Institutional Innovations and Models in the Development of Agro-Food Industries in India: Strengths, Weaknesses and Lessons

Agro-industries are given high priority in India particularly because of their great potential for contributing to development. The emphasis on village-based agro-industries was introduced almost a century ago in India by Mahatma Gandhi as an important ideology and corner-stone of the independence movement. The approach has undergone substantial transformation since then, but major challenges to its success in development remain: how to organize sustained production and procurement from large numbers of small farmers, how to ensure adoption of the right technology and practices to generate quantity and quality output at a reasonable cost, how to obtain capital for ensuring good processing technology and meeting the high working capital requirements in a fluctuating business, how to deliver strong marketing efforts to compete and open nascent markets, and how to ensure effective ownership, management and control to ensure performance for its main stakeholders of producers, consumers and investors. To address these challenges, effective institutional frameworks are a must, and a number of innovations and institutional models have emerged in India. These include the HPMC model, the AMUL model, the Pepsi model, the E-choupal model, the Nestle model, the Heritage model, the Suguna model, the Reliance model and more. The paper uses available literature and data to examine the performance of several of these models with respect to the above mentioned challenges. Many findings and lessons emerge which would be useful for business and for guiding supportive policies and practices in developing countries.