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The Indian food market is estimated at over US$ 182 billion, and accounts for about two thirds of the total Indian retail market. Further, according to consultancy firm McKinsey & Co, the retail food sector in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by 2025, accounting for a large chunk of the world food industry, which would grow to US$ 400 billion from US$ 175 billion by 2025. Exports Exports of agricultural products from India are expected to more than double to top US$ 20.6 billion in the next five years, according to the commerce ministry. According to estimates by the Agricultural and Processed Food Products Export Development Authority (APEDA), the share of India's farm product exports in the global trade will grow from 2 per cent now to over 5 per cent. Exports of fresh and processed vegetables, fruits, livestock and cereals rose 10 per cent to US$ 8.67 billion in 2008-09. Spices Despite a global slowdown, Indian spice exports are growing. India exported 470,520 tonnes of spices valued at US$ 11.68 billion an all-time high in 2008-09. During the 2007-08, 444,250 tonnes valued at US$ 11.01 billion were exported. Compared with 2007-08, exports had shown an increase of 19 per cent in rupee value and six per cent in dollar terms. Food Processing The Indian packaged processed foods industry is estimated at US$ 10.87 billion US$ 13.05 billion, including biscuits, chocolates, ice-cream, confectionery, snacks, cheese and butter. Growing at a healthy 14-15 per cent over the past two-three years, major players in the sector include Britannia, Nestle, Amul, ITC Foods, Parle, Kellogg s, GlaxoSmithKline, Wrigley and FritoLay, among others. The industry received foreign direct investments (FDI) totalling US$ 143.80 million in 2007-08 against US$ 5.70 million in the previous fiscal. The cumulative FDI received by the industry from April 2000-August 2009 stood at US$ 878.32 million. However, India s share in exports of processed food in global trade is only 1.5 per cent; whereas
the size of the global processed-food market is estimated at US$ 3.2 trillion and nearly 80 per cent of agricultural products in the developed countries get processed and packaged. In order to further grow the food processing industry, the government has formulated a Vision2015 action plan under which specific targets have been set. This includes tripling the size of the food processing industry from around US$ 70 billion to about US$ 210 billion, raising the level of processing of perishables from 6 per cent to 20 per cent, increasing value addition from 20 per cent to 35 per cent, and enhancing India s share in global food trade from 1.5 per cent to 3 per cent. This would require an investment of US$ 20.6 billion. According to an Ernst and Young (E&Y) presentation, the food processing industry in India will grow 30-40 per cent as against the present 15 per cent in the next 10-years. Prime Minister Dr Manmohan Singh on October 6, 2009 laid out a blueprint for rapid growth in the country s food processing sector. The Prime Minister said that this can be achieved by simplifying the tax structure, formulating a National Food Processing Policy and improving rural infrastructure. Moreover, according to Union Minister for Food Processing Industries, Subodh Kant Sahai the central government is envisaging an investment of US$ 21.50 billion in the food processing industry over the next five years, a major chunk of which it plans to attract from the private sector and financial institutions. Snacks and Confectionery The Indian market holds enormous growth potential for snack food, which is estimated to be worth US$ 3 billion, with the branded snack market estimated to be around US$ 1.34 billion, growing at 15-20 per cent a year. While the growth rate of the US$ 1.56 billion unorganised sector is 7-8 per cent. Health Food Recognising the growth potential of the branded health food sector in India, fast moving consumer goods (FMCG) majors are foraying into this sector in a big way. As Hindustan Lever Ltd (HUL) is test marketing its health food brand, Kissan Amaze, in three southern states in India, Godrej Hershey Foods & Beverages Ltd (GHFBL), a joint venture between Godrej Beverages & Foods Ltd and Hershey Company, is planning to introduce select brands from its international portfolio in the domestic market. Dairy According to Dairy India 2007 estimates, the current size of the Indian dairy sector is US$ 62.67 billion and has been growing at a rate of 5 per cent a year. The dairy exports in 2007 08 rose to
US$ 210.5 million against US$ 113.57 last fiscal, whereas the domestic dairy sector is slated to cross US$ 108 billion in revenues by 2011. India continues to be the largest producer of milk in the world. It produced 110 million tonne of milk in 2008-09. Beverages According to industry experts, the market for carbonated drinks in India is worth US$ 1.5 billion while the juice and juice-based drinks market accounts for US$ 0.25 billion. Growing at a rate of 25 per cent, the fruit-drinks category is one of the fastest growing in the beverages market. Sports and energy drinks, which currently have a low penetration in the Indian market, have sufficient potential to grow. The market for alcoholic beverages has been growing consistently. 'The Future of Wine', a report on the state of the wine industry over 50 years, suggests that the market for wine in India was growing at over 25 per cent per year. Major investments Private investment has been one of the key drivers for growth of the Indian food industry. The 'India Food Report 2008', reveals that the total amount of investments in the food processing sector in the pipeline for the next three years is about US$ 23 billion.
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The government has received around 40 expressions of interest (EoI) for the setting up of 10 MFPs with an investment of US$ 514.37 million. Reliance Industries Ltd has invested US$ 1.25 billion in a dairy project. Focusing on India as a rapidly growing market, US soft drinks giant Pepsico would pump in an estimated US$ 152.30 million to set up four new food and beverages projects by 2012. Geneva-based food service chain Global Franchise Architects (GFA) aims to open 250 stores around the world by March 2010, of which 100 will be in India.
Government Initiatives The new trade policy places increased focus on agro-based industries.
Food processing industries have been put in the list of priority sectors for bank lending. The Centre has also announced a series of new initiatives which include a separate policy at the state level, thrust on contract farming and making the sector tax-free. The government plans to open 30 mega food parks by the end of the 11th five year plan (2007-2012). Fruit and vegetable processing units have been completely exempted from paying excise
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duty. Automatic approval for foreign equity up to 100 per cent is permitted for most of the processed food items. Items like fruits and vegetables products, condensed milk, ice cream, meat production have been completely exempted from Central Excise Duty. Excise duty on ready to eat packaged foods and instant food mixes has been brought down to 8 per cent from 16 per cent. Excise duty on aerated drinks has been reduced to 16 per cent from 24 per cent. The Ministry of Food Processing Industry would assist in the setting up of more food processing units so that the industry could create 10 million jobs by 2015, according to Mr Subodh Kant Sahai, Union Minister for Food Processing.
Looking ahead According to the India Food and Drink Report Q3 2008 by research analysis firm Research and Markets, by 2012, India s processed food output is likely to grow by 44.2 per cent to touch US$ 90.1 billion, while packaged food sales will increase by 67.5 per cent to reach US$ 21.7 billion. On a per capita basis, per capita packaged food spending is expected to grow by 56.5 per cent to US$ 18.06 by 2012. Moreover, according to a FICCI-E&Y study on the Indian food industry, investment opportunities in the Indian food industry are set to shoot up by a huge 42.5 per cent to US$ 181 billion in 2015 and to US$ 318 billion by 2020.
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