With India’s constantly evolving culinary tradition the demand for high-value processed or packaged and ready to serve/ready to cook or reconstitute food has been on a constant rise. A slew of factors including urbanization, rising incomes, more working women, etc., have fueled this inclination towards processed food, especially among the urban middle class. The demand has further been bolstered manifolds post the coronavirus pandemic.
During the pandemic triggered lockdown, processed food products witnessed tremendous growth along with the considerable shifts in consumption patterns of consumers. Globally, the industry has witnessed a spike of around 27 percent in overall exports since March 2020. Similar growth was witnessed in India as well. FMCG retail outlets have registered double digit spike in frozen food item category specially owning to the fear of hygiene.
Market Dynamics
According to a research paper published by the Strategic Investment Research Unit (SIRU), the research and analysis backbone of Invest India, India’s food processing sector is one of the largest in the world and its output is expected to reach US$ 535 billion by 2025-26. The paper titled Indian Food Processing Sector: The untapped growth opportunity outlines how the segment also is a major focus of the incumbent Indian Government as it aligns well with its Make in India and Vocal for Local initiatives.
As India’s position graduates from scarcity to surplus in terms of food production, the processed food segment has come to the fore, and it holds immense opportunities in the years to come. India is the second largest producers of agricultural products in the world in terms of calorie production, yet we are processing less than 10 percent of our agricultural out put.
Currently, the food processing sector has been growing at an Average Annual Growth Rate (AAGR) of around 8.41 percent between 2014-18. The sector constitutes 8.83 percent and 10.66 percent of gross value added in manufacturing and agriculture sector respectively. The Indian food industry’s output is expected to reach US$ 535 billion by 2025-26.
The research further states that according to the latest Annual Survey of Industries (2016-17), food processing accounted for:
- 95 percent of the total number of factories
- Employment to 11.36 percent of the workforce
- 09 percent of the output
- 78 percent of the operational factories
Opportunities
India’s food processing sector has been known for its high-growth and high-profits. As demand for process food escalates, the segment is slated to grow rapidly in the near future promising immense opportunities for both manufacturers and retailers.
As one of the focus industries of the of the government’s, the segment enjoys a favourable policy ecosystem as well. “New initiatives like a planned infrastructure spend of around ₹100 lakh crore (around $1 trillion) and ₹25 lakh crore to boost the rural economy have put the food processing sector on a high growth trajectory. The Pradhan Mantri Kisan Sampada Yojna, for example, is a comprehensive package which shall create modern infrastructure with efficient supply chain management from farm to retail outlet. More recently, boosting Prime Minister Modi’s Atmanirbhar Bharat vision, the scheme of Formalization of Micro Food Processing Enterprises (FME) is being rolled out with an outlay of ₹10,000 crores,” highlights Deepak Bagla, CEO & MD Invest India.
