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Food Processing in India

13-16 minutes

Agriculture

 03 Jul 2019
 17 min read

Why In News?

With farm distress making headlines, the state government of Tamil Nadu unveiled its own food
processing policy keeping an eye on increasing farmers’ income, reducing wastage of food products and
value addition of farm products, to ensure a healthy food processing industry.

The objective is to encourage setting up of food processing industries by agro-entrepreneurs, availing

financial assistance from Union.

What is Food Processing

Food Processing includes process under which any raw product of agriculture, dairy, animal husbandry,
meat, poultry or fishing is transformed through a process (involving employees, power, machines or money)
in such a way that its original physical properties undergo a change and the transformed product has
commercial value and is suitable for human and animal consumption.

It also includes the process of value addition to produce products through methods such as preservation,
addition of food additives, drying etc. with a view to preserve food substances in an effective manner,
enhance their shelf life and quality.

Significance

The Food Processing Industry (FPI) is of enormous significance as it provides vital linkages and synergies
that it promotes between the two pillars of the economy, i.e. agriculture and industry.

 Employment Generation: It provides direct and indirect employment opportunities, because it acts
as a bridge between Agriculture and Manufacturing.
 Doubling of farmers’ income: With the rise in demand for agri-products there will be
commensurate rise in the price paid to the farmer, thereby increasing the income.
 Reduce malnutrition: Processed foods when fortified with vitamins and minerals can reduce the
nutritional gap in the population.
 Reduce food wastage: UN estimates that 40% of production is wasted. Similarly, NITI Aayog
estimated annual post-harvest losses of close to Rs 90,000 crore. With greater thrust on proper
sorting and grading close to the farm gate, and diverting extra produce to FPI, this wastage could
also be reduced, leading to better price realisation for farmers.
 Boosts Trade and Earns Foreign exchange: It is an important source of foreign exchange. For e.g.
Indian Basmati rice is in great demand in Middle Eastern countries.
 Curbing Migration: Food Processing being a labour intensive industry will provide localized
employment opportunities and thus will reduce the push factor in source regions of migration.
 Curbing Food Inflation: Processing increases the shelf life of the food thus keeping supplies in tune
with the demand thereby controlling food-inflation. For e.g. Frozen Safal peas are available
throughout the year.
  Crop-diversification: Food processing will require different types of inputs thus creating an
incentive for the farmer to grow and diversify crops.
 Preserve the nutritive quality of food and prolongs the shelf life by preventing them from
spoilage due to microbes and other spoilage agents,
 Enhances the quality and taste of food thereby bringing more choices in food basket
 Enhances consumer choices: Today, food processing allows food from other parts of the world to
be transported to our local market and vice versa.

Status of Food Processing In India

 India is the world's second largest producer of fruits & vegetables after China but hardly 2% of the
produce is processed.
 In spite of a large production base, the level of processing is low (less than 10%). Approximately 2%
of fruits and vegetables, 8% marine, 35% milk, 6% poultry are processed. Lack of adequate
processable varieties continues to pose a significant challenge to this sector.

 India's livestock population is largest in the world with 50% of the world's buffaloes and 20% of
cattle, but only about 1% of total meat production is converted to value added products.
 More than 75% of the industry is in unorganized sector.
 Processing can be delineated into primary and secondary processing. Rice, sugar, edible oil and flour
mills are examples of primary processing. Secondary processing includes the processing of fruits and
vegetables, dairy, bakery, chocolates and other items.
 Most processing in India can be classified as primary processing, which has lower value-addition
compared to secondary processing. There is a need to move up the value chain in processed food
products to boost farmer incomes. For instance, horticulture products, such as fruits and vegetables,
carry the potential for higher value-addition when compared to cereal crops.
 At present, India’s agricultural exports predominantly consist of raw materials, which are then
processed in other countries, again indicating the space to move up the value chain.
Food processing industry in India can be segmented as follows

 Cereal/ pulse milling

 Fruit & vegetable processing
 Milk & milk products
 Beverages like coffee, tea & cocoa
 Fish, poultry, eggs & products
 Meat & meat products
 Aerated waters/soft drinks 8. Beer/alcoholic beverages
 Bread, biscuits & other bakery products
 Edible oil/fats.
 Confectioneries
 Breakfast cereals, malt protein, weaning, extruded food products

Problems in Food Processing Industries

At present most of the industries are in unorganized sectors. So, number of problems are arising from
different sections of the industries. Some of the basic problems encountered by Indian food industries at
different levels are given below. 

Farm level problems

 Poor yield of farm produce and therefore low returns.

 Lack of material resources necessary for development.
 Primitive methods of farming.
 No control on the quality of inputs and lack of finance to manage.
 Vagaries of weather.
 Unavailability of reliable handling and transportation system.
 Lack of storage facilities at farm.

Objectives of Draft National Food Processing Policy 2017

 To reduce wastages, increase value addition, ensure better prices for farmers while ensuring
availability of affordable and quality produce to consumers
 To address the challenges of malnourishment and malnutrition by ensuring availability of
nutritionally balanced foods
 To make food processing more competitive and future ready through creation of adequate
infrastructure facilities along the supply chain, use of modern technology and innovation, promoting
traceability, food safety, encouraging optimum capacity utilization of assets and resources.
 To position India as the most preferred investment destination for the agribusiness and food
processing.
 To generate more opportunities for the development of the agribusiness and Food Processing
Industry, and create employment.

Distributors’ problems

 Lack of modern transportation facilities and high cost

 Inadequate cold storage faculties
 Irregular quality and quantity of farm produce

Processing industries problem

 Financing
  Higher import duties
 Higher cost of raw material and packaging
 Inadequate transport and cold storage facilities
 Infrequent availability of refrigerated containers
 Staggering advertising costs
 Limited domestic market

Consumer discontent

 Does not get value for money

 The price variation is a day to day affair
 Continued dependence on seasonal products
 Lack of variety of semi processed or prepared convenience food at affordable prices.

Reasons for slow growth of processed foods in India

 Majority of the population has low-income levels and cannot afford processed foods.
 The high cost of packaging pushes up the cost of the processed items and thereby makes them out of
reach of the common man.
 Indians traditionally prefer fresh foods that are cooked rather than use preserved foods.
 There is also no national character for food habits and these keep changing from region to region.
 However, the scenario is changing with some foods, especially fast food, acquiring the national
character. Also some foods such as idli, dosa, some Punjabi foods like chhole, alu mutter etc., some
Chinese foods and now the western foods like burgers and pizza are fast gaining national popularity.
 Transport (both road and railways) and communication are poor.
 There are no reliable cold chains, which are necessary for temperature sensitive foods like fruits &
vegetables, ice creams etc.
 Modernization is unaffordable for small-scale manufacturer but the large companies do not find
investment justifiable due to small size of the market.
 Supermarkets are not yet popular although a few are making an appearance.

Challenges

 Extensive use of fertilizers, pesticides and other chemicals has raised concerns about the quality of
food which should be looked into. Further, protection is needed from unfair and hazardous practices
such adulteration.
 Care should be taken as processed foods may not be nutritionally balanced and may pose a health
risk especially for children unless fortified. This could trigger a negative perception regarding
processed foods and could likely impact the economic gains made by this sector.
 Low value-added in processing: There is major fragmentation of food processing capacity, with a
large unorganized segment and widespread use of primitive processing. This results in lower value-
addition at the processing stage, especially from a nutritional point of view.
 Limited ability to control quality and safety: The sheer number of players, especially in the large
unorganized segment, involved in the food value-chain, makes implementation of quality and safety
norms difficult. This has led to practices such as milk adulteration and use of carbide for fruit
ripening becoming more widespread.
 Low consumer awareness: Consumer awareness is a critical aspect of an improved nutritional
situation in the country. Consumers currently lack awareness of several nutritional and food safety
and quality aspects.

Suggestions

 Storage capacities and infrastructure should be increased.

  Develop the agricultural facility with good agricultural practice which leads to the transition from
staple food crops to diversification of crops.
 Backward linkages to farmers need to be made more robust. Contract farming can be promoted.
According to the Model Contract Farming Act, 2018, the contract will specify the quantity, quality
and price of produce being supplied. This would shield farmers from price volatility, subject to
quality commitments.
 Skilling is required at two levels. First at the farm gate in promoting agricultural best practices and
in processing activities.
 Public investment and connectivity should be increased.
 Slaughter animal rules should be framed in a comprehensive policy framework.
 Farm pattern diversification which leads to a production of variety of crops other than constant set
of crops which creates lot of job opportunities.
 Second Green Revolution should be updated with the diversified technologies.
 We have to encourage the domestic startups and industry than the international companies.
 There should be a Centre of Excellence between centre and state.
 Should have more training institutes for upcoming entrepreneurs and it should be in all
states.Scholarship should be given to the upcoming entrepreneurs.
 New technology should be updated in the training institutes and skill development should be given
the top most priority.

Government’s Initiative

It has been the endeavor of the Government to promote food processing industry in the country to reduce
wastage of agricultural produce and minimize post- harvest losses.

According to “Assessment of Quantitative Harvest and Post-Harvest Losses of Major Crops and
Commodities in India” by ICAR the percentage of post-harvest losses as assessed by the study is as under:

Crops Cumulative wastage (%)

Cereals 4.65 – 5.99
Pulses 6.36 – 8.41
Oil Seeds 3.08 – 9.96
Fruits & Vegetables 4.58 – 15.88
Milk 0.92
Fisheries (Inland) 5.23
Fisheries (Marine) 10.52
Meat 2.71
Poultry 6.74

 With the above in view, the Ministry of Food Processing Industries (MoFPI) is implementing
PMKSY (Pradhan Mantri Kisan SAMPADA Yojana)
o The objective of PMKSY is to supplement agriculture, modernize processing and decrease
agri-waste.
o It is an umbrella scheme incorporating ongoing schemes
o Under PMKSY the following schemes are to be implemented.
 Mega Food Parks.
 Integrated Cold Chain, Value Addition and Preservation Infrastructure.
 Creation/Expansion of Food Processing/Preservation Capacities.
 Infrastructure for Agro Processing Clusters.
 Scheme for Creation of Backward and Forward Linkages.
 Food Safety & Quality Assurance Infrastructure.
 Human Resources and Institutions.
  Foreign Direct Investment (FDI) policy: FDI up to 100%, under the automatic route is allowed in
food processing industries.
 Agricultural and Processed Food Products Export Development Authority (APEDA)– an apex
organization under the Ministry of Commerce and Industry – focusses on ‘export’ of scheduled
products.

Way Forward

 Food processing has numerous advantages which are specific to Indian context. It has capacity to lift
millions out of poverty and malnutrition. Government should develop industry in a way keeping in
mind the interests of small scale industry along with attracting big ticket domestic and foreign
investments.
 The entire food value chain in India is controlled by multiple ministries, departments and laws. A
comprehensive policy will ensure that various initiatives across the departments are aligned to the
overall goal of ensuring availability, awareness, affordability, access, quality and safety of food.
 The target of ensuring food security for more than a billion people requires a concerted effort by all
stakeholders including government and the food processing industry. In addition to private players
and government, industry bodies and academia will also have a crucial role in the success of these
initiatives.

ibef.org

Indian Food Industry, Food Processing Industry in

India, Statistics
7-8 minutes

Introduction

The Indian food industry is poised for huge growth, increasing its contribution to world food trade every
year. In India, the food sector has emerged as a high-growth and high-profit sector due to its immense
potential for value addition, particularly within the food processing industry.

Accounting for about 32 per cent of the country’s total food market, The Government of India has been
instrumental in the growth and development of the food processing industry. The government through the
Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments in the
business. It has approved proposals for joint ventures (JV), foreign collaborations, industrial licenses, and
100 per cent export oriented units.

Market Size

The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the
sales. The Indian food processing industry accounts for 32 per cent of the country’s total food market, one of
the largest industries in India and is ranked fifth in terms of production, consumption, export and expected
growth. It contributes around 8.80 and 8.39 per cent of Gross Value Added (GVA) in Manufacturing and
Agriculture respectively, 13 per cent of India’s exports and six per cent of total industrial investment. The
Indian gourmet food market is currently valued at US$ 1.3 billion and is growing at a Compound Annual
Growth Rate (CAGR) of 20 per cent. India's organic food market is expected to increase by three times by
2020#.
The online food ordering business in India is in its nascent stage, but witnessing exponential growth. With
online food delivery players like FoodPanda, Zomato, TinyOwl and Swiggy building scale through
partnerships, the organised food business has a huge potential and a promising future. The online food
delivery industry grew at 150 per cent year-on-year with an estimated Gross Merchandise Value (GMV) of
US$ 300 million in 2016.

Investments

According to the data provided by the Department of Industrial Policies and Promotion (DIPP), the food
processing sector in India has received around US$ 7.54 billion worth of Foreign Direct Investment (FDI)
during the period April 2000-March 2017. The Confederation of Indian Industry (CII) estimates that the
food processing sectors have the potential to attract as much as US$ 33 billion of investment over the next
10 years and also to generate employment of nine million person-days.

Some of the major investments in this sector in the recent past are:

 Global e-commerce giant, Amazon is planning to enter the Indian food retailing sector by investing
US$ 515 million in the next five years, as per Mr Harsimrat Kaur Badal, Minister of Food Processing
Industries, Government of India.
 Parle Agro Pvt Ltd is launching Frooti Fizz, a succession of the original Mango Frooti, which will be
retailed across 1.2 million outlets in the country as it targets increasing its annual revenue from Rs
2800 crore (US$ 0.42 billion) to Rs 5000 crore (US$ 0.75 billion) by 2018.
 US-based food company Cargill Inc, aims to double its branded consumer business in India by 2020,
by doubling its retail reach to about 800,000 outlets and increase market share to become national
leader in the sunflower oil category which will help the company be among the top three leading
brands in India. 
 Mad Over Donuts (MoD), outlined plans of expanding its operations in India by opening nine new
MOD stores by March 2017.
 Danone SA plans to focus on nutrition business in India, its fastest growing market in South Asia, by
launching 10 new products in 2017, and aiming to double its revenue in India by 2020.
 Uber Technologies Inc plans to launch UberEATS, its food delivery service to India, with
investments made across multiple cities and regions.

Government Initiatives

Some of the major initiatives taken by the Government of India to improve the food processing sector in
India are as follows:

 The Government of India aims to boost growth in the food processing sector by leveraging reforms
such as 100 per cent Foreign direct investment (FDI) in marketing of food products and various
incentives at central and state government level along with a strong focus on supply chain
infrastructure.
 In Union Budget 2017-18, the Government of India has set up a dairy processing infra fund worth Rs
8,000 crore (US$ 1.2 billion).
 The Government of India has relaxed foreign direct investment (FDI) norms for the sector, allowing
up to 100 per cent FDI in food product e-commerce through automatic route.
 The Food Safety and Standards Authority of India (FSSAI) plans to invest around Rs 482 crore (US$
72.3 million) to strengthen the food testing infrastructure in India, by upgrading 59 existing food
testing laboratories and setting up 62 new mobile testing labs across the country.
 The Indian Council for Fertilizer and Nutrient Research (ICFNR) will adopt international best
practices for research in fertiliser sector, which will enable farmers to get good quality fertilisers at
affordable rates and thereby achieve food security for the common man.
 The Ministry of Food Processing Industries announced a scheme for Human Resource Development
(HRD) in the food processing sector. The HRD scheme is being implemented through State
 Governments under the National Mission on Food Processing. The scheme has the following four
components:
o Creation of infrastructure facilities for degree/diploma courses in food processing sector
o Entrepreneurship Development Programme (EDP)
o Food Processing Training Centres (FPTC)
o Training at recognised institutions at State/National level

Road Ahead

Going forward, the adoption of food safety and quality assurance mechanisms such as Total Quality
Management (TQM) including ISO 9000, ISO 22000, Hazard Analysis and Critical Control Points
(HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices (GHP) by the food
processing industry offers several benefits. It would enable adherence to stringent quality and hygiene norms
and thereby protect consumer health, prepare the industry to face global competition, enhance product
acceptance by overseas buyers and keep the industry technologically abreast of international best practices.

Exchange Rate Used: INR 1 = US$ 0.0155 as of April 17, 2017.

investindia.gov.in

Food Processing
Authored By:Strategic Investment Research Unit (SIRU)
7-9 minutes

Snapshot

Food processing - 'A sunrise sector'

India's food ecosystem offers huge opportunities for investments with stimulating growth in the food retail
sector, favourable economic policies and attractive fiscal incentives. The Food & Grocery market in India is
the sixth largest in the world. Food & Grocery retail market in India further constitutes almost 65% of the
total retail market in India.

The Government of India through the Ministry of Food Processing Industries (MoFPI) is also taking all
necessary steps to boost investments in the food processing industry. The government has sanctioned
39 Mega Food Parks (MFPs) to be set up in the country under the Mega Food Park Scheme. Currently,
18 Mega Food Parks have become functional.

Click here to know more about Mega Food Park Projects approved by MoFPI.

 By 2020, Indian Food and Retail market is projected to touch $828.92 bn

 By 2020, the Indian Dairy industry is expected to double to $140 bn
 By 2024, the Food Processing industry will potentially attract $33 bn investments and generate
employment for 9 million people
 By 2030, Indian annual household consumption to treble, making India 5th largest consumer

100% FDI is permitted under the automatic route in Food processing industries.
100% FDI is allowed through government approval route for trading, including through e-commerce in
respect of food products manufactured or produced in India.

For further details, please refer FDI Policy

[ + More ]

 32%

Share in India's food market

 11.6%

Share in total employment

 10.7%

Share in India's exports

 142%

Cropping intensity

World's largest producer, consumer & exporter of spices

World's largest processor, producer and consumer of cashew nuts

World's second largest producer of food grains, fruits, and vegetables

Industry Scenario
The Processed food market is expected to grow to $ 543 bn by 2020 from $ 322 bn in 2016,
at a CAGR of 14.6%.

Food processing has an important role to play in linking Indian farmers to consumers in the domestic and
international markets. The Ministry of Food Processing Industries (MoFPI) is making all efforts to
encourage investments across the value chain. The industry engages approximately 1.85 mn people in
around 39,748 registered units with fixed capital of $ 32.75 bn and aggregate output of around $ 158.69 bn.
Major industries constituting the Food processing industry are grains, sugar, edible oils, beverages and dairy
products.

The key sub-segments of the Food Processing industry in India are: Dairy, Fruits & Vegetables, Poultry &
Meat processing, Fisheries, Food retail etc.
Key facts:

 311.71 mn tonnes of horticulture crop production in 2017-18

 Milk production of 176.3 mn tonnes during 2017-18 with per capita availability of milk at a level of
375 grams per day in 2017-18
 Egg production of around 95.2 bn during 2017-18
 Total fish production was 12.6 mn tonnes during 2017-18
 Food Retail market is majorly dominated by Food Grocery (growing at CAGR 25%) and Food
Services (growing at CAGR 15%) segments.

Growth Drivers

 Agri-commodity hub

Largest producer of several agri-commodities

 Huge consumer base

1.3 bn consumers with increasing demand for branded food

 Strong economy

India is the fastest growing largest economy in the world

 Conducive policies

Proactive government policies with attractive fiscal incentives

Data On Map
 


Gallery
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in Budget 2020

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Mar 17, 2017Food Processing: Make In IndiaFood Processing: Make In India

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Feb 05, 2020Key announcements for the Food Processing in…Key announcements for the Food Processing
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Food Processing sector

Sep 04, 2017Ravindra Pratap Singh, Food Safety Commissio…Ravindra Pratap Singh, Food Safety
Commissioner, Government of Odisha

Mar 17, 2017Food Processing: Make In IndiaFood Processing: Make In India

Jan 10, 2017Agriculture, Food & Feed Processing Industry…Agriculture, Food & Feed Processing Industry
in Jharkhand

Jun 01, 2016Two Years of Government: Initiatives of Mini…Two Years of Government: Initiatives of
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