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Indian Food Processing Industry: an overview

September, 2013


Food sector is one of the largest sectors in India in terms of production, growth, consumption, and export. Indian food industry currently stands at Rs 247,680 crore (US$ 39.71 billion) and is expected to touch Rs 408,040 crore (US$ 65.41 billion) by 2018, registering a growth of 11 per cent, according to a report titled 'India Food Service Report 2013' by National Restaurant Association of India (NRAI).

The Indian food services industry has witnessed strong growth over the past few years. The industry is further expected to grow, given the rising disposable incomes, a greater population of younger people, the growth of consumers in smaller towns and the widening exposure to new cultures and cuisines besides an increased propensity of eating outside the home.

With a huge agriculture sector, abundant livestock, and cost competitiveness, India is fast emerging as a sourcing hub of processed food. Food processing sector has become a catalyst for the development of Indian agriculture and is of enormous significance to development.

Key Players

  • Cadbury India plans to invest more than Rs 1,000 crore (US$ 160.31 million) in the first phase of a manufacturing plant in Sri City, Andhra Pradesh (AP). The company has signed an agreement with Sri City to take on lease 134 acres of land for the proposed facility
  • Tierra Food India plans to make an investment of Rs 7 crore (US$ 1.12 million) in its production facility at Kinfra Park, Adoor, to expand the product line
  • Nissin Foods, world’s popular Top Ramen brand of cup noodles, plans to buy Capital Foods to expand its footprint in India
  • Ruchi Soya Industries, India's leading food and agro-based FMCG player, has inked a joint venture (JV) with J-Oil Mills Inc and Toyota Tsusho Corporation (TTC), both from Japan. The JV plans to start supplying products to the institutional customers by the end of 2013
  • Parle Agro has launched Cafe Cuba, India’s first coffee-flavoured carbonated beverage. Parle expects the new coffee drink to record Rs 1,000 crore (US$ 160.31 million) sales in the first 12-18 months of its launch

Food Processing Industry

The Indian food processing industry is a high priority sector and is poised for excellent growth in the coming years. The total value of Indian food processing industry is expected to touch US$ 194 billion by 2015 from a value of US$ 121 billion in 2012, according to Mr Swapan Dutta, Deputy Director General, Indian Council of Agricultural Research (ICAR).

The packaged food sector is presently the fifth largest sector in India and has grown rapidly over the past few years. The industry registered a compound annual growth rate (CAGR) of 15.6 per cent during FY07-FY13. In India, the industry is largely dominated by ready to eat segment, which contributed nearly 90 per cent of the total sales of packaged foods in India FY13.

The Indian food processing industry is primarily export orient. India’s agri and processed foods exports stood at Rs 116,331.68 crore (US$ 18.65 billion) during April-March, 2012-13, as compared to Rs 82,480.25 crore (US$ 13.22 billion) in the corresponding period last year, according to data compiled by the Agricultural and Processed Food Products Export Development Authority (APEDA).

Investments in the Indian food processing sector grew at 20 per cent per annum in five years and total investment at present is estimated at Rs 150,000 crore (US$ 24.04 billion), employing over 10 million, as per Mr S Sivakumar, Head, ITC Agri and IT Business Group. Further, the Government of India expects US$ 21.9 billion of investments in food processing infrastructure by 2015.

The food processing industries in India attracted foreign direct investments (FDI) worth US$ 1,970.09 million during April 2000 to July 2013, according to the latest data published by Department of Industrial Policy and Promotion (DIPP).


India is amongst leading consumers of soft drinks in the Asia Pacific. Growth in the market has been mainly spurred by investments made by foreign investors, according to a research report titled ‘India Quarterly Beverage Tracker Report Q1 2013’.

The branded tea segment in India is valued at Rs 6,000 crore (US$ 961.59 million). With growing affluence of Indian consumers, a few segments such as premium and organic coffee and green-herbal tea have created early inroads into the market.

Expecting fast growth in value-added dairy products such as milk, foreign entities have started looking at India as a dairy product market. Packaged milk segment in India is projected to grow from US$ 7.76 billion to US$ 32.9 billion by 2030, registering an annual growth of 8 per cent.

India could emerge as a top five market for the Coca Cola Company by 2020," according to Mr Ahmet C Bozer, International President, Coca Cola. Rasna expects revenues worth Rs 500 crore (US$ 80.13 million) in the next three years from the ready-to-drink beverage segment, with launching four variants of juices.

Government Initiatives

The Government of India has allowed 100 per cent FDI under the automatic route in the food processing sector, in agri-products, milk and milk products, and marine and meat products. 100 per cent tax exemption is also allowed for five years followed by 25 per cent tax exemption for the next five years for new agro-processing industries. In addition, full excise duty exemption for goods that are used in installation of cold storage facilities.

According to Vision 2015, formulated by the Ministry of Food Processing Industries (MOFPI), the government plans to establish 30 mega food parks in public-private partnership mode across the country; out of these 10 have already been approved in the first phase.

The government has set up National Institute for Food Technology Entrepreneurship & Management to offer high quality educational research and management programme specific to the food industry, provide referral advice on food standards, disseminate knowledge on the food sector and provide business incubation facility. Further, the government has approved up-gradation of Indian Institute of Crop Processing Technology (IICPT) to a national level Institute at a cost of Rs 102.13 crore (US$ 16.36 million).

To implement various Schemes for promotion and development of food processing sector, the government has made a plan allocation of Rs 5,990 crore (US$ 959.73 million) during the 12th Five Year Plan.

The Cabinet Committee on Economic Affairs has approved the continuation of the National Mission on Food Processing (NMFP) for the remainder of 12th Five Year Plan (2013-17). The NMFP outlay for 2012-17 has been kept at Rs 1,600 crore (US$ 256.34 million) consisting of Rs 1,250 crore (US$ 200.26 million) provided by the Government of India and corresponding State share of Rs 350 crore (US$ 56.09 million). Following are the schemes under the NMFP will be implemented by State Governments for the remainder of 12th Plan:

  • Scheme for technology up-gradation/ establishment/ modernisation of food processing industries
  • Scheme for cold chain, value addition and preservation infrastructure for non- horticulture products
  • Setting up/ modernization/ expansion of abattoirs
  • Scheme for Human Resource Development (HRD)
  • Scheme for promotional activities
  • Creating primary processing centres/ collection centres in rural areas
  • Modernization of meat shops
  • Reefer vehicles.
  • Old food parks

Road Ahead

India is fast becoming an essential player in the global food ingredients market. Anticipating the future growth, many big international players are entering the Indian market by partnering the domestic players. This trend will emerge more strongly by 2015, providing opportunities to local players to widen their product portfolios.

Supported by a young population and changes in the food consumption pattern with shift from simple grain based diet to a diet which includes more vegetables, eggs, milk, fruits and meat, especially among the middle class. Another trend visible of late is the increasing demand for convenience items such as semi cooked ready-to-eat, ready-to-cook meat food products. Some frozen meat and poultry products are already available in the market and their demand is increasing.

The domestic fast food market is estimated to double from the current Rs 3,400 crore (US$ 544.89 million) in the next three years, largely driven by demand from smaller cities, according to a report by Crisil.

Exchange Rate Used: INR 1 = US$ 0.01602 as on September 25, 2013

References: Ministry of Food Processing Industries (MoFPI), Agricultural and Processed Food Products Export Development Authority, Media reports, Department of Industrial Policy and Promotion (DIPP), Union Budget 2013-14, Press Information Bureau (PIB)