1. 1. Bn stands for billion
2. CAGR stands for compounded annual growth rate
Food Processing Industry India – Bundle of Growth Opportunity
Food Processing involves any value addition activities applied to produces right from harvesting stage to
making it available as a
usable food product to
either to the end user or
as an industrial raw
material to
manufacturing
industries. The sector
has attracted an FDI
(foreign direct
investment) worth USD
2.15bn between during
the April-October
period of FY 2015.
Production of high
perishable
commodities with
improper storage
system has
necessitated the
development of Food
Processing
Infrastructure (FPI) in
the country. Indian Food Processing Industry accounts for 32% of the Country’s total food market, 14% of
manufacturing GDP, 13% of India’s export and 6% of total industrial investment. India food market size is
estimated to reach around USD 258bn(1)
by 2015 and USD 482bn by 2020. The Gross output of FPI sector
has grown at a CAGR of ~11% during the period FY2010-14 to reach US$ 13.2 Bn.
Food processing industry is dominated by oils and grain products. Vegetable & animal oils and fats
accounts for approximately 27% of the total FPI output by value followed by grain mills and starch products.
Growth drivers remain intact
Rising urbanization, evolving
distribution network, favorable
regulatory policies remain the
pillar of FPI growth in India.
Hectic life style, rising number of
nuclear families, and rising
participation of women in
workforce demand convenience,
leading to growing dependence on
processed food.
A combination of these factors is
likely to increase the size of FPI
output from USD 13.2bn in 2014
to USD 20bn registering a
CAGR(2)
of 11% during FY 2014 -
20.
2. 3. Mn stands for million
Efforts at multiple levels needed to tackle challenges constraining the growth of FPI
Decrease in Land Holdings: Average size of land
holdings in India has been under continual decline.
India’s 140 mn. hecatre-wide farmlands are now
worked upon 14Cr. farmers, up from 7 Cr. farmers 40
years ago.
Poor Market Linkages: Inadeqaute forward
integration coupled with fragmented supply chain
resulted in subprime quality, lower prices and high
wastage of farm produce. Direct access to markets is
still a stiff challenge for distant and small farmers.
Lack of adequate processing capacity, equipment
& technology: Dominated by the practice of
production driven market supply instead of market
driven production, inconsistency in the quality of
produce & supply prevails. Development of cutting
edge technology at par with developed country
remains a challenge for the sector.
Skilled Manpower: There remains a marked deficiency
in technical knowhow support at each level in the food
processing value chain in India.
Insufficient Infrastructure & Supply chain:
Inadequate availability of core infrastructure needs like
cold storage, high-tech production facilities, grading &
packing units, warehousing and integrated processing
units coupled with erratic power supply, inefficient or
poor supply chain and transportation are major concern
for the sector.
Slow growth Of SMEs: SMEs provide the essential link
between the agricultural and industrial segments of the
economy by enhancing the value of agricultural
production. Increasingly rigorous quality standards
demanded by exports markets, survival challenges in
the face of highly competitive market environment are
the main threats to the growth of SMEs.
Government support to the sector is rising
Government has permitted upto 100% FDI under
automatic route in all processed food segment except
for items reserved for Micro & Small Enterproses. Vision
Document – 2015 was prepared by Ministry of Food
Processing Industries inorder to promote FPI in India.
The document envisages trebling the size of investment
in the processed food sector by increasing the level of
“processing of perishables” from 6% to 20%, “value
addition” from 20% to 35% and share in global food
trade from 1.5% to 3% by 2015. An Investment of USD
16Bn would be required in 2015 to achieve these
targets.
Establishment of Mega Food Parks in the states of Bihar, Maharashtra, Himachal Pradesh and Chattisgarh,
a corpus of USD 301mn(3)
(In Budget 2015-16) was created under National Bank for Agriculture and Rural
Development (NABARD) to provide cheaper credit to food processing industry. Across India excise duty on
plant and machinery for packaging and processing has been brought down to 6% from 10%.
A promising sector to explore
India’s population is growing and so is the economy.
Demand for food & beverages is increasing which
indicates the growth drivers for FPI is robust and
holds strong potential to grow enormously. The new
government has already identified this sector as
priority one and by ensuring improved affordability
and consistent export policy – future growth is
inevitable!
“Make in India” – A campaign which supports
investment in India will enhance Innovation, Skills
and easy access to credit encouragement.
