Food Processing Sector in India

Syllabus: GS3/Economy

Context

• At the third edition of World Food India 2024, the Prime Minister said that India has introduced “wide-ranging” reforms to transform the food-processing sector in the last 10 years.

What is Food Processing?

• Food processing can be defined as the use of methods and techniques involving equipment, energy, and tools to transform agricultural products such as grains, meats, vegetables, fruits, and milk into food ingredients or processed food products.
• This can include a wide range of activities, such as: Preparation, Cooking, Preservation, Packaging and Fortification.
• Formulations and processing techniques are scientifically developed to deliver food that is safe, eliminating the presence of any harmful chemical contaminants and micro-organisms that could cause food-borne illnesses. 

Food Processing Industry in India

• The market size of the food processing sector in India is estimated to reach US$ 1,274 billion in 2027 from US$ 866 billion in 2022.
• The growing consumption of food is expected to reach US$ 1.2 trillion by 2025-26, owing to urbanization and changing consumption patterns.
• The Indian food and beverage packaged industry is experiencing substantial growth with market size projected to increase from US$ 33.7 billion in 2023 to US$ 46.3 billion by 2028.​
• Reasons for the Growth of Sector: India is the largest producer of milk and spices and one of the leading producers of fruits and vegetables, poultry, and meat.
  • India has access to several natural resources that provides it with a competitive advantage in the food processing sector.
  • Due to its diverse agro-climatic conditions, it has a wide-ranging and large raw material base suitable for food processing industries.​

Challenges  

• Cold Chain Logistics: Lack of adequate cold storage facilities leads to significant food wastage, especially for perishable items.
• Transportation: Poor road and transport infrastructure delay the movement of goods, affecting freshness and quality.
• Complex Compliance: Navigating various regulations and standards set by agencies like FSSAI can be challenging, particularly for small and medium enterprises (SMEs).
• Bureaucratic Delays: Obtaining licenses and approvals can be time-consuming, affecting business operations.
• Limited Adoption of Modern Techniques: Many small processors lack access to advanced processing technologies and machinery, which limit efficiency and scalability.
• Price Sensitivity: Consumers are often price-sensitive, which pressures margins for processors.
• Inconsistent Supply: Fluctuations in agricultural production due to weather conditions disrupt the supply chain, leading to shortages and price volatility.
• Health Consciousness: Increasing demand for healthier and organic options requires processors to adapt their offerings, which can be resource-intensive.
• Changing Tastes: Rapid shifts in consumer preferences necessitate constant innovation and product development.
• Waste Management: Efficient waste management systems are needed to minimize the environmental impact of food processing operations.

Government Initiatives

• Initiatives for attracting Investment: Exempting all the processed food items from the purview of licensing under the Industries (Development and Regulation) Act, 1951.
  • 100% Foreign Direct Investment (FDI) permitted through automatic route for the food processing sector subject to sectoral regulations.
  • 100% Foreign Direct Investment, under Government approval route, for trading including through e-commerce, in respect of food products manufactured or produced in India.
  • Lower GST for raw and processed products; more than 71.7% food products under various chapter heads/sub-heads are covered in lower tax slab of 0% & 5%.
• MoFPI is also implementing a Centrally Sponsored Scheme- PM Formalisation of Micro Food Processing Enterprises Scheme (PMFME) for providing technical, financial and business support for setting up/upgradation of 2 lakh Micro Food Processing Enterprises.
• MoFPI has also launched the Production Linked Incentive scheme (PLIS) for the period 2021-22 to 2026-27 to create global food champions and improving the visibility of Indian food brands abroad.
• Pradhan Mantri Kisan Sampada Yojana (PMKSY): Launched in 2016, this scheme aims to create modern food processing infrastructure and promote the development of food processing units.
• National Food Processing Policy: This policy aims to enhance food processing capacity and encourage innovation in the sector.
• Market Access: Efforts are being made to improve market access for processed food products through various platforms, including e-commerce and direct selling.

Conclusion

• India’s food ecosystem offers enormous investment opportunities with stimulating growth in the food retail sector encouraging economic policies, and attractive fiscal incentives. 
• Through the Ministry of Food Processing Industries (MoFPI), Government of India is taking all necessary measures to boost investments in the food processing industry in India. 

Read our detailed article on Food Processing: Sub-Segments, Facts, Opportunities & Challenges

Source: IE