Sector Survey: Food Processing

3 Years agoAs India gets ready to host World Food India from Nov 3 - 5, immerse yourself in our Food Processing Sector Survey.

The Food Processing industry is a sunrise sector and is vital to India’s development, primarily due to the linkages and synergies it promotes between the two pillars of our economy - industry and agriculture. The sector in India includes fruit and vegetables; spices; meat and poultry; milk and milk products, alcoholic beverages, fisheries, grain processing and other consumer product groups such as confectionery, chocolates, cocoa products, soya-based products, mineral water and high-protein foods.


Overview of the Food Processing Sector in India


India has evolved from a food-scarce to a food-surplus nation during the last decade and the ever-growing trade in the production of food commodities indicates that the industry is on track in terms of growth and profitability. India’s USD 600 Billion food processing industry is expected to grow three-fold by 2020.1 India currently ranks second in terms of global food production, next only to China.2

India leads in the production of milk, bananas, mangoes, guavas, papayas, ginger and buffalo meat. However, in order to realise the maximum potential of the sector, a rising concern of wastage needs a dire attention.3 Hence, the development of the sector in the country will further strengthen the link between agriculture and manufacturing by using modern food processing technologies and cold storage techniques.


Growth Drivers


The growth in the sector can be expected to be driven by the food and grocery market, Which currently ranks sixth in the world and contributes approximately 70 % to the total retail sales.4 India’s strong 1.2 billion consumer base provides a well-established domestic market for the food processing industry in India.5 As the consumers in the country are becoming more health- conscious, the demand for nutritious food is growing proportionately. In addition, rising number of working women and nuclear families is resulting in high demand for ready-to- eat and frozen food. Thus, overall India’s food value chain is poised to create multiple opportunities for investment and employment in storage infrastructure, farming, retail and quality control.

India is endowed with a strong raw material base to stimulate the growth of food processing industry. The country is first in terms of milk production with production close to 146 155.5 million MT in FY 2015-166 and second in terms of fruits and vegetables in the world with production of 256 million MT.7 It is also the largest producer of spices with 6.9 million tonnes spices produced in the year 2015-16. The country is third in egg production, fifth in meat production and second in fish production in the world. The steady supply of raw materials and availability of cold storage infrastructure will complement the growth in sub-segments like dairy, horticulture, plantation, animal husbandry and fisheries. India’s diverse agro-climatic zones allows the country to produce a variety of crops.


Government Support


Under the Make in India initiative, the Government plans to stimulate growth in the Food Processing sector through the creation of a strong infrastructure, reduction of food wastage and promotion of Ease of Doing Business (EODB) measures. The upcoming ‘Scheme For Agro-Marine produce Processing and Development of Agro-clusters’ (SAMPADA) will provide a renewed thrust to the sector with the budget allocation of USD 923 Million.8 The FDI in trading and e-commerce of food products is allowed up to 100% through Ggovernment approval route.9 Additionally, the 100% FDI policy through automatic route in the sector for manufacturing in India has resulted in inflows of USD 1.7 Billion during April 2014 to December 2016 and USD 263.71 million from April - June 2017.10 With such an increased government support, food business giants such as Kelloggs, Ferrero and BSA International are all set to expand their footprint in India.11

To spur the growth in the e-retailing segment of the sector, the government has allowed 100% Foreign Direct Investment (FDI) for Food Processing in e-commerce through government approval route for products manufactured/produced in India. The move will open new avenues of growth in food retailing and boost the income of the farmers.12 13 India’s geographical proximity to food importing regions such as Singapore, Middle East, Thailand, Europe, Korea and Malaysia will further boost exports in the future.14

Furthermore, the Integrated Cold Chain and Value Addition Infrastructure scheme under MoFPI aims to build strong cold storage infrastructure for dairy, fish and horticultural industry. The Ministry of Food Processing is presently assisting 135 integrated cold chain projects. Of this, 97 have already achieved completion and commenced commercial operation.15 In the Budget 2017- 18, a new Dairy Processing and Infrastructure Development Fund worth USD 1.3 Billion was proposed in addition to the already allocated National Bank for Agriculture and Rural Development (NABARD’s) Food Processing Fund worth USD 307 Million. This is expected to give an impetus to Food Parks and processing units.16 The Mega Food Parks have been at the forefront of setting up Food Processing clusters across the country. Nine Mega Food Parks, namely Patanjali Food and Herbal Park (Haridwar, Srini Food Park (Chittoor) and North East Mega Food Park (Nalbari), among others, are functional so far and several more are in the pipeline.17

The Electronic National Agriculture Market (E-NAM) has integrated 417 markets from 13 states for efficient sale and distribution of food products and raw materials. 18 The service aims to create a unified national market for agricultural produce with 585 regulated mandis to be integrated with the portal by March 2018.19

The Ease Of Doing Business (EODB) measures implemented by the government such as the launch of a single window clearance for customs, single window investor facilitation cell, simplification of application forms, along with online system of food licensing and registration are landmark moves.20

Additionally, the Ministry of Food Processing is also organising events such as World Food India (WFI) to facilitate partnerships between Indian and international business units and investors. WFI, to be held in New Delhi from November 3-5, 2017, is said to be the largest gathering of investors, manufacturers, producers and policy makers from the global food ecosystem.21 The event will showcase the government’s new initiatives on the policy, regulatory and projects fronts. Further, there would be opportunities to conduct Business – to – Government (B2G) and Business to Business (B2B) meetings with key government stakeholders and potential business partners.

The Food Processing industry is critical to India’s growth and the government is focused on providing adequate impetus to the sector. A well-developed Food Processing sector will help facilitate crop diversification and generate employment opportunities. The introduction of modern processing techniques for food will result in improved shelf-life of the agricultural produce and ensure steady revenue to farmers. With the correct set of policy implementations and support, the industry can grow by leaps and bounds, taking India to a new position of strength and prosperity in the global economy.

9 DIPP statistics