Market Survey
By: ANJANA V.M.
DR SR. ROSA K.D.
FOOD PROCESSING INDUSTRIES
IN INDIA: AN OVERVIEW
This market survey studies the inflow of foreign direct investment (FDI) and its annual
growth rate in the food processing industries in India. The survey also analyses export of
food products and points out strengths, weaknesses, opportunities and threats to the food
processing industries in India.
T
he food processing sec-
tor has been attract-
ing substantial FDI
and is amongst the top
ten sectors getting FDI
equity. FDI approvals in food pro-
cessing have doubled in the last one
year alone. FDI in the country’s food
sector is poised to hit the US $3 bil-
lion mark in the coming years. The
food processing industry in India is a
sunrise sector that has gained prom-
inence in recent years. Availability
of raw materials, changing lifestyles
and relaxation in policies has given a
considerable push to the industry’s
growth. This sector is amongst the
few that serve as a vital link between
the agriculture and industrial seg-
ments of the economy. Strengthen-
ing this link is of critical importance
to improve the value of agricultural
produce, ensure remunerative prices
to farmers and at the same time cre-
ate favourable demand for Indian
agricultural products in the world
market. A thrust to the food process-
ing sector implies significant devel-
opment of the agriculture sector and
ensures value addition to it.
FDI with up to 100 per cent eq-
uity is permitted under the automatic
route in food and infrastructure such
as food parks and cold chains. There
are many areas for investment in
this sector such as mega food parks,
agri-infrastructure, supply chain ag-
gregation, logistics and cold chain
infrastructure, fruit and vegetable
products, animal products, meat and
dairy, fisheries and seafood cereals,
consumer foods/ready-to-eat foods,
wine and beer and machinery/pack-
aging. Though India has a strong raw
material base, it has been unable to
tap the real potential for processing.
Objectives of the survey
1. To study the inflow of FDI in
food processing industries in India.
January 2014 • FACTS FOR YOU 9
 Market Survey
2. To know about the exports of
food products from India.
3. To make a SWOT analysis of
food processing sectors in India.
Methodology
Data required for the survey is
collected from secondary sources.
Data relating to inflow of FDI, per-
centage of GDP and export of agro
food products are collected from the
website of Ministry of Food Process-
ing Industries and DGCIS and the
official website of RBI.
Table I shows the number of
food processing units in organised
sector.
Why to invest in food
processing sector
in India?
1. Vast sources of raw materials
2. Low production cost. The rela-
tively low-cost but skilled workforce
can be effectively utilised to set up
large, low-cost production bases for
domestic and export market.
3. The government has intro-
duced several schemes to provide fi-
nancial assistance for setting up and
modernising food processing units,
creation of infrastructure, support
for research and development and
human resource development in ad-
dition to other promotional meas-
ures to encourage the growth of the
processed food sector.
4. In an effort to boost the food
sector, the government is working on
agri zones and the concept of mega
food parks.
The vision 2015 of the
government of India for
the food processing sector
1. Enhance and stabilise the in-
come level of the farmers
2. Provide choice to consumers in
terms of wide variety and taste in-
cluding traditional ethnic food
10 FACTS FOR YOU • January 2014
3. Provide greater assurance in
terms of safety and quality of food to
consumers
4. Promote a dynamic food pro-
cessing industry
5. Enhance a competitiveness of
food processing industry in both do-
mestic as well as international mar-
kets
6. Make the food processing sec-
Table I
Number of Food Processing Units
in Organised Sector
Food processing units Number
Flour mills 516
Fish processing units 568 (+482 cold
storage units)
Fruit and vegetable processing units 5293
Meat processing units 171
Sweetened and aerated water units 656
Milk products units 266
Sugar mills 429
Solvent extract units 725
Rice mills 139,208
Modernised rice mills 35,088
Table II
inflows of FDI in food processing ment.
industries in India (2008-13)
Year FDI FDI Annual
(million) ($ million) growth rate
2008-09 4560 103 NA
2009-10 13,140 279 188.1578
2010-11 57,962.2 1271.77 341.1126
2011-12 76,777.4 1652.38 32.4611
2012-13 28,870.3 529.09 –62.3973
Source: Ministry of Food Processing Industries (MOFPI)
Chart 1: Structure of the Indian food
processing industry (Source: FAIDA/
Ministry of Food Processing Industries)
tor attractive for both domestic and
foreign investors
7. Achieve integration of the food
processing infrastructure from farm
to market
8. Have a transparent and indus-
try-friendly regulatory regime
9. Put in place a transparent
system of standards based on sci-
ence
Important aspects
of FDI inflows to
food processing
industries in India
1. Government of India
gave an estimation of FDI
inflows to reach USD 325.93
million by 2009 keeping
in view the rising demand
amongst the corporate play-
ers in the Indian retail in-
dustry.
2. A number of active
measures have been taken
up by the government to
ameliorate the food process-
ing units in terms of infra-
structure, human resource
and research and develop-
3. One hundred per cent
of FDI is permitted in al-
most all the food processing
units with the exception of
alcohol.
4. Enactment of the Food
Safety and Standards Bill,
2005 has introduced a gov-
erning body for the food pro-
cessing sector.
5. This legislation has
also allowed a 100 per cent
tax deduction on profits for five
years and 25 per cent for the next
five years, especially to the upcom-
ing agro-processing industries.
6. Most of the items in food pro-
cessing sector are exempted from li-
cence agreement, except those that
are kept in reserve for the small-
scale sectors.

FDI inflows in food point (-62.3973) in 2012-13.
In Table III, contribution of
processing industries
food processing industries towards
in India India’s GDP shows an increasing
Table II shows annual growth trend. In 2009-10, it comes around
rate of FDI inflows in food process- 1.3 per cent. Table IV shows the to-
ing industries in India. From the ta- tal export of India’s agro food prod-
ble it is clear that the annual growth ucts from 2010 to 2013.
rate of FDI inflows shows a fluctu- Whilst considering quantity, ex-
ating trend for the past five years. port of fresh fruits and vegetables
During the first three years, it shows comes in the first place (40.34) fol-
an upward trend and it reaches at its lowed by processed foods (31.53),
highest in 2010-11 (341.1126). From but value-wise analysis shows that
2011 onwards, it shows a downward animal products come first (52.98)
trend and it reaches at its lowest followed by processed foods (35.76).
Table III SWOT analysis of food
Contribution of Food
processing industries
Processing Industries in India
towards India’s GDP
Strengths.
Year Contribution to GDP
(per cent) 1. Abundant availability of raw
material
2009-10 1.3 2. Priority sector status for agro-
2010-11 1.4 processing given by the central gov-
2011-12 1.5 ernment
Source: Ministry of Food Processing Industries (MOFPI) 3. Vast network of manufactur-
ing facilities all over the country
4. Vast domestic
market
Weaknesses.
1. Low avail-
ability of adequate
infrastructural fa-
cilities
2. Lack of ad-
equate quality con-
trol and testing
methods as per in-
Chart 2: The annual growth rate of FDI inflows in food ternational stand-
processing industries ards
Table IV
Total Export of India’s Agro Food Products
(percentage)
Main products 2010-11 2011-12 2012-13
Quantity Value Quantity Value Quantity Value
Processed foods 32.93 37.12 36.08 38.79 31.53 35.76
Animal products 26.74 47.08 26.43 44.08 28.12 52.98
Fresh fruits and vegetables 40.32 15.69 37.48 17.11 40.34 11.25
Source: DGCIS report
Market Survey
3. Inefficient supply chain due to
a large number of intermediaries
4. High requirement of working
capital
5. Inadequately developed link-
ages between R&D labs and indus-
try.
6. Seasonality of raw material
Opportunities.
1. Large crop and material base
offering a vast potential for agro pro-
cessing activities
2. Setting up of SEZ/AEZ and
food parks for providing added in-
centive to develop greenfield projects
3. Raising income levels and
changing consumption patterns
4. Favourable demographic pro-
file and changing lifestyles
5. Integration of development
in contemporary technologies such
as electronics, material science, bio-
technology, etc offer vast scope for
rapid improvement and progress
6. Opening of global markets
Threats.
1. Affordability and cultural pref-
erences of fresh food
2. High inventory carrying cost
and high packaging cost
3. High taxation
Though there are many promis-
ing dynamics which support good
growth of food processing indus-
tries in India, there are still some
significant constraints which, if not
addressed sooner, can impede the
growth prospects of this industry.
One of the biggest constraints is that
this industry is capital intensive. It
creates a strong entry barrier and al-
lows lesser number of players to en-
ter the market. Lesser players mean
lesser competition and lesser com-
petition means reduced efforts to
improve the quality standards. The
second constraint is poor infrastruc-
ture for storing raw food materials.

Anjana V.M. is a research scholar and
Dr Sr. Rosa K.D. is an associate profes-
sor at St. Joseph’s College, Irinjalakuda,
Thrissur, Kerala
January 2014 • FACTS FOR YOU 11