Indian Food Processing: An Untapped Growth Opportunity
By: Aayushi Bhatia
Radhika Mehta Malik
Kanika Verma
Kartikeya Saigal
- Indian Food Processing: An Untapped Growth Opportunity
FOREWORD
Under the leadership of Prime Minister Narendra Modi, India has spearheaded a range of efforts to introduce fundamental and modernizing changes to the economy such as increasing digital transactions, cutting red tape, increasing efficiency, introducing the Goods and Services Tax, among others. This rethinking and restructuring of the economy created room for growth and improvement in areas such as food and product retail.
India’s food processing sector is one of the largest in the world and its output is expected to reach $ 535 Bn by 2025-26. It lies at the heart of the Government of India’s Make in India initiative and resonates with Prime Minister Modi’s call for ‘vocal for local’.
New initiatives like a planned infrastructure spend of around INR 100 lakh crore (around $1 Trn) and INR 25 lakh crore to boost the rural economy have put the food processing sector on a high growth trajectory. The Pradhan MantriKisanSampadaYojna, for example, is a comprehensive package whichshall create modern infrastructure with efficient supply chain management from farm to retail outlet. More recently, boosting Prime Minister Modi’s AtmanirbharBharat vision,thescheme of Formalizationof Micro Food Processing Enterprises (FME) is being rolled out with an outlay of INR 10,000crore.
Buoyed by such actions, India’s food sector attracted $ 4.18 Bn in foreign direct investment between April 2014-March 2020. India is one of the largest producers of a range of agricultural products and as the global population grows, demand for made in India food is ever rising.
This report will give you a detailed overview of why the food processing sector in India is so exciting and I hope you will enjoy reading it.
– Deepak Bagla, CEO & MD Invest India
OVERVIEW OF THE INDIAN FOOD PROCESSING SECTOR
With India moving from a position of scarcity to surplus in terms of food production, the opportunities for increasing food processing levels are innumerable. India’s food processing sector, in recent years, has been known for its high-growth and high-profits, thus, increasing its contribution to the world food trade every year.
Currently, India is processing less than 10 %¹ of its agricultural output, thus, presenting immense opportunities for increasing these processing levels and leading to investments in this sector. With agriculture and its allied sectors being the largest source of livelihoods in India, 70 %² of its rural households still depend primarily on agriculture for their livelihood. Thus, this sector provides a huge employment generation potential as well. The food processing sector has been acknowledged as a high priority industry by the government of India and is currently being promoted with various fiscal reliefs and incentives.
With the government’s focus and a favourable policy ecosystem, the food processing sector has been growing at an Average Annual Growth Rate (AAGR) of around 8.41 %³ between 2014-18. The sector constitutes 8.83 %⁴ and 10.66 %⁵ of gross value added in manufacturing and agriculture sector respectively.
The Indian food industry’s output is expected to reach $ 535 Bn⁶ by 2025-26. Rising household incomes, urbanization and the growth of organized retail are currently some of the major drivers of this market.
According to the latest Annual Survey of Industries (2016-17), food processing accounted for⁷:
- 15.95 % of the total number of factories
- Employment to 11.36 % of the workforce
- 14.09 % of the output
- 16.78 % of the operational factories
The Indian market is fast evolving and has seen some major changes in terms of changing consumption patterns due to urbanisation, changes in the gender composition of the workforce, and growing consumption rates. The growing consumption of food is expected to reach $ 1.2 Trn by 2025-26⁸, owing to these factors.
