Global slowdown to impact India’s processed food exports

The Dollar Business Bureau

Even as the government looks to double India’s food processing exports over the next five years, a recent report by Dun and Bradstreet has suggested that the sector will register a subdued growth this fiscal due to a sluggish global demand.

According to the report, food exports are projected to remain subdued in 2017 due to slowdown in global demand, while the share of FPI related commodities to total exports could remain marginally moderate. 

The exports of FPI and related commodities slumped by 18% y-o-y to $29.7 billion in FY16, in line with the falling trend in India’s overall outbound shipments.

Looking at the sector’s exponential growth prospects in future, the government has set an ambitious target of doubling its processing levels to 20% by 2019 from its current 10%, D&B’s report 'Food Processing - Sectoral Outlook 2017' said.  

“The share of FPI in manufacturing value added is expected to increase, which aligns with the objective of 'Make in India, which provides an opportunity for companies to capitalise on the potential that the industry has to offer,” the report specified. 

“While total cereal exports in FY17 would be close to last year's level due to tighter availabilities and moderation in demand, going forward we can expect a partial recovery as few countries have now opened their markets to Indian rice,” it added.

Meat exports are also estimated to grow marginally, especially to the countries with the highest demand, such as Africa, the Middle East and South Asia. Meanwhile, exports to the countries like the US and the European Union continue to face several hurdles due to their stringent food quality and safety standards.

There are several challenges acting as barriers to the growth of domestic food processing sector.   Inadequate infrastructure accounts for a major share of the trouble, resulting in both high harvest and post-harvest losses.

"The present cold storage capacity falls significantly short of the required capacity. Logistics cost also remains elevated due to multi-tier transportation in the absence of end-to-end logistics service providers. These constraints translate into low level of food processing in the country," it said.