The food processing sector is one of the key pillars of the Indian economy, as it provides vital linkages between agriculture and industry. The sector has immense potential to create employment, generate income, and reduce wastage of agricultural produce. The government of India has set a vision for the sector to achieve a target of doubling its contribution to the GDP by 2030. How can this vision be realized and what are the challenges and opportunities for the sector?
Food Processing: Definition and Significance
Food processing refers to the conversion of raw agricultural products into value-added products for human consumption. The products we consume have made it through several processes, such as harvesting, cleaning, packaging, grading, preserving and transportation. The raw products from agriculture, dairy, plant based/poultry meat, etc. undergo processing involving cutting-edge technology for post-harvest processing.
Food processing is not only essential for how we conduct our daily lives, but it is also a significant economic pillar. The sector has been acknowledged as a high priority industry by the government of India, as it has shown enormous potential for creating employment opportunities and generating income in the country. According to the Economic Survey 2020, the sector is expected to add 9 million jobs by 2024. Foreign direct investments in India’s food industry totalled $4.18 billion between April, 2014 and March, 2020.
Food processing also has several benefits for the farmers and consumers. It can help in doubling the farmers’ income by providing them with better technological inputs, contract farming, value addition, and protection against price shocks. It can also help in crop diversification and reducing the dependence on cereals. For the consumers, food processing can offer a variety of products, enhanced nutrition, longer shelf life, and lower prices.
Food Processing: Current Scenario and Future Prospects
The food processing sector in India is currently at a nascent stage, but it has shown promising growth in recent years. The sector’s size is estimated to be around US$322 billion, and it is expected to reach US$543 billion by 2025, growing at a compound annual growth rate of 14.6%. By 2030, India’s annual household consumption is believed to quadruple, making it the fifth-largest consumer in the world.
The food processing industry in India is primarily concentrated in the northern and western regions of the country. The states of Maharashtra, Uttar Pradesh, Andhra Pradesh, Tamil Nadu, and Gujarat are the leading contributors to the sector. However, there is a huge untapped potential for the sector in the eastern and north-eastern regions of the country, where the availability of raw materials and the demand for processed food are high.
The food processing sector in India is also characterized by a high concentration of unorganised segments, representing almost 75% across all product categories. Most processing in India can be classified as primary processing, which has lower value-addition compared to secondary processing. This limits the scope for innovation, quality, and exports. In comparison to more developed economies, such as the USA and EU, India’s food processing industry is still in its infancy. The sector in these countries is more advanced and technologically sound.
However, India has a unique advantage of having a vast supply of raw materials, which can be utilized for food processing. Additionally, India’s vast population and increasing disposable income present a significant opportunity for the growth of the food processing industry. India is also one of the largest producers and consumers of several agricultural commodities, such as milk, fruits, vegetables, spices, and pulses. These products have a high potential for value addition and processing.
Food Processing: Challenges and Solutions
The food processing sector in India faces various challenges, such as inadequate infrastructure, lack of proper storage and cold chain facilities, and a fragmented supply chain. These factors result in high post-harvest losses, estimated to be around Rs 90,000 crore annually. The sector also suffers from low levels of standardization, certification, and quality control, which affect its competitiveness and exports. The sector also faces policy and regulatory hurdles, such as multiple taxes, licenses, and clearances, which increase the cost and time of doing business.
To overcome these challenges and achieve the vision of doubling its contribution to the GDP by 2030, the food processing sector needs a holistic and integrated approach, involving the government, industry, farmers, and consumers. Some of the possible solutions are:
- The Ministry of Food Processing Industries (MoFPI) is implementing the Pradhan Mantri Kisan SAMPADA Yojana, which aims to supplement agriculture, modernize processing, and decrease agri-waste. The scheme includes components such as Mega Food Parks, Integrated Cold Chain, Value Addition and Preservation Infrastructure, Agro Processing Clusters, and Creation of Backward and Forward Linkages. These initiatives can help in creating a robust infrastructure and supply chain for the sector.
- The government has also liberalized the foreign direct investment (FDI) policy, allowing 100% FDI under the automatic route in food processing industries. This can help in attracting more investments, technology, and best practices from global players. The government has also launched the Production Linked Incentive (PLI) scheme for the food processing sector, which aims to support the creation of global food manufacturing champions and strengthen the domestic supply chain.
- The government has also established Agri Export Zones, which aim to promote the export of agro products by adopting a cluster approach and integrating the entire process from production to marketing. The Agricultural and Processed Food Products Export Development Authority (APEDA) has been nominated as the nodal agency to coordinate the efforts. The government has also reduced the import duties on various raw materials and intermediates used in food processing, such as palm oil, sunflower oil, and cashew nuts, to boost the competitiveness of the sector.
- The industry needs to focus on innovation and product development, catering to the changing preferences and needs of the consumers. The industry also needs to adopt higher standards of quality, safety, and hygiene, and obtain certifications and accreditations from national and international agencies. The industry also needs to leverage the opportunities offered by e-commerce, digital platforms, and online delivery services, which have seen a surge in demand due to the Covid-19 pandemic.
- The farmers need to be integrated with the food processing value chain, through contract farming, farmer producer organizations, and cooperatives. The farmers also need to be provided with better access to credit, insurance, technology, and extension services. The farmers also need to be encouraged to diversify their crops and adopt organic and sustainable farming practices.
- The consumers need to be made aware of the benefits of processed food, such as convenience, variety, nutrition, and affordability. The consumers also need to be educated about the quality and safety standards of processed food, and the labels and logos that indicate them. The consumers also need to be sensitized about the environmental and social impacts of food processing, and the ways to reduce food wastage and carbon footprint.
Food processing is a vital sector for the Indian economy, as it links agriculture and industry, and provides employment, income, and nutrition to millions of people. The sector has a vision to double its contribution to the GDP by 2030, which can be achieved by overcoming the challenges and leveraging the opportunities. The sector needs a collaborative and coordinated effort from all the stakeholders, including the government, industry, farmers, and consumers, to realize its full potential and transform India as a leading food processing destination of the world.