Food Processing Industry India-291115
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1. The food processing industry in India is a growing sector that accounts for 32% of the country's total food market and has attracted $2.15 billion in foreign direct investment in 2015. 2. The size of the food processing industry is estimated to reach $258 billion by 2015 and $482 billion by 2020, growing at a compounded annual growth rate of 11% from 2010-2014. 3. The industry faces challenges such as a decline in land holdings, poor market linkages, a lack of adequate processing capacity and technology, and insufficient infrastructure and supply chains. However, the government is increasingly supporting the sector through policies aimed at tripling investment and exports of processed foods by 2015.
Food Processing Industry India-291115
- 1. 1. Bn stands for billion 2. CAGR stands for compounded annual growth rate Food Processing Industry India Bundle of Growth Opportunity Food Processing involves any value addition activities applied to produces right from harvesting stage to making it available as a usable food product to either to the end user or as an industrial raw material to manufacturing industries. The sector has attracted an FDI (foreign direct investment) worth USD 2.15bn between during the April-October period of FY 2015. Production of high perishable commodities with improper storage system has necessitated the development of Food Processing Infrastructure (FPI) in the country. Indian Food Processing Industry accounts for 32% of the Countrys total food market, 14% of manufacturing GDP, 13% of Indias export and 6% of total industrial investment. India food market size is estimated to reach around USD 258bn(1) by 2015 and USD 482bn by 2020. The Gross output of FPI sector has grown at a CAGR of ~11% during the period FY2010-14 to reach US$ 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. Indias 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 Indias 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.
- 3. References & Bibliography: 1. http://www.makeinindia.com/sector/food-processing 2. http://articles.economictimes.indiatimes.com/2015-01-14/news/58066421_1_lakh-crore-food- standards-food-retail 3. http://www.indiaretailing.com/FoodGrocer/7/42/44/12135/Food-Processing-Sector-in-Ind- 4. http://timesofindia.indiatimes.com/business/india-business/FDI-in-food-processing-touches-2- 15-billion/articleshow/29259620.cms 5. http://www.asa.in/pdfs/surveys-reports/Food-Processing-Sector-in-India.pdf 6. http://www.ibef.org/industry/indian-food-industry.aspx 7. http://www.investindia.gov.in/food-processing-sector/ 8. http://gtw3.grantthornton.in/assets/Farm_to_Fork_Grant_Thornton_report.pdf 9. Dun & Bradstreet Report (2014) on Sectoral Risk Output - Food Processing: Downloaded from EMIS