India budget gives fresh boost to investments in food processing industry

Food ecosystem offers huge opportunities with stimulating growth in food retail, favourable economic policies and attractive fiscal incentives.

Food processing has a vital role to play in linking Indian farmers to consumers in domestic and global markets – and the Union Budget for 2021-22 will help boost India’s overall competitiveness and capacities in the sector, according to top Indian officials and experts.

While the Ministry of Food Processing Industries (MoFPI) has been making all-out efforts to encourage investments across the value chain, the industry currently engages around 1.93 million people in nearly 40,000 registered units with a fixed capital of $32.75 billion and aggregate output of around $160 billion.

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Operation Green

Those efforts got a major boost in the Union Budget announced earlier this week by Indian Finance Minister Nirmala Sitharaman, with the “Operation Green” scheme of the ministry increased to 22 perishable items. Earlier, the scheme was limited to onion, potatoes and tomatoes, and the decision to promote more agriculture sector products for exports would help creation of infrastructure and value addition for horticulture products, Indian Commerce Secretary Anup Wadhawan said.

The Budget allocation for schemes such as Agriculture Export Policy (AEP) and Transport and Marketing Assistance (TMA) has also been enhanced, which will help in the implementation of AEP in States and boost agriculture exports, he said.

With key sub-segments such as dairy, fruits & vegetables, poultry & meat processing, fisheries and food retail, and major industries constituting the food processing industry including grains, sugar, edible oils and beverages, the sector has quickly emerged as a cornerstone of Indian Prime Minister Narendra Modi’s sustained push for Aatmanirbhar Bharat or Self-Reliant India.

Despite the pandemic last year, India managed to approve 134 food processing projects across various states, of which there were 21 agro-processing clusters, 47 cold chains and 43 food processing units. Altogether, the projects are slated to create additional agricultural produce processing and preservation capacity of 3.83 MMT per annum and generate direct and indirect employment for more than 77,300 people, according to the ministry’s estimates.

Huge gain from grain

India’s food processing industry as a whole and the food ecosystem in particular thus offer huge opportunities for investments with stimulating growth in the food retail sector, favourable economic policies and attractive fiscal incentives. The food & grocery market in India is the sixth largest in the world, and the sector’s retail market constitutes almost 65% of the total retail market in India.

The massive opportunities in the sector can be gauged from some of the key numbers:

• By 2024, the food processing industry will attract $33 billion investments and generate employment for 9 million people

• By 2025, India’s food processing sector is expected to be worth over half a trillion dollars

• By 2030, Indian annual household consumption is expected to treble, making India the fifth largest consumer globally

With the policy already in place for 100% FDI through the government approval route for trading, including through e-commerce in respect of food products manufactured or produced in India, the government is taking further necessary steps to boost investments in the industry.

“The ministry has been supporting small innovation projects for developing new products & processes, packaging, testing equipment and more affordable technology for the predominant MSME industry in this sector,” said Pushpa Subrahmanyam, Secretary of MoFPI, adding that it is innovation that drives the sector and determines its path and expansion. “We will continue to focus, particularly now, on Waste to Wealth technologies, also packaging solutions that are more biodegradable or can be plastic substitutes. The sector sees this as a big challenge, and we would like to give resources to fund these kinds of sustainable solutions to the industry,” she said.