India ranks 63 among 88 countries in Global Hunger Index. But the country is one of the key food producers in the world, with the second largest arable land area. While the industry is large in terms of size, it is still at a nascent stage in terms of development. According to the ministry, the actual worth of money per year in India from food wastage is estimated at a whopping over Rs. 92,000 Crore. Out of the country’s total agriculture and food produce, only 2 percent is processed and 40% gets wasted before reaching the plate. FAO estimates that even if just one-fourth of the food currently lost or wasted globally could be saved, it would be enough to feed 870 million hungry people in the world.
Given the size and significance of the food processing sector in India’s economy, several states in India are focusing on developing the sector and attracting investments. At the same time, there are a few states that are attractive to investors due to favourable market and factor conditions. The following points give a high-level assessment of India’s strengths in Food Processing which clearly shows that there is huge potential for start-ups.
Strength in Food Processing – India Scenario:
The Food Processing sector offers many opportunities across the value chain right from the farm equipment players to the retail/food services segment.
Factor Conditions – Availability of Raw Materials & Human Resources: India has access to several natural resources that provides it a competitive advantage in the food processing sector. Due to its diverse agro climatic conditions, it has a wide-ranging and large raw material base suitable for food processing industries. Also, India’s comparatively cheaper workforce can be effectively utilized to set up large low-cost production bases for domestic and export markets.
Firm Structure/Rivalry – Structure of the Industry/Vertical Integration: With organized retail penetration increasing and government’s proposed mega food parks obviating the need for an intermediary, Contract Farming is an opportunity for the processors that will help in better handling, price realization and minimizing wastage.
Demand Conditions – Local Market Demand: Given the rushed and time-pressed lifestyle that people in urban India lead, consumers are progressively looking at wholesome and appropriate solutions like packaged food that provide the required nourishment.
Supporting Industries – Institutional Support: The industry has significant support from the well-developed R&D and technical capabilities of Indian firms. India has a large number of research institutions like Central Food Technological Research Institute, Central Institute of Fisheries Technology etc. to support the technology and development in the food processing sector in India.
Government Support – Tax Policies/Incentive: In order to promote investment in the food processing sector, several policy initiatives have been taken during recent years. The national policy aims to increase the level of food processing from 2 percent to 25 percent in 2025.
A well-integrated supply chain and a successful marketing strategy with investments in the most attractive segments and states are key to competitiveness to success in the food processing sector.