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Food processing 'A sunrise sector'

India's food ecosystem offers a wide range of opportunities with a massive food market that is expanding further, stimulating growth in the retail sector, favourable economic policies and attractive fiscal incentives. Food sector has emerged as high growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry. The Industry is rapidly expanding with 42 mega food parks being set up at an allocated investment of USD 2.3 bn.

  •  By 2020, Indian dairy industry is expected to double to USD 140 bn
  •  By 2020, Indian food and retail market is projected to touch USD 482 bn
  •  By 2020, food processing sector has the potential of attracting USD 33 bn of investment in coming years  
  •  By 2030, Indian annual household consumption to treble, making India 5th largest consumer

100% FDI is permitted under the automatic route in food processing industries

100% FDI is allowed through government approval route for trading, including through e-commerce in respect of food products manufactured or produced in India.

For more details refer FDI Policy 2017


  • World's largest producer of milk
  • World's largest processor and producer of cashew nuts
  • World's second largest producer of food grains,fruits and vegetables

Industry Scenario

The processed food market , currently valued at USD 322 bn in 2016, is expected to grow to USD 543 bn by 2020 at a CAGR of 14.6%.

Food processing has an important role to play in linking Indian farmers to consumers in the domestic and international markets. The Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments across the value chain. The sector that engages approximately 1.77 mn people, has a total of 38, 608 registered units with fixed capital of USD 29.7 bn and aggregate output of around USD 144.6 bn. Major industries constituting the food processing sector are grains, sugar, edible oils, beverages and dairy products.

  • Major food categories and their share in the food processing sector are as follows: 
    •   Dry food grocery: 34.7%
    •   Milk & dairy products: 16%
    •   Fresh produce: 15.6%
    •   Perishables: 8%
    •   Spices: 6%
    •   Others: 19.7%
  •   Indian food processing industry has two major sub-segments:
    •   Food and grocery retail (92%)
    •   Foodservice market (8%)

Growth Drivers

Food GD
  • Share in India's Food market


  • Share in total employment


  • Share in Indian exports


  • Cropping intensity


Key policies

Dairy Processing & Infrastructure Development Fund

The Cabinet Committee on Economic Affairs,  chaired by Prime Minister Shri Narendra Modi has approved a Dairy Processing & Infrastructure Development Fund” (DIDF) with an outlay of Rs 10,881 crore during the period from 2017-18 to 2028-29.

The project will focus on building an efficient milk procurement system by setting up of chilling infrastructure & installation of electronic milk adulteration testing equipment, creation/modernization/expansion of processing infrastructure and manufacturing faculties for Value Added Products for the Milk Unions/ Milk Producer Companies

Highlight of Budget 2018-19 in respect of Food Processing sector

a) Pradhan Mantri Kisan Sampada Yojna (PMKSY) — Allocation has been increased from USD 110 mn in RE 2017-18 to USD 215.2 mn in RE 2018-19.

b) Tomato, Onion and Potato processing- Operation Green has been launched to promote FPOs, agro logistics, processing facilities and professional management with a sum of USD 76.9 mn.

c) State of the Art Testing facility would be set up at 42 Mega Food Park to promote Agri export from current USD 30 bn to USD 100 bn.

d) Corporate Income Tax has been reduced from 30% - 25% to companies having annual turnover up to USD 38.5 mn for all sectors.

e) 100% tax exemption from profit derived from activities such as post-harvest value addition to agriculture would promote operation Green as well as PMKSY. This provision is applicable to FPOs’ having annual turnover up to USD 15.4 mn.

f) Setting up of a Fisheries and Aquaculture Infrastructure Development Fund (FAIDF) for fisheries sector and an Animal Husbandry Infrastructure Development Fund (AHIDF) for financing infrastructure requirement of animal husbandry sector. Total Corpus of these two new Funds would be USD 1.53 bn.

g) Department of Agricultural Cooperation & Family Welfare (DAC&FW) would reorient its ongoing schemes and promote cluster based development of Agri commodities and regions in partnership with the MoFPI, commerce and other allied Ministries.


The Government of India encourages farmers in taking up projects in select areas by subsidizing a portion of the total project cost. All these projects aim at enhancing capital investment, sustained income flow and employment areas of national importance.

Nivesh Badhu

To improve ease of doing business and boost investors’ confidence, a dedicated investors’ portal "Nivesh Bandhu" has been set up by MoFPI aimed at easing the process for investors.

Pradhan Mantri Kisan Sampada Yojana (PMKSY)

The Ministry of Food Processing Industries has been implementing several schemes under the umbrella of the ‘Pradhan Mantri Kisan Sampada Yojana’ . These schemes, with an allocation of USD 900 mn for the period 2016 to 2020, are expected to leverage investments of USD 5 bn for development of infrastructure in the food processing sector

The following schemes will be implemented under PM Kisan SAMPADA Yojana:
• Mega Food Parks
• Integrated Cold Chain and Value Addition Infrastructure
• Creation / Expansion of Food Processing & Preservation Capacities
• Infrastructure for Agro-processing Clusters
• Creation of Backward and Forward Linkages
• Food Safety and Quality Assurance Infrastructure
• Human Resources and Institutions

PM Kisan SAMPADA Yojana is expected to leverage investment of USD. 4.65 bn for handling of 0.5 MMT agro-produce valued at USD 15.4 bn, benefiting 20 lakh farmers and generating 5,30,500 direct/indirect employment in the country by the year 2019-20


a) Pradhan Mantri Kisan Sampada Yojna (PMKSY) — Allocation has been increased from USD 11 cr in RE 2017-18 to USD 2.15 bn in RE 2018-19

b) 100% tax exemption from profit derived from activities such as post-harvest value addition to agriculture would promote operation Green as well as PMKSY. This provision is applicable to FPOs’ having annual turnover up to USD 15.4 mn.

(for more details, click here)

Scheme for Cold Chain, Value Addition and Preservation Infrastructure under PMKSY

The scheme envisages financial assistance to food processing units in the form of grant-in-aid as under:

o    For storage infrastructure including Pack House and Pre cooling unit, ripening chamber and transport infrastructure, grant-in-aid @ 35% for General Areas and @ 50% for North East States, Himalayan States, ITDP Areas & Islands, of the total cost of plant & machinery and technical civil works will be provided

o    For value addition and processing infrastructure including frozen storage/ deep freezers associated and integral to the processing, grant-in-aid @ 50% for General Areas and @ 75% for North East States, Himalayan States, ITDP Areas & Islands, will be provided

o    For irradiation facilities grant-in-aid will be provided @ 50% for General Areas and @ 75% for North East States, Himalayan States, ITDP Areas& Islands

o    MoFPI has invited proposals under Scheme for Integrated Cold Chain and Value Addition Infrastructure of Pradhan Mantri Kisan SAMPADA Yojana (PMKSY) for setting up Integrated Cold Chain Projects in the country. Proposals may be submitted online at  by the potential entrepreneurs / promoters willing to set up integrated cold chain projects in India. The last date for submitting application online is extended upto 17:00 Hrs on 31th May, 2018. For further information please visit Link

Scheme for creation of backward and forward linkages under PMKSY

Under the scheme, the maximum admissible grant for each project would be at 35% of the eligible project cost for general areas and at 50% for North East states, Himalayan states, ITDP areas and Islands respectively, subject to maximum of INR 5 Crore per project.

o    MoFPI has invited proposals / Expression of Interest (EoI) from potential promoters for setting up Backward & Forward Linkages in the processed food industry of the country. The willing promoters / investors may submit their proposals through online portal ( .aspx) only as per the revised operational guidelines for the Scheme for Creation of Backward & Forward Linkages dated 22.02.2018. The last date for submission of EOI / proposal has been extended up to 30th June 2018 (Saturday) up to 5 pm.For further information please visit the Link.

FDI Facts

  • FDI inflows (in USD) in April 2000 - March 2018

  • FDI equity inflows (in USD) in April 2014 - March 2017

  • Share of total FDI inflows

  • FDI allowed in Food Product Retail, including through e-commerce under government route, in respect of food products manufactured and/or produced in India.

Recent Investments

  • June 2018 -  Amazon Retail India, the global company's food retail business in India, has received an infusion of USD 1.6 mn  from the parent company, as per regulatory filings. Amazon has committed to invest up to USD 500 mn in its food retail business, for which it has kicked off a pilot in Pune.

  • June 2018 -  DXN Industries plans to invest USD 27 mn to set up agro industry in Siddipet district,Telangana.

  • May 2018 - Future Group to invest USD 51.8 mn to open 140 exclusive FBB outlets

  • February 2018 - Amazon becomes first foreign ecommerce firm to enter food retail venture in India. Amazon has rolled out its own food retailing business in India with a pilot in Pune, becoming the first foreign ecommerce firm to stock and sell food items directly to consumers.

  • February 2018 - The Food Processing Park at Vinchur in Nashik district has attracted an investment of USD 150 mn, and it is expected to generate 5,400 jobs. A total of 15 food processing units have signed MoUs with the state government during ‘Magnetic Maharashtra’, global investors’ summit and exhibition.

  • January 2018 - UAE-based diversified conglomerate Lulu Group has inked a memorandum of understanding (MoU) with Telangana to invest USD 400 mn in the retail and food processing industry in Telangana.

Major Investors