Nuffoods Spectrum India

Make in India in food processing sector

17 March 2016 | Column | By Dr Prabodh S Halde, President, AFST, Mumbai

<p style="text-align: justify;">India is the second largest producer of food and holds the potential to be the biggest on the global food and agriculture canvas, according to a Corporate Catalyst India (CCI) survey. The food processing industry is one of the largest in India &ndash; it is ranked fifth in terms of production, consumption, export and expected growth.&nbsp;</p>

The agriculture sector is the base for most of the food processing industry and this sector has touched a growth rate of 4.4% in 2012-13. The food grain production at the India level is close to 245 million MT. The food processing industry is growing at a 13% growth rate and for the Indian economy the growth of this industry is crucial for the overall growth of the nation.

India annually produces 205 million tonnes of fruits and vegetables, but unfortunately the processing percentage is poor - only 4.6%. In contrast, countries like the USA (65%), China (23%) and Philippines (78%) are far ahead of India in reducing wastage and enhancing the value addition and shelf life of farm products. This is an alarming signal for India as a large volume of the agricultural produce is wasted. About 35% of the fruits and vegetables are wasted annually due to poor storage facilities, amounting to a revenue loss of Rs 500 billion. Also, 80% of the vegetables rot due to high water content and lack of processing facilities, resulting in a revenue loss of Rs 125 billion.

The food processing industry is of enormous significance for India's development as it has efficiently and effectively linked the nation’s economy, industry and agriculture. The linking of these three pillars has synergised the development process and promoted the growth of the nation to a great extent. The food processing industry is one of the largest industries operating in India and is divided into several segments. Government of India has identified food processing sector as one of the key sector for Make in India and thus Ministry of Food Processing Industries is focusing on growth of this sector. Till now India got 42 mega food parks with allocated investment of Rs 98 billion. Growth drivers for Make in India Key growth drives for Make in India are:

• Liberalisation and the growth of organised retail has made the Indian market more attractive for global players; with a large agricultural resource base, abundant livestock and cost competitiveness, India is fast emerging as a sourcing hub of processed foods.
• With a population size of 1.22 billion of which 604 million were under the age of 24 in 2011, this rising youth population is likely to increase India’s overall food consumption.
• Rising income levels, affluence and a growing middle class.
• Availability and good demand of Indian nutraceuticals.
• One-third of the population will be living in urban areas by 2020.
• Increasing desire for branded food as well as increased spending power.
• Large distinct consumer segments to support customised offerings/new categories and brands within each segment.
• Consumption in India is driven towards packaged and ready-to-eat foods.
• Favourable economic & cultural transformation, shift in attitudes & lifestyles, consumers are experimenting with different cuisines, tastes and new brands.
• There is an increase in awareness and concern for wellness and health, high protein, low fat, wholegrain, traditional foods and organic food.
• Exports of food items have been rising steadily.
• Also not only in manufacturing sector, Make in India will be successful in other allied sectors like research & development since capital and operative cost of R&D in India is less. Availability of skill manpower and good knowledge of English and food science. Thanks to over 300 food science and nutrition colleges all across India.
• Make in India will be successful in ‘Analytical Testing Sector’ thanks to new FSSA requirements on testing and huge investment is needed in food testing sector. Today awareness about food testing is low in unorgansied sector and thus huge potential in ’Food Analytical’ sector and I could see many companies will invest in India in this sector.

There will be good opportunity of investment by multinational & domestic players in following sectors.
• Training, auditing and certification
• IT solutions for food processing
• Food supply chain
• Food packaging sector
• Food safety/food processing education
• Consumer in sighting and consumer studies
• On line food marketing – e/m commerce
• Food advertising
• Food nutrition
• Food regulatory & legal cell

Apart from this most of the foreign countries (developed countries) have reached their saturation point and thus they are looking towards developing countries as a market and India could be best destination today. Challenges India needs to overcome basic challenges to make Make in India successful in food processing sector. The biggest challenge is that the food processing sector is dominated by unorganised players who contribute to 80% of the food processing industry (by volume) unlike other sectors viz. pharma, automobile and IT where over 90% of the sector is under organised players. There is a conversion of unorganised to organised sectors but we still need to cross quite a distance.

In India 85% of the GSDP comes from service and industry sectors and only 15% is from the agriculture and food sector, but 55% of the population is dependent on agriculture/food sector. If you look at this statistic minutely, 55% sector contributes only 15% in GSDP value and this is mainly due to the lack of processing non value addition. We need to change this scenario and money should go back to the farmers as per their value addition and thus agriculture/food sector should equally contribute to its size (1:1 ratio) in GSDP. This is possible if we focus properly like many developed countries who have a higher ratio.

The main challenges in the food processing industry are
• Unavailability of processable quality and quantity of fruits and vegetables and raw material: Focus on agriculture Low productivity of agri products: Need to link all agriculture universities with food processing mission.
• Low land holding per farmer: Need to change the policies.
• Poor infrastructure and high tariff rates for electricity.
• Low technology base/low automation.
• Labour-intensive operations.
• Need liberal policies and regulation to support his new initiatives: Need reforms in labour laws/pollution control Act/plastic waste management policies and factories Act.
• Many states do not have food processing ministry which will be one point contact for sector, central food processing ministry is one point contact at India level. Attracting foreign and domestic investment in food processing sector can be easy task but keeping them engaged for long term is a real task.

Why it will work? 
Today India is in right mood of investment in area of food processing sector and under strong leadership of food processing minister, entire ministry is working towards this agenda of Make in India. In last 10 years FDI flow is showing positive trend in food processing sector and the share of food processing in total FDI would reach to 5% in coming three yea Conclusion Today the Indian food industry is a natural choice for foreign direct investment. Special sectors like nutraceuticals/post-harvest sector/traditional food/convenience food can bring good value addition to farmers, processors and consumers. Due to strong focus in sector by government today India has become one of best foreign direct investment destination. With a focused approach we can achieve 20% growth year on year in the food processing industry in the coming 5 years and by 2018 India will reach a number of 25% processing with GSDP contribution of 40% from agri/food sector.


The Make in India event in Mumbai resulted in an investment commitment of Rs 15.20 lakh crore, half of which will be in Maharashtra. In the week one could see very well-organized commercial event and B2B meetings. There was special emphasis on food processing sector with one hall dedicated for the sector. Ministry of Food Processing, CII and NIFTEM were key organisers.

One of the outcomes of the event is that it has established the fact that Indian food processing industry has huge potential for investment and this sector saw huge enquiries. With favourable policy initiatives of Government of India, India beckons to become food basket of world in the coming years. India could be next destination in the world for ‘Invest in India in food processing sector’.

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