Food Processing in India

Food processing in India is one of the most dynamic and fast-growing sectors of the economy, acting as a crucial link between agriculture and industry. It involves the conversion of raw agricultural commodities into consumable food products through processes such as cleaning, grading, packaging, preservation, and value addition. The sector not only reduces post-harvest losses but also enhances farmers’ incomes, generates employment, and contributes significantly to export earnings and overall economic growth.

Overview and Significance

India is the world’s second-largest producer of food, with abundant agricultural resources, including cereals, fruits, vegetables, milk, meat, poultry, and marine products. Despite this advantage, the level of food processing has traditionally been low—only around 10% of total agricultural output is processed—indicating vast potential for expansion.
The food processing sector contributes approximately 11% of India’s total manufacturing output and about 9% of GDP in the manufacturing and agriculture sectors combined. It also accounts for nearly 12% of India’s total employment, encompassing both organised and unorganised segments.
The industry plays a strategic role in achieving key national objectives, such as doubling farmers’ income, reducing wastage, ensuring food security, and enhancing export competitiveness.

Classification of Food Processing

Food processing activities in India can be categorised as follows:

1. Primary Processing:
   • Involves basic operations such as cleaning, grading, milling, dehusking, drying, and packaging.
   • Examples: Rice milling, flour milling, and pulse processing.
2. Secondary Processing:
   • Converts primary processed foods into ready-to-eat or ready-to-cook products.
   • Examples: Bread, biscuits, confectionery, dairy products, and packaged beverages.
3. Tertiary (Value-Added) Processing:
   • Involves high-value transformation through advanced techniques like freezing, canning, fermentation, dehydration, and extraction.
   • Examples: Frozen foods, instant noodles, juices, and nutraceuticals.

The sector covers a wide range of sub-industries, including dairy, fruits and vegetables, meat and poultry, fisheries, grains, bakery, beverages, and packaged foods.

Institutional and Policy Framework

The development and regulation of the food processing sector in India are overseen by multiple ministries and agencies:

• Ministry of Food Processing Industries (MoFPI): Nodal ministry responsible for policy formulation, infrastructure creation, capacity building, and promotion of investments.
• Food Safety and Standards Authority of India (FSSAI): Regulates food safety and quality under the Food Safety and Standards Act, 2006.
• Ministry of Agriculture and Farmers Welfare: Supports raw material development and supply chain integration.
• Agricultural and Processed Food Products Export Development Authority (APEDA): Promotes processed food exports.
• National Horticulture Board (NHB) and Marine Products Export Development Authority (MPEDA): Facilitate sector-specific development.

Government Initiatives and Flagship Schemes

To harness the sector’s potential, the Government of India has launched several flagship programmes and policy initiatives under the MoFPI:

1. Pradhan Mantri Kisan Sampada Yojana (PMKSY)

Launched in 2017, PMKSY is an umbrella scheme aimed at creating modern infrastructure with efficient supply chain management from farm gate to retail outlet.

• Components:
  • Mega Food Parks
  • Integrated Cold Chain and Value Addition Infrastructure
  • Creation and Expansion of Food Processing and Preservation Capacities
  • Food Safety and Quality Assurance Infrastructure
  • Human Resources and Skill Development in Food Processing
  • Infrastructure for Agro-Processing Clusters
  • Operation Greens – “TOP to TOTAL” (Tomato, Onion, Potato and other perishables)

2. Mega Food Parks Scheme (MFPS)

Provides common infrastructure facilities such as cold storage, packaging, logistics, and testing labs for clusters of food processing units.

• Each park operates as a hub for small and medium food processing enterprises.
• Promotes farm-to-market linkages and rural employment generation.

3. Production Linked Incentive (PLI) Scheme for Food Processing Industry

Introduced in 2021 to promote value-added manufacturing and exports in key food segments such as ready-to-eat foods, processed fruits and vegetables, marine products, and organic foods.

4. Operation Greens (TOP to TOTAL)

Aims to stabilise the supply and price of perishable commodities like tomato, onion, and potato through integrated value chain development, cold chain logistics, and market intelligence.

5. Food Processing Fund (FPF)

Established by the National Bank for Agriculture and Rural Development (NABARD) to provide affordable credit for food park and cold chain infrastructure projects.

6. Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PM-FME) Scheme

Launched in 2020 as part of the Atmanirbhar Bharat Abhiyan, it supports unorganised micro enterprises in food processing through credit-linked subsidies, branding, and skill development.

7. One District One Product (ODOP) Initiative

Focuses on promoting local food-based products from each district, facilitating value addition, branding, and marketing to enhance local employment and exports.

Infrastructure Development

Infrastructure plays a critical role in improving efficiency across the food value chain. Major infrastructure initiatives include:

• Integrated Cold Chain Networks: Refrigerated storage and transport systems to reduce post-harvest losses.
• Agro-Processing Clusters: Regional clusters supporting SMEs engaged in food processing.
• Warehousing and Logistics: Public-Private Partnerships (PPP) for modern storage and transportation.
• Testing and Quality Labs: Ensuring compliance with national and international food standards.

The Mega Food Parks and Cold Chain Infrastructure projects have created backward linkages with over 250,000 farmers and forward linkages with retail and export markets.

Foreign Direct Investment (FDI) and Industry Participation

The food processing industry in India is among the most open sectors for foreign investment.

• FDI Policy:
  • 100% FDI under the automatic route in food processing.
  • 100% FDI under the government route in retail trading of food products manufactured or produced in India.
• Major global players such as Nestlé, PepsiCo, Unilever, ITC, and Amul have significant presence in the Indian market.

FDI inflows into the food processing sector between 2000 and 2024 exceed USD 12 billion, contributing to technological advancement and employment generation.

Contribution to Employment and Exports

The sector provides employment to more than 1.8 crore people, both directly and indirectly. It is particularly significant for rural employment, as a large share of processing units are agro-based and located near production areas.
In terms of exports, processed food products constitute nearly 12–13% of India’s total exports. Key export categories include:

• Basmati and non-basmati rice
• Processed fruits and vegetables
• Meat and poultry products
• Marine products
• Ready-to-eat and instant foods

Major export destinations include the Middle East, USA, Europe, and Southeast Asia.

Challenges in the Food Processing Sector

Despite its potential, the food processing industry faces several challenges:

• Supply Chain Inefficiencies: Lack of cold chain and logistics integration leads to post-harvest losses estimated at 4–6% for cereals and up to 30% for perishables.
• Fragmented Raw Material Base: Small and marginal farmers limit economies of scale.
• Credit and Finance Constraints: Limited access to affordable finance for small processors.
• Infrastructure Gaps: Inadequate rural roads, power, and storage facilities.
• Regulatory Complexity: Multiple clearances required across central and state agencies.
• Low R&D and Technology Adoption: Slow modernisation among small and medium enterprises (SMEs).

Government Reforms and Modernisation Efforts

To address these issues, several reforms have been initiated:

• Simplification of Regulatory Framework under FSSAI for easier compliance.
• Promotion of Food Parks and Agro Export Zones to enhance competitiveness.
• Skill Development Initiatives under PMKVY and National Skill Development Corporation (NSDC).
• Digitalisation of Supply Chains through e-NAM and AgriTech platforms.
• Encouragement of Sustainable and Organic Processing for global markets.

Emerging Trends and Opportunities

The food processing sector is undergoing rapid transformation due to changing consumer preferences, technological innovations, and policy support. Major trends include:

• Rising Demand for Processed and Packaged Foods: Driven by urbanisation and income growth.
• Growth of Health and Wellness Products: Increased focus on organic, plant-based, and functional foods.
• Expansion of E-commerce and Food Delivery Platforms: Digital retailing of processed foods through online marketplaces.
• Export Diversification: Focus on value-added exports such as nutraceuticals and ready-to-eat meals.
• Adoption of Advanced Technologies: Use of automation, AI, and IoT in food processing and supply chain management.

Future Outlook

The Indian food processing industry is projected to grow at a compound annual growth rate (CAGR) of around 11–12%, supported by domestic demand, export potential, and favourable policy environment. The sector is expected to play a pivotal role in achieving:

• Doubling of farmers’ income through value addition and market linkages.
• Job creation in rural and semi-urban areas.
• Reduction of food wastage through better storage and processing.
• Improved nutritional security through diversified food products.