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Growth opportunities for the food processing industry in India

IBEF, Knowledge Centre

Dec 31, 2020 10:37


Food processing is simply a method by which agricultural products are transformed into food products that are fit for consumption. It involves different ways of processing such as, grinding grain to make raw flour, home cooking, and industrial methods to produce convenience foods including noodles, pasta and chips. The food processing industry forms a major part of India’s economy owing to the variety of food products that the country harvests and further processes for consumption. India is the largest producer of milk, bananas, mangoes, guavas, papaya, ginger, okra; second-largest producer of wheat, rice, fruits, vegetables, tea, sugarcane and cashew nuts and the third-largest producer of cereals, coconut, lettuce, chicory, nutmeg, mace, cardamom and pepper worldwide. Rising incomes and a growing demand for healthy, packaged food ensure that this industry is likely to sustain all seasons and never fear a recession. The industry also receives growing support from the government.

Market Stats

  • India’s food processing sector is one of the largest in the world and its output is expected to reach US$ 535 billion by 2025-26.
  • This sector is expected to generate 9 million jobs by 2024.
  • The Indian food industry is expanding at a CAGR of 11% and the food processing sector accounts for 32% of the total food industry.
  • India’s food sector attracted US$ 4.18 billion in foreign direct investments between April 2014 and March 2020.
  • By 2030, Indian annual household consumption is expected to triple, making India the fifth-largest consumer in the world.

Key Growth Drivers & Trends

  • There is growth in the organised food retail sector and increase in urbanisation.
  • MSME’s are playing a vital role in India’s food processing chain through various advancements in skills and technology.
  • The online food ordering business in India is witnessing an exponential growth.
  • There is high demand for packaged, healthy and immunity booster snacks such as roasted nuts, popcorns, and roasted pulses.
  • There is a shift in focus from loose to branded packaging.
  • The government’s ‘Atmanirbhar Bharat’ initiative places priority on this sector and offers support through various policies.

Recent Government Initiatives

The Indian Government, in the ‘Make in India’ campaign, has prioritised the food processing sector and promotes investments in the sector. In addition, the government has established 18 mega food parks and 134 cold chain projects to develop the food processing supply chain. These initiatives are likely to boost food processing companies. Also, the recent government initiatives—such as Rs. 10,000 crore (US$ 1.35 billion) scheme rolled out by the Finance Minister, Mrs. Nirmala Sitharaman, to support this industry—have placed the food processing sector on a high growth trajectory.

Launch of GIS One District One Product (ODOP) Digital Map of India: On November 18, 2020, the Ministry of Food Processing launched the capacity building component of the Pradhan Mantri Formalisation of Micro Food Processing Enterprises Scheme (PM-FME Scheme) and GIS One District One Product (ODOP) Digital Map of India, which provides detailed information on ODOP products to all stakeholders. The ODOP programme was aimed to upgrade SME’s on select products (within a district) through credit linked subsidy of 35% of the eligible project cost limited to a maximum value of Rs. 10 lakh (US$ 13.52 thousand).

The Minister for Food Processing Industries, Mr. Narendra Singh Tomar, emphasised on forming/creating a local value chain and providing training to food processing entrepreneurs through the PM-FME Scheme. These training sessions aimed to benefit ~8 lakh SME beneficiaries; will be conducted through online lectures and demonstrations. Further, on November 21, 2020, the government approved a grant of Rs. 107.42 crore (US$ 14.52 million) to implement 28 food processing projects.

New Cold Chain Projects to Reduce Food Waste and Boost Exports:

In September 2020, the Ministry of Food Processing Industries (MOFPI) approved 28 new local cold chain infrastructure projects to boost the export potential of the local agri-food sector and reduce food waste. These 28 projects fall under the ‘Pradhan Mantri Kisan SAMPADA Yojana’ (PMKSY) scheme, with Rs. 2.08 billion (US$ 28 million) aid from the central government.

MOFPI also highlighted benefits that will arise from these cold chain projects that will help India become self-reliant. These integrated cold chain projects will be undertaken in 11 states and run by either central or state-owned enterprises, or other bodies subject to the government’s approval.

While announcing these projects, Food Processing Minister, Mr. Harsimrat Kaur Badal, said that these projects will not only boost the food processing sector but also streamline the agricultural supply chain, generate employment, provide better prices to farmers, end-users and benefit the allied sectors. The Federation of All India Vyapar Mandal (FAIVM), the local FMCG trade and retail industry body, rejoiced over this programme and stated that this move will avoid agri-food wastage caused due to insufficient, temperature sensitive warehouses.

Additional Food Processing Projects:

On November 25, 2020, the government approved seven food processing projects worth >Rs. 234 crore (US$ 31.63 million), including grant-in-aid of Rs. 60.87 crore (US$ 8.23 million) in Meghalaya, Gujarat, Madhya Pradesh, Karnataka and Maharashtra. MOFPI said that these projects will leverage private investments of Rs. 173.81 crore (US$ 23.49 million) and are expected to generate 7750 jobs.

Recent State Initiatives


Mr. C Anandha Ramakrishnan, Director, Indian Institute of Food Processing, Tanjore, emphasised on India’s immense potential to grow into a global food factory with its huge food and grocery market share. He spoke at a webinar organised by Kerala Agricultural University (KAU) about the emerging opportunities in the food processing industry under the PM-FME scheme.

Mr. Ramakrishnan suggested that Kerala is likely to benefit from food customisation and promotion of convenient and ethnic food chains under the One District One Product (ODOP) concept. KAU officials and the State Industries Department have partnered to implement the ODOP concept to help SME’s focus on local production. A range of products including mussels, tapioca, coconut oil and spices are considered under this initiative for various districts.


On November 2, 2020, for the first-time in Untnoor, Telangana, tribal women started a food processing unit. This unit was established through a collaboration between Tribal Cooperative Finance Corporation Limited (TRICOR), Tribal Welfare Department of Telangana, Government of India’s Ministry of Tribal Affairs and ICRISAT’s Agribusiness and Innovation Platform (AIP). This project aims to localise production and address malnutrition, besides improving economic conditions of tribal communities. The unit, Komaram Bheem Peanut Chikki Industries, will supply produce to government nutrition programmes and anganwadis in the tribal region.


In September 2020, the Punjab government constituted the ‘Punjab Food Processing Advisory Committee’ to promote investments in the food processing sector. Punjab Food Processing Minister, Mr. Om Prakash Soni, assured that this move will boost the farmer’s confidence in the system because they will be able to realise reasonable prices for their crops. Punjab’s Chief Minister, Captain Amarinder Singh, called for special attention to strengthen the food processing sector in the state, as it will boost farmer incomes and the state’s economy. In addition, Chairman of Punjab Agro Industries Corporation, Mr. Joginder Singh Mann, praised the survey conducted by the food processing department under the ODOP scheme in Chandigarh.

Key Players in India

International – Coca-Cola, Pepsi, Unilever, Mars, Mondelez (Kraft Foods), Kellogg’s, Del Monte, Cargill, Ferrero, Nestle, Danone, McCain, Hershey and Perfetti Van Melle

National – Kissan, Amul, Godrej Industries, Parle Agro, ITC Ltd., Agro Tech Foods, Dabur India Ltd., Britannia Indistries Ltd., Sunfeast and Haldiram’s

Road ahead

Various factors, such as rise in health issues, the ongoing COVID-19 pandemic, busy lifestyles and increase in food adulteration, have witnessed a change in the consumer’s buying behaviour, which includes demand for ready-to-cook, ready-to-eat meals and healthy, immunity boosting snacks. Safe and processed food categories such as biscuits and snacks have seen a growth amid the COVID-19 crisis.

In an interview with Economic Times, Mr. Anand Ramanathan, Partner, Deloitte India, highlighted that opportunities in the Indian food processing sector are yet to be leveraged. He stated that India ranks much lower in the sector as compared with the world and has only a 10% share among the Asian countries. The size of the Indian food processing sector is 1.5x that of the agricultural sector, while it is 4-5x for the developed countries. Compared with other developed economies, the ratio of food retail sales to GDP from agriculture in India is relatively low, signifying an opportunity to scale up the food processing industry. At present, India is processing <10% of its agricultural output; thus, presenting immense opportunities to boost processing levels and attract investments in this sector.

Mr. Ramanathan further stated that the growth of food processing sector will be led by the demand in retail and rise of health-conscious consumers, who opt for safe, branded food. He also explained the role of COVID-19 in pushing agriculture and horticulture. Currently, the Indian food processing industry has a good mix of operational MSMEs. He also added that a strong crop value chain with adequate funding and technology applications will boost the food processing sector via the MSME sector.