Food Processing

Food Processing

The Food Processing Industry in India offers unique opportunities in production and export of processed food. The food market is worth approximately Rs.10.1 lakh crore out of which the Food Processing Industry comprises 53% or Rs.5.3 lakh crore. The food processing industry employs 13 million people directly and 35 million people indirectly. In 2004-05, food processing sector contributed about 14% of manufacturing GDP. The Indian Food Processing Industry is mainly unorganized with 42% being unorganized, 33% small scale and 25% organized.

Composition of the Industry

The Indian Food Processing Industry is varied in its production. The major categories under which food is processed in India are : Fruits & Vegetables, Milk and Milk Products, Meat & Poultry, Marine Products, Grain Processing, Beer & Alcoholic Beverages, Consumer Foods i.e. confectionery, chocolates and cocoa products, soya-based products, mineral water, high protein foods, soft drinks, ready-to-eat and ready-to-cook products, salted snacks, chips, pasta products, bakery products and biscuits.

Opportunities Galore in Food Processing Industry

There are abundant opportunities for food processing companies in India. The demand for various products of food processing industry is on the rise because of the increase in per capita income of the Indians which results in higher spending on value added foods.

In terms of volumes of production, India ranks amongst the highest in the world in some of the food products. The table below shows areas of Food Processing in India which have considerable output.

Food Processing Category

Amount Processed Annually (in Million Tonnes)

Rank in the world in terms of production

Milk and milk products

88

1st

Fruits and Vegetables

150

2nd

Rice

132

2nd

Sugarcane

289

2nd

Fish Production

6.3

3rd

Wheat, Groundnuts, Tea, Coffee, Spices, Sugar, Eggs and Oilseeds

-

Amongst the top five producers in the world


This shows that a lot of supply is available for processing in India. The opportunity emerges when we analyze the percentage of volume that is processed to the volume that is produced. In India around 2% of fruits and vegetables are processed, 37% of milk is processed 1% of meat and poultry is processed and 12% of fish is processed. Comparing this to 80% quantity produced being processed in developed countries; we realize that a massive opportunity exists in the food processing business in India.

These opportunities were not fully realized till after the liberalization of the Indian Economy. The Government since has approved of joint ventures, foreign collaboration and foreign direct investment (FDI) in this sector. The government has also implemented many schemes to develop this industry. De-licensing, establishment of food parks, establishing packaging centers, and integrated cold chain facilities are some of the initiatives taken by the government. The Industry has also been opened to Foreign Direct Investment (FDI), up to a 100%. The total FDI investment in the food processing sector in 2008-09 was Rs. 4700 crore.

The Future of Food Processing in India
The problem of high levels of production and low levels of processing is a problem that occurs across the Food Processing Industry and this tells us about the massive potential that still rests to be exploited. Infrastructure and low investment in research and development remain the biggest challenges. But various investment vehicles provided by the Government should accelerate investment and growth in Industry.
Investment opportunities of approximately Rs.1.1 lakh crore are to be created by 2015. The domestic processed-food market is currently worth Rs.5.3 lakh crore. Taking into consideration the tremendous growth and investment opportunities, it is expected to grow to US$ 310 billion by 2015.
India is one of the world’s major food producers but accounts for only 1.7% (valued at Rs.34,400 crore in 2008) of world trade in Food Processing. This share is expected to rise to 3% (Rs.91,800 crore) by 2015. This would be achieved by raising the amount processed (as a percentage of the total production) and subsequently increasing exports.

The Ministry of Food Processing’s Vision Document provides estimated values for the targets for Processed Food (as a percentage of total production), as mentioned in the table below.

Targets for Processed Food (as a percentage of total production)

Food Processing Sector

2004

2010 (Estimated)

2015(Estimated)

Fruit and Vegetables

1

4

8

Dairy Products

15

20

30

Marine Products

11

15

20

Meat

21

28

35

Poultry

6

10

15

Data sources: McKinsey and Company report, India Food Report 2008 by Food Forum India, Ministry of Food Processing – Vision Report, National Manufacturing Competitiveness Council (NMCC)

Relevant Reports

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