Agro and Food Processing Sector

Food Processing industry in India is of enormous significance due to the development opportunities it
provides. This sector is a sunrise phase where its true potential is still not tapped. India is the largest
producer of milk and dairy products, 2nd largest producer of cereals, fruits and vegetables and the 2nd
largest producer of fish in the world. Within the perishable goods sector, 60% is contributed by fruits
and vegetables. However, out of the perishable goods only 10% is processed. This 10% is constituted by
35% dairy, 21% meat, 6% poultry ,23% marine and only 2% fruits and vegetables.

This provides an immense opportunity to not only the food processors but also to equipment and
machinery manufacturers, farmers and other value chain stakeholders include retail stores. India with its
huge agricultural produce and large market provides opportunities to investors both domestic and
foreign. Also, organised retail sector with very less percentage along with young population and large
disposable income provides even a greater opportunity to food retailers and processors.

The food processing sector has a long way to go in India. Almost 25% - 35% of the fruits and vegetables
are lost post-harvest and over ₹55000 crores worth of crops are lost each year. Although, India has now
become a nation surplus in food and production is expected to double over the next decade, India still
faces hunger problems. Over, 20 crore Indians go to sleep hungry every day and 1 crore die every year
due to hunger related diseases. Also, 15% of India’s population is malnourished. This is largely due to
India losing a major chunk of its produce to spoilage. Food processing sector can contribute to reduce
the spoilage in food and help India achieve Food security.

Since, we have established that India has a strong demand for food products accompanied with a steady
supply of raw materials, the market for food processing is virtually untapped. India’s current food
processing industry is currently at US $260 billion and is estimated to reach up to US $482 billion by
2020. Also, an FDI of US $33 billion along with an employment generation of 9 million is estimated by
the year 2022 through a study done by Grant Thornton.

India holds a lot of advantages including demand, raw material, increasing investment and Government
policy support in food processing sector. However, it faces the problem of unorganised sector. Over 42%
of the food processing sector is unorganised. But it also holds advantages such as a shift towards
processed food in the Indian market, international interest in Indian products, frozen and processed
goods healthiness, product innovation and direct procurement from farmers.

It also provides a lot of exports opportunities. India is already the 3rd largest exporter of beef in the
world. There is also a great demand for Indian horticulture products in the international market. India
has the potential to become the global outsourcing hub with its because India enjoys major supply side
fundamentals.

But India faces challenges in various aspects, the major one being infrastructure- lack of cold chain
stores, government certified labs and storage facilities. Also, innovation and skills set are areas where
India suffers. Credit availability is also where India suffers.

Thus, the opportunities and the necessary supply is adequate for the growth of this sector but there
needs to a constant Government support as well as a need for foreign investment to tap the true
potential of this sunrise sector.