Food Processing Industry in India - Opportunities & Advantages

The food processing sector in India holds a pivotal position, contributing around 30% to the nation's total food market. It has seen remarkable growth due to private investments and government support. The industry offers significant potential for employment, entrepreneurship, and profits. Ministries like MoSDE and MoFPI actively encourage domestic and foreign investment, leading to joint ventures and export-oriented units. Changing consumer preferences and rising aspirations have driven the focus towards nutritional security. The industry encompasses diverse food products, attracting FDI of Rs. 2,934.1 crore (US$ 368.8 million) in FY21. Prospects for the sector are promising with ongoing government support and increasing investment opportunities.

Recent Trends

• Ultra High Temperature processing and aseptic packaging extend dairy product shelf life.
• Invest India promotes advanced mechanical systems for food processing.
• Horticulture consumption surges, driving fruit and vegetable demand.
• Frozen and processed foods gain popularity for convenience and nutrition.
• Direct farmer-firm linkages and contract farming strengthen procurement.
• Digital revolution empowers consumers, brands engage through diverse channels.

Market Overview

India's food retail sector presents attractive investment opportunities due to favourable policies and fiscal incentives. Initiatives like PMKSY, PMFME, and PLISFPI by MoFPI aim to modernize food processing infrastructure, strengthen micro-enterprises, and boost domestic manufacturing and exports. These efforts have led to a 13% increase in agricultural and processed food exports. Additionally, India's horticulture, milk, egg, fish, and meat production, along with online grocery retail growth and rice exports, reflect the country's potential in the food processing industry.

Growth Drivers

• India is the largest producer of various agricultural commodities, with a massive consumer base.
• The country's strong economy enhances its global position as the fastest-growing and largest economy.
• Proactive government policies provide fiscal incentives for agricultural sector growth.
• The "One District, One Product" (ODOP) initiative focuses on specialised products in 713 districts, contributing to regional development and economic diversification.

Why India?

The Indian food processing sector shows impressive growth, with a substantial contribution to the economy. It is projected to reach US$ 535 billion by FY26, driven by urbanization, rising income, and organized retail expansion. India excels in milk, spices, livestock, and ranks high in other agricultural production. With a dynamic food industry, revenue is expected to reach US$ 1.2 trillion by FY26. The country's real GDP growth for FY22 surpassed pre-pandemic levels, and FDI inflows remain robust, reaching US$ 84.8 billion in FY22. India's extensive road and railway networks, coupled with substantial infrastructure investments, support its development. Urbanization and a focus on human capital further contribute to India's economic prospects.

Major Categories

The food processing sector in India is diverse, comprising six distinct segments:

• Dairy
• Meat and Poultry
• Fisheries
• Fruits and Vegetables
• Consumer Foods
• Grains and Cereals

Advantages for the Food Processing Industry in India

India's food processing industry benefits from several favourable factors. Its diverse agro-climatic conditions provide abundant raw materials, and it holds a leading position in the production of primary products like milk, marine products, fruits, and vegetables. The country's vast labour force supports the industry's workforce requirements. With a growing population and rising per-capita income, India offers a strong domestic market. Government support and priority status for the agro-processing sector encourage growth and entrepreneurship. Furthermore, well-established sea routes facilitate the industry's export potential, enabling a presence in foreign markets.

Opportunities for the Food Processing Industry in India

India's food processing industry benefits from Special Economic Zones (SEZs), Agri-Export Zones (AEZs), and Mega Food Parks, providing crucial infrastructure for small and medium-scale enterprises' growth. Emerging trends like low-fat and functional foods offer opportunities for innovation and expansion. Farmers' diversification into higher-value crops contributes to the sector's raw material availability. Indian products' increasing acceptability in global markets and adherence to international quality standards fuel the industry's export potential, enhancing its growth and competitiveness worldwide.

Key Food Processing Hubs in India

• Mumbai, Maharashtra: Financial hub with diverse agricultural output and strong industrial infrastructure. Key players: Parle Products, Britannia, Amul.
• Ahmedabad, Gujarat: Investor-friendly policies and abundant agricultural output. Key players: Haldiram's, Mother Dairy, Adani Wilmar.
• Delhi-NCR: Large consumer market with developed infrastructure. Key players: Nestlé India, Dabur India, MTR Foods.
• Kolkata, West Bengal: Major seaport, rich culinary heritage. Key players: ITC Limited, Britannia Industries, Emami Agrotech.
• Bengaluru, Karnataka: Technological innovation and rich agricultural output. Key players: Britannia Industries, Heritage Foods, Mother Dairy.
• Hyderabad, Telangana: Proactive industrial approach, known for spices and ready-to-eat meals. Key players: MTR Foods, Priya Foods, Goldwinner.
• Pune, Maharashtra: Proximity to major agricultural regions. Key players: Parle Products, Mother Dairy, Coca-Cola India.
• Ludhiana, Punjab: Wheat and dairy products. Key players: Verka, Mrs. Bector's Food Specialties, Grewal Foods.
• Chennai, Tamil Nadu: Strategic location with diverse agricultural output. Key players: Britannia Industries, Hatsun Agro Products, Dabur India, ITC Limited.
• Kochi, Kerala: Seafood processing and coconut-based products. Key players: Dabur India, MTR Foods, KLF Nirmal, KPL Oil Mills.

Major Organizations

India's food processing sector is supported by several major government institutions and departments, such as the Agriculture and Processed Foods Export Development Authority (APEDA), Food Safety and Standards Authority of India (FSSAI), Ministry of Agriculture & Farmer's Welfare, and Ministry of Food Processing Industries (MoFPI). APEDA and MPEDA play crucial roles in promoting agricultural and marine product exports, while FSSAI ensures food safety standards. Industry associations, including AIFPA, AFTPAI, and CIFTI, advocate for the sector's interests and technological advancements. Various specialized institutes and educational institutions also contribute to the industry's growth by focusing on research, standardization, and skill development.

Confederation of Indian Food Trade and Industry (CIFTI)

CIFTI, the Confederation of Indian Food Trade and Industry, is a significant industry association dedicated to the food processing sector. As the food wing of FICCI, it collaborates with the Government to shape policies and facilitate private investment. CIFTI focuses on creating strong backward linkages in the supply chain, addressing regulatory challenges, and assisting members in exploring export opportunities. By providing sector information and fostering collaboration, CIFTI contributes to the growth and competitiveness of the food processing industry in India.

FSSAI Registration

The Food Safety and Standards Authority of India (FSSAI) is an autonomous body under the Ministry of Health and Family Welfare. Its main role is to ensure food safety and standards in the country. FSSAI formulates regulations, advocates good practices for food business operators, and provides scientific advice to the government. It also manages laboratories, collects data on food safety, and disseminates information to the public. Through collaborations and capacity building, FSSAI contributes to maintaining high food safety standards in India, protecting public health.

Other Licenses and Registrations

• Fire Department NOC
• Water Testing Certificate
• Pollution Clearance
• Import Export Code (IEC)
• GST Registration
• Trademark Registration

PLI Scheme for the Food Processing Industry

The Indian government's Production Linked Incentive (PLI) scheme for the food processing sector aims to boost domestic manufacturing and attract investments. It has a budget allocation of ?10,900 crore and includes incentives for major food product categories, support for innovative/organic products, and assistance for branding and marketing. The scheme will run for six years, promoting India as a leading exporter of processed foods and fostering strong Indian brands in the global market.

Government Support and Initiatives

• Micro Food Processing Enterprises Scheme (PM FME)
• The One District One Product (ODOP) Initiative
• Relaxed FDI Norms
• Dairy Processing Infra Fund
• Strengthening Food Testing Infrastructure
• International Best Practices in Fertilizer Research
• Human Resource Development (HRD) Scheme
• PM Kisan Sampada Yojana

Project Estimation

The cost of setting up a food processing unit in India can vary significantly depending on several factors, including the scale of the operation, the type of food products being processed, the location, and the specific requirements of the unit. Some key components include cost of infrastructure, machinery and equipment, raw materials, labour, marketing and branding etc. The total estimated cost for setting up a small to medium-sized food processing unit in India can range from ?1 crore to ?5 crores (approximately $135,000 to $675,000) or more.

Conclusion

The Indian food processing industry is thriving and diverse, with strengths in supply-side opportunities, abundant agricultural production, and a young and skilled workforce. The industry is driven by a large and growing urban population with increasing disposable income. Despite challenges, food processing exports have shown growth, and the government's support and initiatives are further boosting the industry's potential for success and expansion. Notable success stories include Parle and AMUL. With favorable market positioning and effective execution, the industry is expected to experience significant growth in the future.


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