India focuses on food processing sector to bolster growth, exports

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India plans to use food processing industry as a buffer against imports of essential items during shortage

  Only about 2% of India’s fruits and vegetables are processed and improving this could boost India’s food exports and solve a plethora of problems faced by the Indian economy, according to Harsimrat Kaur Badal, Minister for Food Processing Industries (MoFPI). Speaking at a press conference in New Delhi today, Badal said that the government is planning to give a major push to India’s food processing industry which is growing at a rate of around 8.4%, compared to 6.6% growth in manufacturing and 3.3% in agriculture, the mainstays of Indian economy. Badal said that encouraging food processing could generate employment across the country, reduce food wastage (now estimated at a high of around 6-18%) significantly, and uplift the farmer community. Despite being a top food producer, India’s food processing industry remains stunted due to various factors, including lack of capital and technology know-how. To address these problems, the government has adopted a three-pronged approach: develop mega food parks; introduce a food chain and introduce and modernise abattoirs. The government has allocated Rs.2,000 crore for the food processing sector in the budget and has reduced the excise duty on food processing equipment from 10% to 6% in the budget. The government is developing a food map which will show production and consumption trends in the country. Skill development is also being planned and around 10,000 people will be trained in the next one year to help develop the food processing industry, MoFPI officials said. The government has also simplified the application procedure to set up food processing units in India and is in talks to facilitate imports of materials required by the food processing industry. Food processing sector in India is considered a mostly export oriented one, but lacks competitiveness in the international market. According to the Agricultural and Processed Food Products Export Development Authority (APEDA), India's processed food exports stood at around Rs.31,551.99 crore (about $5.18 billion) in FY2013-14 and FDI in food retail could help the sector grow significantly. It says, “One of the prime factors for non-competitiveness of the food processing industry is because of the cost and quality of marketing channels. Globally more than 72% of food sales occur through super stores.” Badal agreed that FDI in food retail could transform the sector. She added that India’s food exports grew at around 12.1% in FY2013-14, and there is an “enormous interest” in foreign companies to invest in India’s food processing industry.

This article was published on September 22, 2014.