India is the world's largest producer of milk, second largest producer of fruits and vegetables and the third largest fish producer. With a large agriculture sector, abundant livestock, and cost competitiveness; India is fast emerging as a sourcing hub of processed food. India produced 250 million tonnes (MT) of food grains in FY12.
India's comparative advantage lies in its favourable climate, geographic location - it is geographically close to key export destinations (Middle East, South East Asia), large agriculture sector and livestock base, long coastline, and inland water resources.
Government of India expects US$ 21.9 billion of investments in food processing infrastructure by 2015. Investments, including foreign direct investment (FDI), will rise with strengthening demand and supply fundamentals. The FDI inflow into agriculture and food processing between April 2000 and February 2012 was US$ 4.5 billion.
The Government of India allows 100 per cent FDI under automatic route (except for alcohol, beer, and sectors reserved for small scale industries). In addition, 100 per cent export-oriented units are allowed to sell up to 50 per cent of their produce in the domestic market. Export earnings are exempted from corporate taxes. Besides, the import duty was scrapped on capital goods and raw materials for 100 per cent export-oriented units and 100 per cent tax exemption for 5 years followed by 25 per cent tax exemption for the next 5 years for new agro-processing industries. The Government's Vision 2015 Plan, aims at trebling the food processing sector, by setting up Agri Export Zones and mega food parks.
Wide array of products, coupled with increasing global connectivity has led to a change in the tastes and preference of domestic consumers. Liberalisation and growth of organised retail have made the Indian market more attractive for global players. Global supermarket majors are looking at India as a major outsourcing hub.