Food Processing Industry

INTRODUCTION

India is the world’s second largest producer of food next to China, and has the potential of being the biggest with the food and agricultural sector contributing around 26% of India’s GDP. The total food production in India is likely to double in the next ten years and there is an opportunity for large investments in food and food processing technologies, skills and equipment, especially in areas of Canning, Dairy and Food Processing, Specialty Processing, Packaging, Frozen Food/Refrigeration and Thermo Processing. Fruits & Vegetables, Fisheries, Milk & Milk Products, Meat & Poultry, Packaged/Convenience Foods, Alcoholic Beverages & Soft Drinks and Grains are important sub-sectors of the food processing industry. Health food and health food supplements is another rapidly rising segment of this industry, which is gaining vast popularity amongst the health conscious.

As a result of several policy initiatives undertaken since liberalisation in August 1991, the industry has witnessed fast growth in most of the segments. As per a recent study on the food processing sector, the turnover of the total food market is approximately Rs.250, 000 crores (US $ 69.4 billion) out of which value-added food products comprise Rs.80, 000 crores (US $ 22.2 billion).

Since liberalisation in Aug’91 and up-till Feb 2000 proposals for projects of over Rs.53, 800 crores (US.13.4 billion) have been proposed in various segments of the food and agro-processing industry. Besides this, Govt. has also approved proposals for joint ventures, foreign collaboration, industrial licenses and 100% export oriented units envisaging an investment of Rs.19, 100 crores (US $ 4.80 billion) during the same period. Out of this, foreign investment is over Rs. 9100 crores (US $ 18.2 billion).

Processed food exports were at over Rs.13, 500 crores (US $ 3.2 billion) in 1998-99. Out of these exports, rice accounted for 46%, whereas marine products accounted for over 34%.

Primary food processing is a major industry with lakhs of rice-mills/hullers, flourmills, pulse mills and oil-seed mills. There are several thousands of bakeries, traditional food units and fruit/veg/spice processing units in unorganised sector.

In the organised sector, there are over 820 flourmills, 418 fish processing units, 5198 fruit/veg processing units, and 171 meat-processing units.

Facts & Statistics

• India is one of the world’s major food producers but accounts for less than 1.5 per cent of international food trade. This indicates vast scope for both investors and exporters. Food exports in 1998 stood at US$5.8 billion whereas the world total was US$438 billion.

• The Indian food industry’s sales turnover is Rs 140,000 crore (1 crore = 10 million) annually as at the start of year 2000.

• The industry requires about Rs 29,000 crore in investment over the next five years to 2005 to create necessary infrastructure, expand production facilities and state-of-the-art- technology to match the international quality and standards.

• The office of the Agricultural Affairs of the USDA / Foreign Agricultural Services in New Delhi says that one of India’s proudest accomplishments has been achieving a tenuous self-sufficiency in food production and that the country produces a wide variety of agricultural products at prices that are at or below world values in most cases.

• The Indian palate is accustomed to traditional foods, mostly wheat and rice-based, rather than potato and corn-based western palate. In marketing perspective, this is considered an important factor for foreign marketers.

• India’s middle class segment will hold the key to success or failure of the processed food market in India. Of the country’s total population of one billion, the middle class segments account for about 350-370 million. Though a majority of families in this segment have non-working housewives or can afford hired domestic help and thus prepare foods of their taste in their own kitchens, the profile of the middle classes is changing steadily and hired domestic help is becoming costlier. This is conducive to an expansion in demand for ready-to-eat Indian-style foods.

Reasons for Investing in Indian Food Processing Sector

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