Report Highlights:
India's food-processing sector, although still in a nascent stage, has undergone important changes over the last six to seven years. The types, variety, quality, and presentation of products have all improved, mainly as a result of economic liberalization, which led to foreign direct investment (FDI) in this sector. Several multinational companies, including US companies like Pepsi, Coca Cola, ConAgra, Cargill, Heinz, and Kellogg's have invested in the Indian food-processing industry. The growth in the food-processing sector has generated increased interest in quality food ingredients in order to produce higher quality foods.
I.MARKET SUMMARY
India’s food-processing sector, though still developing, contributes 14 percent to the manufacturing GDP (5.5 percent of aggregate GDP), produces goods worth rs. 2.8 trillion ($64 billion), and employs 13 million people[1]. Much of India’s food-processing industry is small-scale and involves very little value addition, although in recent years several multinational food-processing companies have started operations in India (see Section II. C).A plethora of internal restrictions, including (a) prohibition on foreign direct investment in retail, (b) prohibitions on contract farming, (c) barriers to interstate commerce based on revenue and food security concerns, (d) some of the highest taxes on processed foods in the world, and (e) inefficient in infrastructure and marketing networks seriously constrain growth of the sector.
The almost year-round availability of fresh products across the country, combined with the consumers’ preference for fresh products and freshly cooked foods has dampened demand for processed food products.The level of processing varies across segments – ranging from less than 2 percent of the production in the case of fruits and vegetables to over 90 percent in non-perishable products such as cereals and pulses.In the latter, however, processing involves very little value addition, and is mostly confined to grading, cleaning, milling, and packing; with negligible use of additives, preservatives, and flavors.
According to the Ministry of Food-processing Industries (MFPI), the food-processing industry over the last decade has grown at an average annual rate of 7.1 percent.This higher rate is indicative of the relatively low base, the increasing marketable surpluses of agricultural products, changing consumer life styles and tastes, and the country’s higher disposable income.The growth is projected at around 7.3 percent per annum over the next five years.Of the estimated total food sales of rupees 8.6 trillion ($198 billion) in 2003/04, processed food consumption was valued at rs. 5.3 trillion ($122 billion), with the share of value-added foods (juice, jams, pickles, cheese, butter, ghee, processed meat, confectionary and chocolate, alcoholic beverages, aerated beverages, malted beverages, food services, etc.) estimated at 37 percent.