Advantage India
Growing
Demand
* India's food processing sector's market size is estimated to more than double to Rs. 60,40,300 crore (US$ 700 billion) in 2030 from Rs. 26,49,103 crore (US$ 307 billion) in 2023, driven by growing demand for processed products, according to industry body PHDCCI.
* The food processing sector has grown substantially, averaging an annual growth rate of around 7.3%, during 2015-2022. The sector has contributed 10.54% of the Gross Value Added (GVA) in Manufacturing and 11.57% of GVA in Agriculture sector in 2020-21.
Competitive
Advantage
* India is the largest producer of milk and spices and one of the leading producers of fruits and vegetables, poultry, and meat.
* India has access to several natural resources that provides it with a competitive advantage in the food processing sector.
* Due to its diverse agro-climatic conditions, it has a wide-ranging and large raw material base suitable for food processing industries.
Government
support
* The Ministry of Food Processing Industries (MoFPI) has implemented schemes like Pradhan Mantri Kisan SAMPADA Yojana (PMKSY), PM Formalisation of Micro food processing Enterprises (PMFME) Scheme and Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) offering financial, technical, and business aids to establish food processing enterprises.
* Food processing units qualify for complete profit exemption in the first five years and 100% FDI is permitted in the food processing sector.
Opportunities
* The growing consumption of food is expected to reach US$ 1.2 trillion by 2025-26, owing to urbanization and changing consumption patterns.
* According to the Viksit Bharat@2047 report, India's food processing sector will grow significantly, reaching US$ 1,100 billion by FY35, US$ 1,500 billion by FY40, US$ 1,900 billion by FY45, and US$ 2,150 billion by FY47.
* The food processing industry has received Rs. 85,343 crore (US$ 12.96 billion) in FDI equity inflows from April 2000-September 2024.
Introduction
India is the fifth largest economy in the world and expected to be the fastest-growing economy among major G20 countries, with GDP growth estimated to be around 8% in FY24. The food processing sector has become a key contributor to India's economy over the past few years, thanks to progressive policy measures by the Ministry of Food Processing Industries (MoFPI). The sector has performed exceptionally well with an impressive average annual growth rate of 7.3% from 2015 to 2022. It has significantly contributed to Gross Domestic Product (GDP), employment, and investment. As of 2024, it contributes around 8.80% and 8.39% of Gross Value Added (GVA) in Manufacturing and Agriculture respectively, 13% of India's exports and 6% of total industrial investment. GVA in Food Processing sector has increased from Rs. 1.61 lakh crore (US$ 24.60 billion) in 2015-16 to Rs. 1.92 lakh crore (US$ 24.43 billion) in 2022-23 (as per First Revised Estimates of Ministry of Statistics and Programme Implementation).
India's diverse agro-climatic conditions allow for abundant production of cereals, pulses, fruits, and vegetables, making it a leading producer of various foods.
India was a global leader in milk production contributing ~25% to global milk production, in 2022-23. The country ranked second in vegetables and fruits and egg production and fifth in meat production, respectively, in 2022-23.
Additionally, India is the largest producer of spices in the world, with 11.26 million tonnes of major spices produced in 2022-23, as per the third advanced estimate by spices board of India. As of 2024, the Indian food and grocery market is the world's sixth largest, with retail contributing 70% of the sales. The Indian food processing industry accounts for 32% of the country's total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth.
A strong food processing industry is essential for our nation to tackle food and nutritional security issues. Processed food offers convenience, extended shelf life, easy transport to remote areas, and improved accessibility, serving as a valuable source of nourishment. Additionally, it offers our farmers increased opportunities for better price realization and expanded selling prospects.
Market Size
India is one of the largest populated countries in the world and is expected to continue having one of youngest populations in the world till 2030. The growing consumption of food is expected to reach US$ 1.2 trillion by 2025-26, owing to urbanization and changing consumption patterns. The processed fruits and vegetables industry was valued at US$ 15.4 billion in 2019. With heightened consumer awareness during lockdowns, there's increased demand for processed foods, especially in RTE/RTC, dairy, and fruit and vegetable segments.
India's food processing sector's market size is estimated to more than double to Rs. 60,40,300 crore (US$ 700 billion) in 2030 from Rs. 26,49,103 crore (US$ 307 billion) in 2023, driven by growing demand for processed products, according to industry body PHD Chamber of Commerce and Industry (PHDCCI).
According to the Viksit Bharat@2047 report, India's food processing sector will grow significantly, reaching US$ 1,100 billion by FY35, US$ 1,500 billion by FY40, US$ 1,900 billion by FY45, and US$ 2,150 billion by FY47.
Food processing industry contributes 32% to this food market and is also one of the largest industries in the country, contributing 13% to total export and 6% of industrial investment. The food processing industry, within the registered factory sector, employs about 1.93 million people while the unregistered sector also employs approximately 5.1 million workers.
The employment in Food Processing Industries has increased from 17.73 lakh in 2014-15 to 20.68 lakh in 2021-22 as per the latest Annual Survey of Industries (ASI) report.
Recent Development/Investments
The food processing sector has seen some major developments and investments in the recent past.
- In a major boost to the dairy industry, India’s iconic dairy brand, Amul has announced setting up the world’s largest curd (dahi) manufacturing facility in Kolkata. This new integrated dairy plant, backed by Rs. 600 crore (US$ 69.1 million) investment, will significantly expand Amul’s footprint in West Bengal.
- Amul has been named the world's strongest food and dairy brand in the Brand Finance Food & Drink 2024 report, achieving an impressive Brand Strength Index (BSI) score of 91.0 out of 100 and earning a prestigious AAA+ rating. This recognition underscores Amul's leadership in the global food and dairy industries.
- As on 30th June 2024, Ministry of Food Processing Industrieshas approved 41 Mega Food Parks, 399 Cold Chain projects, 76 Agro-processing Clusters, 588 Food Processing Units, 61 Creation of Backward & Forward Linkages Projects & 52 Operation Green projects under corresponding component schemes of PMKSY.
- A total of 92,549 micro food processing enterprises have been approved for assistance under PMFME as on 30th June 2024.
- The Ministry of Food Processing Industries (MoFPI) was allocated Rs. 4,364 crore (US$ 505.70 million) in the Union Budget 2025-26.
- Pradhan Mantri Kisan Sampada Yojana (PMKSY) budget was allocated Rs. 729 crore (US$ 84.50 million). The food processing industry's Production-Linked Incentive Scheme was allocated Rs. 1,444 crore (US$ 167.30 billion) to promote innovation in the sector.
- An outlay of Rs. 2,000 crore (US$ 231.80 million) was allocated towards the Prime Minister Formalization of Micro Food Processing Enterprises Scheme (PMFME).
- In the Interim Budget 2024-25, the Ministry of Food Processing Industries was allocated a total Budget of Rs. 3,290 crores (~US$ 396 million), an increase of ~13% over revised estimates for fiscal year 2024.
- Of the total budget, Rs. 2,173.02 crore (~US$ 261.5 million) was allocated towards central sector schemes and projects, including the Pradhan Mantri Kisan Sampada Yojana (PMKSY) and Production-Linked Incentive Scheme for Food Processing Industry (PLISFPI).
- An outlay of Rs. 879.5 crore (~US$ 105.8 million) was allocated towards the centrally sponsored schemes including the Prime Minister Formalization of Micro Food Processing Enterprises Scheme (PMFME).
- The food processing industries have attracted US$ 12.96 billion between April 2000-September 2024, constituting around 1.83% of the total FDI equity inflow in all sectors, placing it in top 15 sectors.
- The Ministry of Food Processing Industries hosted ‘World Food India’ event, in November 2023, in New Delhi. The event provided a distinctive platform to all the stakeholders in the food value chain including food processors, equipment manufacturers, producers, cold chain players, technology providers, logistics players, researchers, start-ups and innovators, food retailers etc. to engage and demonstrate their capabilities.
- The United Nation’s General Assembly (UNGA) declared 2023 as the International Year of Millets. The Union Budget 2023-24 included a special focus on millet, highlighting the aspirations to make India a Global Hub for Millets (Shree Anna).
- During the Presidency of G20 summit, India had organized a two-day Global Millets Conference in March 2023 in New Delhi bringing together participants from more than 102 countries facilitating discourse on important issues related to millets, including its production, consumption, nutritional benefits, value chain development, market linkages, and research and development.
- The Indian Institute of Millets Research in Hyderabad was declared as a Centre of Excellence for sharing best practices, research, and technology at national and international level.
- The Mega Food Park (MFP) Scheme was launched to integrate agricultural production with the market by bringing together farmers, processors, and retailers. The scheme follows a cluster approach, establishing modern food processing units within well-defined agri/horticultural zones. Each park includes supply chain infrastructure like collection centres, processing units, and cold chains, along with developed plots for entrepreneurs. Under the MFP scheme 41 projects were approved, of which 24 are operational as of December 2023.
- In 2022, a Special Food Processing Fund of US$ 263 million (Rs. 2,000 crore) was set up with National Bank for Agriculture and Rural Development (NABARD) to provide affordable credit for investments in setting up units under Mega Food Parks (MFP) and Designated Food Parks (DFP).
- The Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) was approved in March 2021, with a budget of US$ 1.3 billion (Rs. 10,900 crore) to be implemented from 2021-22 to 2026-27. It is aimed at incentivizing manufacturing, promoting innovative/organic SME products, and endorsing Indian brands internationally. Additionally, a PLI Scheme for Millet-based Products (PLISMBP) was launched in FY23 with an outlay of ~US$ 96 million (Rs. 800 crore).
Government Initiatives
- The Government of India (GOI) introduced the Pradhan Mantri Kisan SAMPADA Yojana (PMKSY), administered by the Ministry of Food Processing Industries (MoFPI). The scheme aims to establish modern infrastructure and streamline supply chain management from farm to retail, fostering growth in the food processing sector. It aims to enhance farmer returns, double farmers' incomes, generate employment opportunities in rural areas, reduce agricultural wastage, increase processing levels, and boost processed food exports.
- The Agro Processing Cluster Scheme under PMKSY is aimed at developing modern infrastructure and common facilities to facilitate the establishment of food processing units based on a cluster approach. This involves connecting groups of producers/farmers with processors and markets through a well-equipped supply chain. Each agro-processing cluster includes Basic Enabling Infrastructure (such as roads, water supply, power supply, drainage, ETP) and Core Infrastructure/Common facilities (including warehouses, cold storages, IQF, tetra pack, sorting, grading) along with at least 5 food processing units requiring a minimum investment of Rs. 25 crore (US$ 3 million). The units are established simultaneously with the creation of common infrastructure, requiring at least 10 acres of land arranged either through purchase or lease for a minimum of 50 years.
- The "Integrated Cold Chain and Value Addition Infrastructure" Scheme under PMKSY was launched to establish uninterrupted cold chain facilities from farm to consumer, including pre-cooling, storage, and distribution. It encompasses various temperature-controlled storage, packing, and transportation facilities for diverse products like horticulture, dairy, and meat.
- The cold chain infrastructure created by 372 completed cold chain projects under this scheme until October 2023 involve 10.3 lakh MT of Cold Storage, Controlled Atmosphere (CA)/Modified Atmosphere (MA) Storage and Deep Freezer, 335 MT per hour of Individual Quick Freezing (IQF), 175.8 Lakh Litres Per Day (LLPD) Milk Processing/Storage, and 1860 reefer vehicles. Milk processing capacity is expected to double from 53.5 MMT to 108 MMT by 2025.
- The Mega Food Park (MFP) Scheme was launched under PMKSY to integrate agricultural production with the market by bringing together farmers, processors, and retailers. The scheme follows a cluster approach, establishing modern food processing units within well-defined agri/horticultural zones. Each park includes supply chain infrastructure like collection centres, processing units, and cold chains, along with developed plots for entrepreneurs. Under the MFP scheme 41 projects were approved, of which 24 are operational as of December 2023.
- MoFPI initiated the PM Formalisation of Micro food processing Enterprises Scheme (PMFME) nationwide to aid micro food processing enterprises with financial, technical, and business assistance for upgrading operations.
- The One District One Product (ODOP) scheme under PMFME was launched to reap the benefit of scale in terms of procurement of inputs, availing common services and marketing of products. It aims to provide the framework for value chain development and alignment of support infrastructure. ODOP approved for 713 districts in 35 States/UTs with 137 unique products.
- The Branding and Marketing support scheme provides 50% financial grant to groups of FPOs, Self Help Groups (SHGs), cooperatives to promote their existing or proposed brands to market their processed food products under the scheme.
- Food processing units qualify for complete profit exemption in the first five years and 25 percent (30 percent in case of companies) for next 5 years. 100% deduction permitted on capital expenditure for cold chain or warehouse.
- Loans to food and agro-based processing units and cold chain have been classified under agriculture activities for Priority Sector Lending (PSL).
- Government allows 100% FDI in the food processing sector under the automatic route, facilitating a straightforward and efficient investment process.
Road Ahead
The Indian food processing sector offers a promising growth journey ahead and presents several opportunities with the sector being recognised as a key priority industry under the “Make in India” initiative. The MoFPI has undertaken several initiatives aimed at enhancing infrastructure and fostering food processing industries to stimulate investment in this domain. The Indian Government has sought to involve multiple stakeholders to improve interactions between farmers, processors, distributors, and retailers to establish strong supply chains linking farmers to processing and marketing to empower them with nearby grading and storage facilities which will enhance the value of their products.
There are substantial investment prospects totalling US$ 2.36 billion across 31 projects under Common Infrastructure for Industrial Parks which includes facilities such as specialized processing units, effluent treatment plants, testing laboratories, common warehouses, and logistics support. Foreign investment opportunities in India's food processing sector are also promising due to favourable policies, a vast consumer market, and government initiatives focused on improving the sector's competitiveness and sustainability.
Note: Conversion rate used in January 2025 is Rs. 1 = US$ 0.012
References: Ministry of Food Processing Industries (MoFPI), Press Information Bureau, Nivesh Bandhu Investor Portal, Source: Agricultural & Processed Food Products Export Development Authority (APEDA), News Articles, Department for Promotion of Industry, and Internal Trade (DPIIT), Union Budget 2023-24, Interim Budget 2024-25, Union Budget 2025-26, Grant Thornton - Viksit Bharat by 2047: Role of the food processing sector, India Investment Grid, Startup India.
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