Food Processing Industry: Forward, Backward Linkages; Food Processing Industry and Economic Development

Food Processing Industry: Scope, Importance & Significance in Economic Development

The Economic Linkage Effects of Food Processing Industry

Linkages is a phenomenon which measures the capability of an industry to generate demand for the products of the other industries. Form the point of view of development strategy, linkages are one of the essential feature of an industry. Linkages are of three types: Forward, Backward and sideways.

Forward Linkage: It is when, the establishment of a processing industry can lead to the development and establishment of the number of advanced stage industries. Example, Forest Industry, when established as a base industry, results in establishment of vast number of advanced processing industries like: manufacturing of paper, paper bags, stationary, boxes made of paper, cartons, wooden boxes etc.

There are many other examples: products such as vegetable oils and rubber are used in a wide variety of manufacturing industries; based on the preparation of hides and skins, tanning operations can be started, as can the manufacture of footwear and other leather goods.

Backward Linkage: The feedback effects generated by a base industry on the development of the base sector is called backward linkage. The development of the food processing industry has many feed back effects on the agriculture sector itself.

For Example, once a food processing industry is established, it results in increasing the demand of raw materials provided by the agriculture sector. The establishment of processing facilities is itself an essential first step towards stimulating both consumer demand for the processed product and an adequate supply of the raw material.

The provision of transport, power and other infra-structural facilities required for agro-industries also benefits agricultural production. The development of these and other industries provides a more favourable atmosphere for technical progress and the acceptance of new ideas in farming itself.

Sideways Linkage: Sideways linkages are mostly derived from the use of by products and waste products of the main base industrial activity. For example: many food processing industries using agriculture raw materials produce waste that can be used further in production of fuel, bio-fuels, paper pulp and fertilizer. The production of sugar results in production of molasses as a waste product, which is used by the Alcohol Brewing industry in the production of ethanol.

The capacity of Food Processing industry to generate demand and employment in other industries is the important aspect of the processing industry. It works because of processing industry growing potential for activating backward, forward and sideway linkages.

The Food Processing Industry and Economic Development

Backward Channel

Forward Channel.

The growth of Food Processing Industry at different stages of Development.

The Initial Stage/Less Developed Countries

The Intermediate Stage/Middle Income Countries

The More Advanced Middle-Income Stage

The Final Stage/Developed Countries

 

By
Himanshu Arora
Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University

 

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