With a strong agricultural background and several favourable trends supporting its progress, the Indian food processing industry is on the cusp of a transformation, and the industry could potentially grow at a CAGR of 10-11 per cent to reach $500-530 billion by FY27, according to a report.
The report also stated that by addressing immediate challenges and focusing on optimising food wastage, enhancing food processing penetration and increasing exports, the sector could potentially double its size to $600-650 billion in the same period.
McKinsey & Company, Knowledge Partners of the report, pointed out that India has emerged as a global agricultural powerhouse and it currently is the world’s second-largest agricultural producer leading in the production of cereals, pulses, fruits and vegetables, sugar, and milk.
The agricultural sector not only contributes to 19 per cent of India’s GDP, it also supports nearly half of the population’s livelihoods. The per capita agricultural GDP, at constant prices, grew at a CAGR of 6 per cent to ₹15,056 per year between 2000-01 and 2020-21. The food processing industry in the country grew at a CAGR of 11 per cent between FY 15-20 to USD 300-320 billion. It performed better than Brazil, the US and China in 2021 in terms of growth, especially in cereals.
Despite these achievements, the potential remains untapped. A greater thrust on food processing could significantly increase farmer income and create thousands of jobs and successful businesses on its shores, it said.
Generating demand, setting standards
As different crops are grown in each State, processing in India will remain a concern.
For example, in Maharashtra, 77 per cent of the product undergoes primary processing, while it is close to 50 per cent in Gujarat and Andhra Pradesh. In Tamil Nadu and Madhya Pradesh, it is 60 per cent. In nearly all the states, less than 40 per cent of the product undergoes secondary or tertiary processing.
Furthermore, the unorganised sector adds to the complexity. In fact, it dominates the environments/soils across the country, producing goods of variable quality. This means that the level of processing required for each category changes by State.
The report has suggested some action that industry players, in collaboration with the government and other stakeholders, could consider. These include encouragement of demand-backed production, increasing awareness among consumers to generate demand, improving processing efficiency, building robust logistics infrastructure and ensuring quality and traceability standards for exports.