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How will food technology industry contribute to the growth of Indian Economy?

Food Processing

Food Processing

Introduction

  • In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry.
  • The food industry, which is currently valued at US$ 39.71 billion is expected to grow at a Compounded Annual Growth Rate (CAGR) of 11 per cent to US$65.4 billion by 2018.

Market Size

  • The Indian food processing industry accounts for 32 per cent of the country’s total food market and contributes around 14 per cent of manufacturing Gross Domestic Product (GDP), 13 per cent of India’s exports and six per cent of total industrial investment.
  • The Indian gourmet food market is currently valued at US$ 1.3 billion and is growing at a Compound Annual Growth Rate (CAGR) of 20 per cent. India’s organic food market is expected to increase by three times by 2020.
  • With online food delivery players like FoodPanda, Zomato,TinyOwl and Swiggy building scale through partnerships, the organised food business has a huge potential and a promising future.

 

Impact on economy and size of industry

  • Scale of outputs: The food processing industry is significantly larger than many other labour intensive sectors like textile, apparel and leather .The distributed nature of unorganized food processing across the country leads to wider employment generation across rural and urban regions. The industry generates employment of nine million person-days.
  • Employment generation potential: The industry has large employment generation potential and currently accounts for direct employment of more than 16 lac workers in factories along with over 14 lac workers in the MSME segment.

Output generated across key labour intensive sectors

Sources: Analyst Reports, Ministry of Food Processing Industries – Annual report 2012-13

Employment generation in organized and MSME sectors across select industries

(Millions of persons, 2011)

Sources: Ministry of Food Processing Industries – Annual report 2012-13

Impact on local economy

  • Since a large share of this industry is based in rural, semi-urban regions, there is a significant multiplier effect on the local economies as these regions provide both raw material and labour for the industry, through generation of income and its cascading effect on the economy.
  • The food processing industry typically has an output multiplier of two to four on GDP as seen in several countries. The output multiplier for a sector defines the additional outputs in an economy generated due to cascading effect of outputs of the primary sector. For example, an USD 1 billion growth in the food processing sector could translate into additional GDP growth of USD 2-4 billion from adjacent sectors in the food value chain as well as the larger ecosystem.
  • The food processing industry through its backward and forward linkages has tremendous potential to influence other parts of the food value chain. This can lead to reduction in wastage and improving farm productivity through investments in the supply chain and farm extension services for agriculture.

Effects of FDI policy

  • The Government of India has also relaxed foreign direct investment (FDI) norms for the sector, allowing up to 100 per cent FDI in food product e-commerce through automatic route.
  • The Confederation of Indian Industry (CII) estimates that the food processing sectors have the potential to attract as much as US$ 33 billion of investment over the next 10 years.

Some of the major investments in this sector in the recent past are:

  • Swiggy, a food delivery start-up, has raised Rs 230.34 crore (US$ 33.80 million) in a Series C funding round, with its existing investors SAIF Partners.
  • Zomato, a restaurant search and discovery platform, has raised US$ 60 million from Singapore government-owned investment company Temasek,

Strengthening ties with other Countries.

Strategic geographic location and proximity to food importing nations benefit India in terms of exporting processed foods. During FY11–15, India’s exports of processed food and related products (inclusive of animal products) increased at a CAGR of 23.3 per cent to US$ 21.5 billion. Main export destinations for food products have been the Middle East and Southeast Asia.

 Challenges impacting the Economy

Top Five Challenges Identified Weightage of challenges
Inadequate Infrastructural Facilities 44.25
Comprehensive national policy on food processing sector 34.46
Food safety laws 28.51
Inconsistency in central and state policies 28.08
Availability of trained manpower 25.53

 

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