Food processing industry in India

India's seven export-worthy food sectors

Food: One of India's most FDI-worthy sectors

Intermediate food products market in India

 Did you know?

From a starving nation in 1947 when it won political independence, India today is one of the world's major producer of foodgrains.

 

Compiled by Amitabha Sen

  • India is one of the world’s major food producers but accounts for less than 1.5 per cent of international food trade. This indicates vast scope for both investors and exporters. Food exports in 1998 stood at US $5.8 billion whereas the world total was US $438 billion.

  • The Indian food industry’s sales turnover is Rs 140,000 crore (1 crore = 10 million) annually as at the start of year 2000.

  • The industry requires about Rs 29,000 crore in investment over the next five years to 2005 to create necessary infrastructure, expand production facilities and state-of-the-art-technology to match the international quality and standards.

  • The office of the Agricultural Affairs of the USDA / Foreign Agricultural Services in New Delhi says that one of India’s proudest accomplishments has been achieving a tenuous self-sufficiency in food production and that the country produces a wide variety of agricultural products at prices that are at or below world values in most cases.

  • The Indian palate is accustomed to traditional foods, mostly wheat and rice-based, rather than potato and corn-based western palate. In marketing perspective, this is considered an important factor for foreign marketers.

  • The USDA report says initially consumer-ready food products may have to be tailored to include Indian spices and traditional ingredients. In addition to traditional tastes, there are other social factors which affect consumption in India. Hindus account for approximately 80 per cent of India’s population, and while only 25 or 30 per cent are strict vegetarians, beef slaughter is prohibited in all but two states (Kerala and West Bengal) and consumption of other meats is limited. Incidentally, India is the only country where the US-based MacDonalds sells its burgers without any beef content and even offers purely vegetarian burgers.

  • India’s middle class segment will hold the key to success or failure of the processed food market in India. Of the country’s total population of one billion, the middle class segments account for about 350-370 million. Though a majority of families in this segment have non-working housewives or can afford hired domestic help and thus prepare foods of their taste in their own kitchens, the profile of the middle class is changing steadily and hired domestic help is becoming costlier. This is conducive to an expansion in demand for ready-to-eat Indian-style foods.

  • India’s food processing sector covers fruit and vegetables; meat and poultry; milk and milk products, alcoholic beverages, fisheries, plantation, grain processing and other consumer product groups like confectionery, chocolates and cocoa products, Soya-based products, mineral water, high protein foods etc.

  • According to latest official statistics, India exported processed fruits and vegetables worth Rs 5240 million in 1997-98. The horticulture production is around 102 million tonnes. Foreign investment since 1991, when economic liberalisation started, stood at Rs 8,800 crore. Products that have growing demand, especially in the Middle East countries include pickles, chutneys, fruit pulps, canned fruits, and vegetables, concentrated pulps and juices, dehydrated vegetables and frozen fruits and vegetables.

  • Another potential processed food product is meat and poultry products. India ranks first in world cattle population, 50 per cent of buffalo population and one-sixth of total goat population of the world. Buffalo meat is surplus in India. There is vast scope to set up modern slaughter facilities and cold store chains in meat and poultry processing sector. India’s current level of meat and meat-based exports is around Rs 8,000 million. In last six years foreign investment in this segment stood at Rs 5,000 million which is more than 50 per cent of the total investment made in this sector.

  • Compared with meat, poultry industry has registered significant growth. India ranks fifth in the world with annual egg production of 1.61 million tones. Both poultry and egg processing units have come in a very big way in the country. India is exporting egg powder, frozen egg yolk and albumin powder to Europe, Japan and other countries. Poultry exports are mostly to Maldives and Oman. Indian poultry meat products have good markets in Japan, Malaysia, Indonesia and Singapore. While meat products registered a growth of 10 per cent, eggs and broilers registered 16-20 per cent growth.

  • There are about 15 pure line and grand parent franchise projects in India. There are 115 layer and 280 broiler hatcheries producing 1.3 million layer parents and 280 million broiler parents. They in turn supply 95 million hybrid layer and 275 million broilers, day-old chick. Presently there are only five egg powder plants in India which is considered insufficient in view of growing export demand for different kind of powder - whole egg, yolk and albumen. The scope of foreign investment and state-of-the-art technology in this field is therefore tremendous.

  • Milk and milk products is rated as one of the most promising sectors which deserves foreign investment in a big way. When the world milk production registered a negative growth of 2 per cent , India performed much better with 4 per cent growth. The total milk production is around 72 million tonnes and the demand for milk is estimated at around 80 million tonnes.

  • By 2005, the value of Indian dairy produce is expected to be Rs 1,000,000 million. In last six years foreign investment in this sector stood at Rs 3600 million which is about one-forth of total investment made in this sector. Manufacture of casein and lactose, largely being imported presently, has good scope. Exports of milk products have been decanalised.

  • Grains could emerge as a major export earner for India in coming years. India’s food grains production is now at around 225-230 million tones. These include rice, jawar, bajra, maize, wheat, gram and pulses. Indian basmati rice enjoys command in the international market. Besides growing Middle east market for basmati rive, many other countries are showing interest for this food grain. In 1998-99 export of basmati and non-basmati rice stood at Rs62000 million. There is a total rice milling capacity of 186 million tones in the country.

  • Among plantation, tea emerged as major foreign exchange earner. India is the largest producer and exporter of black tea. However, the most worrying factor for Indian tea industry is that from early next year with the implementation of tea imports into the country, India tea may face a stiff competition within the country as well, specially threat of Sri Lanka’s presence in the Indian market is looming large.

  • The current year’s tea export prospect is not that very good in terms of forex earnings because international prices has fallen significantly this year . India exports between 150-170 million kilogram’s of tea per annum. Of course, the scope of foreign investment in this sector is good and the multinational tea companies would either be trying for marketing joint ventures with the Indian producers or acquire stakes in Indian tea companies. There is strong possibilities of third country exports through such joint venture as quality wise still Indian teas are ruling the international market.

  • Alcoholic beverages is another are where India witnessed substantial foreign investment. Foreign investment in this sector stood at Rs 7000 million which about 70 percent of the total investment made so far. The IMFL (Indian Made Foreign Liquor) primarily comprises wine, vodka, gin, whisky, rum and brandy. Draught beer is a comparatively recent introduction in the Indian market. The Indian beer market is estimated at Rs7000 million a year. One of the major advantages for any investor eyeing the Indian liquor market is that India offers enough raw materials like molasses, barely, maize, potatoes, grapes, yeast and hops for the industry.

  • Yet another catchy investment sector is fisheries. There is growing canned and processed fishes from India. The marine fish include prawns, shrimps, tuna, cuttlefish, squids, octopus, red snappers, ribbon fish, mackerel, lobsters, cat fish etc. In last six years there was substantial investment in fisheries to the tune of Rs 30,000 million of which foreign investments were of the order of Rs 7000 million. The potential could be gauged by the fact that against fish production potential in the Exclusive Economic Zone of 3.9 million tones, actual catch is to the tune of 2.87 million tones. Harvesting from inland sources is around 2.7 million tones.

  • The biggest bottleneck in expanding the food processing sector, in terms of both investment and exports, is lack of adequate infrastructure.

  • Without a strong and dependable cold chain vital sector like food processing industry which is based mostly on perishable products cannot survive and grow. Even at current level of production, farm produce valued at Rs 70,000 million is being wasted every year only because there is no adequate storage, transportation, cold chain facilities and other infrastructure supports. Cold chain facilities are miserably inadequate to meet the increasing production of various perishable products like milk, fruits, vegetables, poultry, fisheries etc.

  • Prevention of Food Adulteration laws is not only stringent one but time consuming also. It is considered as an archaic and no industry friendly food law. It substantial varies from Codex standard. Harmonization of multiple food laws is an urgent necessity.


Food: One of India's most FDI-worthy sectors
India's seven export-worthy food sectors
Intermediate food products market in India




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