The food processing sector offers a vital linkage between agriculture and industry.. With India moving from a position of scarcity to surplus in food production the prospects for increasing processing levels are enormous.

Potential of Food Processing Sector in India

• Sunrise industry: Less than 10% of India’s agri-output is processed and most of it is primary processing that offers lower value-addition. India’s significant agricultural production strength, along with low levels of current processing offer huge opportunities for growth.
• Promising growth pattern: The sector grew at an Average Annual Growth Rate (AAGR) of around 8.5% from 2014-18 and constituted as much as around 9 per cent and 11 per cent of Gross Value Added in the Manufacturing and Agriculture sector respectively. Also, cheaper workforce availability can be effectively utilized to setup large low cost production bases for domestic and export markets.
• Market composition: India’s large and growing market, rising income, changing consumption patterns due to urbanization, changes in the gender composition of workforce, growing household consumption (which is expected to double by 2020) etc. are likely to give boost to growth of this sector.
• Increased Investments: From 2014-19, FDI inflow into Indian food industry has been increasing steadily to the tune of USD 3.28 billion at a CAGR of more than 4%.

Significance of Food Processing Sector

• United Nations estimates that 40% of production is wasted. Similarly, the NITI Aayog estimated annual post-harvest losses of close to Rs. 90,000 crore. Thus, food processing is also significant from the point of reducing food waste.
• With a growth rate of 10.35% in the 2010-17 period, this sector provides huge employment generation potential also.
• Owing to the labour intensive nature of the food processing industry, it has a higher multiplier effect on the overall economy.
• Moving up the value chain in the processed food sector is key to doubling farmer’s income by reducing food wastage; enhancing food exports and contributing to food security.

Challenges facing the Food Processing Sector

• There is a lack of efficient supply chain infrastructure and inadequate expansion of processing and storage capacity commensurate with agriculture production.
• Minimization of losses in the perishable segment requires huge investment with a long payback period in farm gate infrastructure, storage & cold chain infrastructure and expansion of processing capacities.
• Low level of food processing and value addition impacts our competitiveness & export performance.
• Inadequate linkage of processors, exporters and bulk purchasers with farmers results in mismatch between industry requirements and supply of agri-produce by the farmers.
• Inadequate and high cost of credit fails to attract prospective entrepreneurs in the food processing sector for investment.
• Multiple permissions & clearances, inadequate marketing experience, tough labour laws, uniformity of standards applicable to small and large units act as disincentives for smaller establishments.
• There is a lack of adequate emphasis on food safety standards along the food value chain to promote Good Hygiene Practice (GHP) and Good Manufacturing Practice (GMP).

To realize the potential of this sector, the Government of India has accorded it ‘high priority’ status under its Make in India initiative. Furthermore, policy environment is being made conducive through efforts like relaxation of FDI norms, marketing reforms, and facilitation of infrastructure creation through schemes like National Mission on Food Processing, Pradhan Mantri Kisan SAMPADA Yojana, Mega Food Parks Scheme, Agri export zones etc. This shall go a long way in making India the ‘Food Basket of the world’.