Food Processing Industry – The New India’s Sunrise Opportunity
India's food processing sector, a shining pillar of the Indian economy, has been booming in recent years. Holding a place among the largest food processing industries in the world, it is responsible for a significant portion – about 32 per cent – of India's overall food market. India, a bountiful land, has emerged as the second largest producer of agricultural goods and an abundant source of fruits and vegetables. Its dairy, marine, poultry, and meat industries are thriving and leading the world in production. Additionally, the Indian gourmet food market is rapidly expanding at a rate of 20 per cent annually.
Driven by the high-value processing of various agricultural products, increased urbanization, rising disposable incomes, the rise of nuclear families, and the demand for convenient food, India’s food processing industry is expected to reach a staggering $ 535 billion. The COVID-19 pandemic has further boosted growth by shifting customer preferences towards branded packaged goods and promoting a healthier lifestyle. With the market becoming increasingly competitive, customers now have more options with the introduction of new products and market entrants. This strong growth is expected to continue in the future.
In order to boost the growth of the food processing sector, the government launched production-linked incentive (PLI) schemes. With a total budget of INR 10,900 crore, the government has already invested INR 4,900 crore in the sector through the PLI plan. The scheme will run for seven years, from 2020-21 to 2026-27. To qualify for the incentive, the entire manufacturing process, including the initial processing of food items, must take place within India, which is expected to provide a much-needed boost to the local industry. The scheme will also help to promote Indian brands globally. Additionally, with 2023 being declared as the International Year of Millets, the Ministry of Food Processing Industries (MoFPI) is committed to promoting post-harvest value addition, increasing domestic consumption, and branding millet products both nationally and internationally through various PLI schemes. In 2022-23, MoFPI invested 800 crores to expand the PLI Scheme and added a new component specifically for millet-based products. A total of 30 projects for millet-based products have been approved. Furthermore, the government has continued the umbrella Pradhan Mantri Kisan Sampada Yojna (PMKSY) scheme with an allocation of INR 4600 crores till March 2026. The Ministry has also been implementing the PM Formalization of Micro Food Processing Enterprises Scheme (PMFME) for providing financial, technical, and business support for the upgradation of existing micro food processing enterprises.
In the recent Union Budget 2023-24, the Finance Minister, Nirmala Sitharaman, announced an increased grant of roughly INR 1.15 crore for the Ministry of Agriculture and Farmers Welfare, which is a 4.6% increase compared to last year's grant of nearly INR 1.10 lakh crore. This grant aims to create a strong foundation for agriculture-based production and processing.
The industry is expected to continue its robust growth with the support of the government and the private sector. According to the Confederation of Indian Businesses (CII), three key factors will be crucial in the growth journey of India’s food processing industry: first, the establishment of strong backward links to ensure food security and to produce nutritious processed foods; second, improved access to financial resources; and third, cost competitiveness.
The blog has been authored by Bhavya Tyagi and Barnali Das.