving contractors. Along with that, contractors cant work more than 12 hours per day.
  3. Rajasthan Government’s Initiative: The Rajasthan government has formed the Tripartite Board to automatically register gig workers upon joining a platform. The registered gig worker will be eligible to
    • Medical and accident support
    • Educational aid for workers’ children.
    • Access to other welfare schemes.

International Examples

  • In 2021, the UK Supreme Court ruled that Uber drivers should be considered workers and not freelance contractors, making them eligible for all employment-related benefits such as minimum wage, annual leaves, and insurance.

Skilling People in India

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Last Update: Feb 2025 (Skilling People in India)

Skilling People in India

This article deals with ‘Skilling People in India – UPSC Notes.’ This article is part of our series on ‘Economics’ which is an important pillar of the GS-3. For more articles, you can click here.

Need to Skill people ?

The answer to this question lies in analysing the percentage share of GDP & employment of various sectors of the economy.

  • 49% of people engaged in Agriculture contribute to only 18.7% of GDP. Shifting these people to the manufacturing & service sector by skilling them will significantly increase the economy’s overall productivity. For example,  a farmer in Bihar with 1 hectare of land earns ₹50,000 annually, while a factory worker in Chennai or Pune with basic technical skills earns ₹3–4 lakh/year.
  • Skilling the workforce will help reduce disguised unemployment as workers can be employed in productive sectors.  For example,
  • It will also help in land consolidation because marginal farmers will go to the service & manufacturing sectors. They can sell their lands or lease them to those who want to keep working in agriculture. 
  • With over 65% of the population below 35 years, India has a narrow window of opportunity to capitalize on its demographic advantage by skilling the people.
Skilling People in India
  • Companies coming from abroad will need a skilled workforce. Skilling the workforce will make India attractive for MNCs to set up production houses. For instance, Samsung’s Noida plant employs 70,000 workers but imports technicians from South Korea due to local skill shortages.

Why do people in India lack skills?

  • Education: The education system heavily relies on producing the clerical rather than the skilled workforce. 
  • Rapidly changing Technology: There is always a mismatch between the speed of technological change due to advancements in AI, automation, blockchain, and robotics and the rate of changing skill sets.
  • Social Acceptance: Our society gives lesser recognition to vocationally trained people (such as carpentry, plumbing, and tailoring). In contrast, countries like Germany and Switzerland have robust vocational education models where skill-based jobs are highly respected and well-paid.
  • Pending Labour Reforms: Employers generally prefer automation and contract labour to save themselves from labour laws and, as a result, don’t invest in skilling the workers.
  • Poor Infrastructure and Quality in Skill Training Centres: Industrial Training Institutes (ITIs) and Skill Development Centres lack proper infrastructure, experienced faculty, and industry partnerships.

Programs to Skill

1. Skill India Mission

Skill India Mission

Ministry of Skill Development and Entrepreneurship (MSDE)

  • It was created as a separate ministry in 2014.
  • Objective: Address India’s manpower needs and equip youth with industry-relevant skills.
  • Key Functions of the Ministry include
    • Policy Framing: Develop policies like the National Skill Development Policy.
    • Scheme Implementation: Implement schemes like Pradhan Mantri Kaushal Vikas Yojana (PMKVY), UDAAN, a Special Industry Initiative for J&K, etc.
    • Industry Partnerships: Promotes PPPs and CSR funding for skill development.

Pradhan Mantri Kaushal Vikas Yojana (PMKVY)

  • The scheme works under the Skill Ministry.
  • Objectives: Enable a large number of Indian youth to skill them with industry-relevant skills through training, thus helping them secure a better livelihood.
  • Primary Target Group: 10th or 12th-grade dropouts, migrant workers, rural youth, and women.
  • PMKVY has two training components: Short-Term Training and Recognition of Prior Learning. 
  • Under the provisions of the scheme
    • It is a certification scheme under which certification of completion, along with ₹8,000, is given to those who successfully pass the program.
    • After completion, a person can also apply for a loan worth Rs. 20,000 to 1.5 lakh to start a venture.
    • Soft skill & computer course is also provided. 
    • The main focus of the scheme is 10 or +2 dropouts. 
  • The scheme is presently in its third phase. Several new initiatives, like the Upskilling for Weavers and Artisans in Traditional Crafts in Nagaland and Kashmir, digital marketing etc., were launched under PMKVY 3.0.

PM Internship Scheme

  • The scheme was announced in the Budget for 2024-25.
  • Nodal Ministry: Ministry of Corporate Affairs
  • Aim: To provide internships to 1 crore youth in top-500 companies (like Tata, ICICI, Zomato, Flipkart, etc.) over the five years.
  • Age Eligibility: Youth in the 21-24 age group. Selection will be based on academic performance, skill assessment tests, and industry demand.
  • Under the scheme,
    • The Government of India pays a Monthly Stipend of ₹4,500 per month. Additionally, ₹500 per month is contributed by the company (which can be adjusted in its CSR budget).
    • The Government also provides an additional ₹6,000 to each candidate to cover miscellaneous expenses (travel, food, training materials, etc.).

National Apprenticeship Promotion Scheme

  • The scheme aims to encourage industrial establishments to undertake apprenticeship programs by providing financial incentives.
  • Under the scheme, the Government reimburses 25% of the stipend (up to ₹1,500 per apprentice per month).

Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU GKY)

  • The scheme was launched in 2014 with the Ministry of Rural Development (MoRD) as the nodal agency.
  • It is a component of the National Rural Livelihoods Mission (NRLM).
  • Main Features of the scheme include
    • The scheme follows the Placement-Linked Approach.
    • Target beneficiaries include rural youth between  15-35 years.
    • Training is provided by accredited agencies, known as Project Implementing Agencies (PIAs), selected through a rigorous screening process.

National Skill Development Corporation (NSDC)

  • NSDC is owned by the Ministry of Skill Development & Entrepreneurship (MSDE) and the private sector in a 49:51 ratio.
  • Key Function: Fund and support vocational training institutions to promote skill development.

Skill Acquisition and Knowledge Awareness for Livelihood Promotion (SANKALP)

  • It is a World Bank loan-assisted program.
  • Objective: To decentralize skill development and align it with local needs and youth aspirations.

Indian BPO Promotion Scheme  (IBPS)

  • IBPS works under the supervision of the Ministry of Electronics and IT.
  • The scheme incentivizes the establishment of BPOs and their extension to Tier 2 and Tier 3 cities with financial support in the form of Viability Gap Funding.

Indian Institute of Skills 

  • PM  laid the foundation stone of the instruction in 2017.
  • “Indian Institute of Skills” is inspired by the Singapore training model. 
  • The institute would adopt various best practices from the country.  

Indian Skill Development Service

  • To attract dedicated young and talented administrators for skill development, the Government has established ISDS, whose first batch was inducted in 2019.

Digi Saksham

  • The scheme aims to improve the employability of youth by equipping them with essential digital skills.

Memorandum of Understanding

  • The government has signed MoUs with  China, the UK, Australia, and Germany for Skill Development in India.

Schemes for Skilling the Minorities

a. Ustaad Scheme

  • Ustaad scheme aims to skill minority artisans.
  • The main emphasis of the scheme is on 
Kashmiri EmbroidaryMuslims of Kashmir
JardosiBengali Muslims
PhulkariPunjabi Sikhs
Thangka PaintingBuddhists
  • Hunar Haats are organized under the Ustaad scheme, thus providing platforms for marketing artisans’ products belonging to minority communities

b. Sikho aur Kamao

  • The scheme works under the Ministry of Minority Affairs. 
  • Under the scheme, the person belonging to the Minority Community can get computer knowledge, tailoring skills, etc., from the Private Institution. The Government later reimburses that institution. 

c. Manas Scheme

  • MANAS = Maulana Azad National Academy for Skill
  • It is an innovative scheme and works on the principle of ‘Giving back to the Community’ under which the leading celebrities in various skill sets are used as the driving force behind the skill development projects in their respective fields.

Criticisms / Challenges

  • There is no standard definition of skill in India. Hence, there is no way to measure whether the skill is imparted or not.
  • The availability of good quality teachers to impart skills is not adequate. 
  • The industry does not value the certificates that these programs give.
  • The curriculum is not updated at the regular interval.
  • There is duplication of efforts in these schemes. Instead of many schemes, there should be one universal scheme. 
  • There is a need for constant up-gradation of skills. These programs don’t recognise this. 

R&D in Agriculture

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Last Updated: June 2025 (R&D in Agriculture)

R&D in Agriculture

R&D in Agriculture

This article deals with ‘R&D in Agriculture.’ This is part of our series on ‘Economics’ which is an important pillar of the GS-3 syllabus. For more articles, you can click here.

Why to focus on R&D?

  • Return on Investment: The Economic Survey (2021-22) explicitly highlighted the correlation between spending on agri-R&D and agricultural growth. Every rupee spent on agri-R&D yields much better returns (11.2), compared to returns on every rupee spent on fertilizer subsidy (0.88), power subsidy (0.79), etc.
  • Food Security: R&D helps in the development of high-yielding crops and thus achieve food security.
  • Climate Smart Crops: R&D can help create climate-smart crops that can survive extreme climate. 
  • Help Small Farmers: R&D is helpful in the Indian context as it can help to create new technologies designed to help small and marginal farmers.
  • Achieve SDGs: R&D also plays a critical role in achieving Sustainable Development Goals (SDGs), especially SDG-2: Zero Hunger and SDG-13: Climate Action

Schemes

Bodies

  • Indian Council of Agricultural Research (ICAR): ICAR is an autonomous organization for co-ordinating and guiding research & education in agriculture, including animal sciences, horticulture and fisheries in the country.
  • State Agricultural Universities (like Punjab Agricultural University) are dedicated to the development of agricultural technologies.

Krishi Vigyan Kendra (KVK)

KVKs are the institutions at the district level aimed at

  1. On-farm Testing to assess the adaptability of new agricultural technologies
  2. Frontline Demonstrations of the latest agricultural technologies to the farmers
  3. Provide Advisory Services on various aspects like cropping patterns, pest control, post-harvest technology, etc.
  4. Production of good quality seeds & planting materials for distribution to the farmers.

Issues with R&D in Agriculture

R&D in Agriculture is facing problems in India because

1. Lack of Funds

  • The private sector doesn’t contribute much investment in agriculture research, and government funding for R&D is decreasing considerably. This funding needs to be increased. 
  • Allocation for agri-R&D in Budget 2021 was just Rs 8,514 crore. It is even lower than that of a single private global company like Bayer, whose annual spending on agri-R&D is almost Rs 20,000 crore.
  • India spends only around 0.3% of its agri-GDP on research, compared to over 1% in developed countries like the USA and China.

2. Problem with ICAR

  • The problem with ICAR is that a single body plays several roles, from education to research to extension. Hence, it has become the jack of all trades but the master of none.  

3. Problem with Agriculture Universities

  • The agriculture universities have been plagued & not able to do much because of
    • Resource crunch
    • Difficulty in attracting talented faculty
    • Limited linkages and collaborations with international counterparts
    • Weakening of the lab-to-land connect
    • Lack of innovation

4. Low-Quality Research

  • The R&D sector is suffering from ‘technology fatigue’, i.e., no innovative invention has been done by the scientific community in the previous two decades.
  • Many research outputs are also not demand-driven or farmer-centric, leading to low adoption rates in the field.

5. Cereal Centric Research

  • Indian agriculture research has become too much ‘cereal-centric’. Instead, Indian researchers must focus on pulses, oilseeds, horticulture and animal husbandry.        

What can be the way ahead?

  1. Increase expenditure on R&D in Agriculture by the Government sector. 
  2. Kremer’s HIV Vaccine Idea / Government Pull System of Research: Private research in crops grown at a small scale can be boosted by offering the winner proportionately large cash, but the IPR for that innovation is transferred to the government.
  3. Address the regulatory lacunae in GM Crops technology: Pass the BRAI Act (Biotechnology Regulatory Authority of India) to remove the issues associated with the present regulatory framework under the aegis of the Genetic Engineering Appraisal Committee (GEAC).
  4. Adopt International Best Practices: Countries like Israel invest heavily in agri-R&D, especially in water-efficient farming and precision agriculture, yielding world-class productivity even in arid regions. India can adopt similar PPP-led, innovation-driven models.”