India, being a leading producer of a diverse array of agricultural products, presents an extremely lucrative opportunity to turn the country into a potential hub for food processing. The sector is one of the largest employment-generating industries in India and contributes 8% of the GDP of the nation. It is estimated to be worth $380 billion and is projected to grow at a CAGR of 11% to reach $540 billion by 2025. Further, in FY22 alone India exported agricultural and processed food products worth US$ 25.6 billion, and the export of processed vegetables and fruits increased by 59.1%.
Several schemes such as Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME) Scheme, Pradhan Mantri Kisan Sampada Yojana, Production Linked Incentive Scheme for Food Processing Industry, etc. have been implemented to enhance the productivity and competitiveness of the sector.
However, despite its growth, there are several challenges faced by the food processing industry, which hinder it from harnessing its untapped potential, such as:

• Lack of cutting-edge infrastructure: Many food processing businesses operate in the small and medium enterprises (SMEs) sector, which often lacks the resources needed to upgrade their facilities and machinery to the latest technology.
• Post-harvest loss: Inefficient supply chains due to insufficient cold storage facilities and transportation networks result in significant post-harvest losses.
• Lack of access to working capital: Traditional banks and financial institutions often have stringent lending criteria, making it difficult for SMEs involved in the food processing sector to access funding. Moreover, the loan approval process can be time-consuming and cumbersome. This results in cash flow issues, which can hinder their ability to grow and invest in new technologies.
• Competition from international players: The food processing industry in India faces competition from international players, that have access to better technology, more efficient supply chains, and lower costs.
• Lack of skilled manpower: There is a shortage of skilled workers and a lack of training facilities tailored to the specific needs of the sector posing challenges in adopting advanced processing techniques, implementing food safety practices, and optimizing production processes.
• Issue in exports: Compliance with international quality standards and regulations is essential to access export markets. The presence of pesticide residues and lack of awareness on policy requirements for global markets impact food processing exports from India.

In this context, digitization of the sector has the potential in harnessing its untapped potential and resolving the challenges it faces in the following ways:

• Digitization can help streamline the supply chain and help the sector become more efficient, productive, and competitive by enabling real-time tracking of inventory and delivery, reducing wastage and ensuring timely delivery of goods. For instance,
  • Internet of things (IoT) can help connect various parts of the supply chain, enabling real- time tracking and monitoring of inventory and delivery.
  • Artificial intelligence (AI) can help optimize production processes and improve the quality of products.
  • Blockchain can help ensure transparency and traceability in the supply chain, improving the efficiencies for processors by cutting out middlemen.
• The data produced by digitization would help smaller processing units in planning capacities and procurements more efficiently.
• Digitization can enable SMEs’ to determine and analyze their creditworthiness and understand working capital solutions based on their financial history and potential.

Thus, to achieve the target of $540 billion by 2025, the Indian food processing units need to become more competitive and innovative, and digitization can play a crucial role in this.