A continuously growing food processing sector of India may be a key to make in India program in coming years. According to an ‘Assocham Grand Thorton study’, the Indian food processing sector has the potential to attract 33 billion USD in investment and generate employment for 9 million persons by 2024.
India’s food processing sector continues to grow in response to changing demographics, evolving preferences for branded and convenient items, retail and food service sector modernization, and government efforts to develop food manufacturing. Increasing health consciousness is influencing the development and sales growth of packaged foods. Imports of non-standardized processed foods and ingredients remain a challenge, though regulatory reforms are supporting progress. Increasing urbanization, lifestyle changes, greater affluence, and increased rates of women working outside of the home are driving demand for processed foods. According to the India Brand Equity Foundation (IBEF) 2017 Indian Food Processing report, the Indian food processing industry accounts for 32 percent of the country’s total food market. It contributes around 8.8 and 8.4 per cent of Gross Value Added (GVA) in Manufacturing and Agriculture, respectively. In addition, it accounts for 13 per cent of India’s exports and six percent of the total industrial investment.
As per the 2016-2017 Annual Survey of Industries, there are 37,175 registered food processing units in the country that employ approximately 1.7 million people in food and beverage manufacturing. According to an ‘Assocham Grant Thorton Study’, the Indian food processing sector has the potential to attract 33 billion USD in investment and generate employment for Nine million persons by 2024.
The Growth Drivers
Demographic Changes have played a crucial role, India’s current population is nearly 1.3 billion, up from 670 million in 1980. The pace of growth is slowing, but the country’s age structure promises continued gains for some time. The median age is rising but is still relatively low – just 27.9 years in 2016. About 33.5 per cent of India’s population is urban and nearly 61 per cent is under the age of 35. The Indian government projects that there will be 400-500 million people in the work force before 2025, but if female empowerment takes off that figure might increase to 600 or 700 million.
Rising Disposable Incomes that has generated Income growth, increased consumer appetites and discretionary spending. This shift in spending appears promising for manufacturers and service providers, especially in hotel, leisure, healthcare and household goods and service categories. According to the GOI, the per capita income during 2016-17 was USD 1,599 (INR 103,291); a rise of 9.7 per cent over the previous period. The per capita gross domestic product was USD 6,700.
Changing lifestyles and women in the workplace was one of the major driving factors of growth that may continue to shoot facets like Urbanization and the increasing number of working women. It pushed consumers to look for products offering convenience. This is leading to trading up from unpackaged to packaged and unbranded to branded products. Additionally, consumers have gained some health consciousness, which has led them to choose packaged foods products more wisely. Given that the industry is underpenetrated, improved competition will create more awareness and better availability through stronger distribution and bolster volume growth.
Rising Organized Retail and E-Retail has also played a huge role. Although small in individual trade, traditional outlets dominate the food retail sector and account for 98 per cent of sales, modern retail chains offering a consumer-friendly shopping experience are emerging. Organized retail stores exceed 5,300 in 2016. India remains a growing market for consumer-ready food products. With a sharp rise in mobile penetration across India, online and e-commerce retail opportunities have opened up and afforded options to consumers on payment mechanisms as well as conveniences for time and cost savings.