Food Processing Sector

Food processing is a transformation of core food products into new goods and enhances their shelf life.

It can be categorized into primary and secondary products. Primary products are made from processed raw materials, like fruits and vegetables, while secondary products are created by processing primary food items into new products, such as jams, sauces, and butter.

The food processing sector is growing due to four primary factors:

  • Changing lifestyle and food preferences as a result of increasing disposable income
  • High level of agricultural output – a large cattle base, a diverse crop mix, inland water bodies; and a long coastline that contribute to increased marine production
  • Export opportunities such as proximity to key export destinations, increasing connectivity with the global economy
  • Proactive government policy and assistance.

Food Processing Sector: Scope

  • India’s food processing industry facilitates the connection between farmers and domestic and international customers.
  • With approximately 1.93 million employees, the industry accounts for 12.38% of registered factory employment.
  • 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.
  • According to the NSSO 73rd Round data, the unregistered food processing sector employs 5.1 million people. Grain, sugar, edible oils, drinks, and dairy products are the major areas of India’s food processing business.
  • Pradhan Mantri Kisan Sampada Yojana  has approved 41 Mega Food Parks, 376 Cold Chain projects, 79 Agro-Processing Clusters, 489 proposals for the Creation/Expansion of Food Processing & Preservation Capacities (CEFPPC), 61 Creation of Backward and Forward Linkages Projects, 52 Operation Green projects, and 183 Food Testing Laboratories projects across the country.

Food Processing Sector:Significance

  • FDI equity inflows into the food processing sector reached $3.28 billion between 2019-2022. For food goods produced in India, 100% FDI is allowed through the government approval process, including e-commerce.
  • Food processing is the fifth largest sector of the country’s economy and contributes 13% to our annual GDP.
  • More than 3.85 lakh jobs have been created in the food processing sector from the year 2019-2022, and another 4 lakhs will be created by the end of 2024 as new mega food parks come online.
  • India exports agricultural and horticultural products, and processed foods to 100+ countries, including the Middle East, Southeast Asia, SAARC countries, the EU, and the US. In 2022, processed vegetable and fruit exports grew by 59.1%, grains by 37.66%, and basmati rice by 25.5%. Non-Basmati rice emerged as India’s top export, with $4,663 million in the first nine months of 2022-23.
  • Food processing is a sunrise industry with a consistent demand for locally processed food. Abundant raw materials and favourable government regulations benefit food processing plants.

Food Processing Sector:Potential

  • India is a major contributor to global fresh vegetable production, accounting for around 15%. In the crop year 2021-22 (July-June).
    • India’s horticulture crop production of fruits, vegetables, spices, medicinal plants, and plantation crops climbed marginally to a record 342.3 million tonne (mt), up from 334.6 mt in 2020-21.
    • Horticultural crop production continues to surpass food grain production.
  • India has the world’s largest livestock population and ranks as the third-largest egg producer and the seventh-largest grill meat producer, according to the FAO.
    • In 2021-22, the country produced 129.60 billion eggs, a 6.19% increase from the previous year.
    • According to studies, India’s meat output is predicted to be 6.3 million tonnes per year, placing it fifth in the world in terms of production volume.
  • In terms of fish and shellfish species, they account for more than 10% of world biodiversity.
    • Apart from inland waterways, India’s lengthy coastline covering 8,118 km demonstrates the country’s great potential in the industry.
    • The fish production in 2021-22 is 16.24 million tonnes, with 4.12 million tonnes from marine fish production and 12.12 million tonnes from aquaculture.
  • India’s dairy market is one of the world’s largest and fastest-growing.
    • With a significant bovine population, India has been the top milk producer for 18 consecutive years.
    • In 2021-22, the country produced 221.06 million tonnes of milk, securing the global first rank.
    • It is expected that the dairy industry will be built into a $355 Billion industry by 2025.
  • The Indian food retail sector is growing due to changing consumer preferences and convenience.  Online grocery retail in India has grown at a CAGR of more than 50% and is expected to reach $10 billion to $12 billion by 2025.
  • The demand for health supplements and nutraceuticals has increased due to urbanization, changing lifestyles, and a lack of awareness about essential nutrition intake.
    • The global market for health supplements, dominated by the United States, Japan, and Europe, is projected to grow at a CAGR of 8% by 2023, with India expected to capture a 3.5% market share.

Food Processing Sector:Concerns

                  Figure 1: Challenges faced by the food processing sector in India (Source: Invest India)

  • The lack of modern infrastructure is a major challenge for the Indian food processing industry.
  • SMEs, which form a significant portion of the industry, often face resource constraints that hinder their ability to upgrade facilities and adopt the latest technology.
  • Despite being a large employer, food processing faces a labour shortage of qualified and semi-skilled workers.
  • India is the world’s second-largest food producer. Despite providing a vast supply of raw materials to the food processing sector, the quality of the goods received by the business is not as per international standards. As a result, a large portion of the product cannot be exported and must be sold at a cheaper price in the home market.
  • Indian agriculture is dependent on monsoons, making crop production unpredictable. Additionally, the seasonal availability of raw materials, particularly fruits and vegetables, presents a major challenge to the industry’s growth.
  • Rather than a single comprehensive legislation, the food sector in India is governed by a variety of various statutes. This stepwise approach has resulted in regulatory incoherence and inconsistency in the food sector.

Food Processing Sector: Government Schemes

Pradhan Mantri Kisan Sampada Yojana (PMKSY): It aims to develop modern infrastructure and efficient supply chain management from production to retail. It focuses on establishing integrated cold chain and preservation facilities at the grassroots level. The following schemes will be implemented under PM Kisan SAMPADA Yojana:

  • Mega food park
  • Integrated Cold Chain and Value Addition Infrastructure
  • Creation/ Expansion of Food Processing/ Preservation Capacities (Unit Scheme)
  • Infrastructure for Agro-processing Clusters
  • Creation of Backward and Forward Linkages
  • Food Safety and Quality Assurance Infrastructure
  • Human Resources and Institutions

Mega Food Parks are built on a ‘cluster’ strategy and focus on the development of cutting-edge support infrastructure in a well-defined agri/horticultural zone for the establishment of modern food processing units in the park’s industrial plots with well-established supply chains.

Figure 2: Map showing food parks in India (Source: InvestIndia)

  • The formalisation of the Micro Food Processing Enterprises (PMFME) Scheme provides financial, technical, and business support to two lakh existing micro food processing enterprises across the country through the One District One Product (ODOP) approach.
  • The Food Processing Sector Production Linked Incentive Scheme (PLIS) was introduced to help create global food manufacturing champions. The scheme encourages investment while also promoting exports and job creation in the area.
  • The national horticulture board initiated a Capital investment subsidy scheme for the construction/expansion/modernization of cold storage and storage for horticulture produce.
  • Pradhan Mantri Matsya Sampada Yojna was initiated to increase fish production to 22 million MT by 2024-25 and triple fisheries exports to INR 1,00,000 crores (USD 13.25 billion) by 2024-25.
  • Nivesh Bandhu, a dedicated investment portal, has also been established as a resource base for outlining land availability, fiscal incentives, and governmental regulations, as well as disseminating information about agricultural reforms.
  • The Finance Minister declared in the 2023 budget that the agriculture credit target will be enhanced to Rs 20 lakh crore, with an emphasis on animal husbandry, dairy, and fisheries.
  • The Indian government is also planning to set up decentralized storage facilities for farmers and establish cooperative societies in rural areas by 2028.




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