A Taste of Progress: Mapping the Rapid Expansion of India's Food Processing Sector

More than half of India’s workforce is engaged in the agriculture sector. The geographical landscape of India gives it access to a diverse agro-climatic conditions and plenty of natural resources. Availability of these key natural ingredients has aided India in establishing itself as a leading producer in a number of food categories such as milk, eggs, meat, spices, cereals, pulses, fruits, and vegetables. Easy availability of a variety of food products is essential to form a strong foundation for a food processing sector. The Indian food processing industry has been thriving on this natural advantage and grew at a healthy average annual rate of 7.3% from 2015 to 2022. The initiatives undertaken by the Ministry of Food Processing Industries (MoFPI) have also facilitated the growth of the sector.

India’s food processing sector includes various sub-sectors:

• Fruits and vegetables
• Poultry and meat
• Dairy
• Fisheries and marines
• Food grains
• Spices
• Nutraceuticals
• Ready-to-cook (RTC), ready-to-eat (RTE) and ready-to-serve (RTS) food

Food processing: Adding value

A strong food processing industry in the country is vital in order to address food and nutritional security issues, reduce wastage of agricultural produce and to get a better price realisation for the produce.

Processing the food products has multiple advantages which are mentioned below:

• Increases the shelf life
• Minimises wastage
• Adds value through cleaning, sorting, and packaging
• Improves marketability and profitability
• Offers ease of transport and improved accessibility
• Provides farmers with higher selling prospects and better price realisation

In 2021-22, the gross value added (GVA) by the food processing industry was at Rs. 2.08 lakh crore (~US$ 27.95 billion), displaying a growth of ~6% CAGR from Rs. 1.30 lakh crore (~US$ 21.5 billion) in 2013-14.

The industry is expected to reach a market size of US$ 1,274 billion in 2027 from US$ 866 billion in 2022, driven by the following key reasons:

• Rising population
• Changing lifestyle and dietary preferences
• Increasing disposable income
• Rising urbanisation

The sector is also in the top 15 industries for FDI equity inflows. This suggests a growing interest from the foreign investors. The FDI equity inflows in this sector amount to US$ 12.5 billion from April 2000 to December 2023.

India exports variety of processed food products like pulses, vegetables, fruits, fruit juices, cereal preparations, milled products, alcoholic beverages, oil meals, etc. The share of these processed food exports in overall agricultural exports has grown from 13.7% in 2014-15 to 25.6% in 2022-23.

Source: APEDA (* April-January 2023-24)

In 2022-23, the exports of RTE, RTC and RTS products stood at US$ 1,436 million, US$ 773 million, and US$ 669 million respectively.

Growth factors supporting the sector

Key government schemes aimed at promoting the sector

• Mega Food Park (MFP) Scheme:
  • The objective of MFP was to create a system that would link the agricultural produce with the market.
  • 24 out of the 41 projects approved under this scheme are currently operational.
  • These food parks have modern food processing units and supply chain infrastructure like collection centres, processing units, and cold chains. They also include developed plots for entrepreneurs within well-defined agricultural/horticultural zones.

• Pradhan Mantri Kisan Sampada Yojana (PMKSY)
  • PMKSY was launched to establish a modern infrastructure and efficient supply chains.
  • 540 projects were approved, and 399 projects were completed under this scheme from April 2020 to January 2024.
  • 86.06 lakh metric ton (LMT) of processing and 22.63 LMT of preservation capacity has been created through the completed projects.

• Integrated Cold Chain and Value Addition Infrastructure Scheme:
  • The idea behind starting this scheme was to establish uninterrupted cold chain facilities from farm to consumer.
  • Till October 2023, the scheme has created –
    • 10.3 lakh metric tonnes of cold storage, controlled atmosphere (CA)/modified atmosphere (MA) storage and deep freezer capacity
    • 335 metric tonnes per hour of individual quick-freezing (IQF) capacity
    • 175.8 lakh litres per day of milk processing/storage capacity
• Production Linked Incentive Scheme for Food Processing Industry (PLISFPI):
  • The aim behind introducing PLSFPI was to –
    • incentivise manufacturing
    • promote innovative and organic products of small and medium enterprises
    • endorse Indian brands internationally
  • The scheme was allocated ~Rs. 10,900 crore (US$ 1.3 billion).
• PLI Scheme for Millet-based Products (PLISMBP):
  • The scheme was launched in 2023 with an aspiration to make India the global hub for millets.
  • A budget of Rs. 1,000 crore (~US$ 120 million) has been assigned to this scheme.
• Pradhan Mantri Formalization of Micro Food Processing Enterprises (PMFME) Scheme:
  • PMFME scheme offers financial and technical help to start a new micro food processing enterprise or to upgrade an existing one.
  • The aim is to support two lakh micro food processing enterprises through this initiative.
• One District One Product (ODOP) Scheme:
  • The ODOP programme was launched to enable balanced socio-economic growth across the country by selecting, branding, and promoting one product from each district of the country.
  • So far, more than 1,000 products have been identified under this initiative from 760 districts.

Road ahead

The sector is being recognised as a key priority sector under the “Make in India” initiative which offers a promising growth journey ahead. The Indian Government has also launched a National Infrastructure Pipeline (NIP) to identify and prioritise key greenfield and brownfield projects in different sectors to develop India's infrastructure landscape. Under this initiative, the food processing sector offers significant investment opportunities worth US$ 2.36 billion across 31 projects for developing the common infrastructure for industrial parks which include specialized processing units, effluent treatment plants, testing labs, warehouses, and logistics support to ensure compliance with environmental regulations, support the manufacturing processes and promote efficient production and export capabilities.

The food processing sector in India boasts over 3,300 recognized startups, employing 33,000 people across 425 districts. With a proper support from incubators, accelerators, and funds, the startups hold immense potential to drive innovation and economic growth in the food processing industry. Foreign investment opportunities in India's food processing sector are also promising owing to a vast consumer market, favourable policies allowing 100% FDI under automatic route and government initiatives focused on improving the sector's competitiveness and sustainability.