India is the world’s second-largest producer of food after China. Yet, it has one of the lowest levels of food processing in the world. At about 10 per cent, the Gross Value Added (GVA) of the food processing industry in India is among the lowest in the world compared to 30 per cent in China and ranging from 60-80 per cent in Western economies.
However, the country’s still developing food processing industry holds tremendous potential and impact on its economy. Food processing is one of the largest employment-generating industries in India, and it contributes significantly to the country’s GDP.
The food processing industry continues to play a vital role in transforming raw agricultural products into value-added goods and its growth can lead to significant economic development and job creation. Government data from 2016 deemed the food processing industry in India to be at a nascent stage, accounting for less than 10 per cent of total food in India. While the industry has been growing steadily over the years, there is still a lot of untapped potential that needs to be realised.
Rising above the challenges
According to a report by the Ministry of Food Processing Industries, the Indian food processing industry has been growing at an annual growth rate of around 11.18 per cent over the past five years, outpacing the overall industrial growth rate. However, there are still several challenges that need to be addressed to fully leverage the potential of this industry.
Also read: Save the planet by slashing food waste
One of the key challenges faced by the food processing industry in India is the lack of adequate infrastructure. Insufficient cold storage facilities, transportation networks, and capabilities of the existing food processing units result in significant post-harvest losses. To overcome this, there is a need for increased investment in infrastructure development, as well as making the existing infrastructure globally compliant, especially in rural areas where agriculture is the primary source of income.
Despite being one of the top five producers for most agri-products, India lags behind in exports due to a limited proportion of processed products in the overall agri-food basket. The exports of raw agri-products by India are done with limited value addition. In some cases, value is added to India’s exported products by other countries, and the finished products are then exported back the India and other nations.
Despite the aforementioned challenges, there are immense opportunities for the food processing industry to contribute to the Indian economy. One such opportunity lies in the growing demand for processed and packaged food products. As incomes rise and lifestyles change, consumers are increasingly seeking convenient and ready-to-eat food options. This trend presents a significant market for food processors to tap into and diversify their product offerings.
Additionally, the food processing industry can play a crucial role in reducing food wastage and improving food security. India faces the challenge of feeding a growing population and a significant portion of agricultural produce is lost due to spoilage and inadequate storage. By investing in advanced processing and preservation techniques, the industry can help minimise post-harvest losses and ensure a steady supply of food throughout the year.
The food processing industry has the potential to generate employment opportunities, especially in rural areas. A parliamentary report from 2022 revealed that the food processing industry is one of the major employment-intensive segments, having a share of 12.38 per cent in the employment generated in all registered factory sectors in 2017-18. With adequate training and skill development programmes, it can empower individuals to become entrepreneurs and contribute to local economic development. This will not only create jobs but also address the issue of rural-urban migration.
To fully realise the potential of the food processing industry, a multi-pronged approach is required. First, there is a need for supportive government policies and incentives that encourage investment in the sector. This includes streamlining regulations, providing access to affordable credit, and promoting research and development in food processing technologies.
Second, collaborations between industry stakeholders, research institutions, and farmers are essential. This will facilitate knowledge transfer, innovation, and the adoption of best practices across the value chain. Additionally, public-private partnerships can help bridge the infrastructure gap and promote sustainable growth.
The food processing industry has the potential to accelerate India’s economy. The industry has been growing steadily over the years, but there is still a lot of untapped potential that needs to be realised. The industry faces several challenges, and there is an imminent need to invest in infrastructure, skill development, and innovation. The government and the industry need to collaborate to support the growth of the industry, which would benefit not only the industry but also the agriculture sector and the economy as a whole.
The author is co-Founder, Agrizy