What are the key drivers behind the growth of the Food Processing Sector in India? Also, highlight some key challenges associated with the food processing sector.
- Introduce with the Food Processing Sector being a sunrise sector
- Elaborate the key drivers behind the growth of the food processing sector in India.
- Highlight some key challenges associated with the food processing sector.
- Conclude with a way forward.
The Food processing sector is a sunrise sector that is expected to grow to $543 billion in 2020 form $322 billion in 2016 with a CAGR of 14-15%. This sector employs nearly 1.77 million people and holds the key for doubling the farmers’ income by the year 2022.
Key drivers of growth:
- Availability of raw materials:Large and diverse agriculture sector and abundant livestock provides a variety of raw material like milk, fruits, cereals, vegetables etc. providing a large basket of processed food to offer for both the domestic and international market.
- Changing lifestyle:With rising incomes, health awareness, large young working population etc the consumer preference is growing towards the processed foods. In the year 2017, India registered an 8.5% increase in the consumer demand for processed food.
- Export Growth: The exports demand for Indian processed food has been rising with a CAGR of 11.74% during 2011-16. Factors like changing taste preference in foreign markets, the presence of a huge diaspora, connectivity boost to Africa and West Asia etc. have played a key role.
- Affordable workforce availability: The workforce in India presents a competitive cost advantage of nearly 40% against the key competitors giving an edge for the food processing industries based in India.
- Infrastructure:Fragmented supply chain, lack of adequate cold storages, warehousing facilities, government certified labs, mechanised handling etc. results in the wastage especially for the perishable food products.
- Skill Development:Despite the advantage provided by the cheap workforce, the inadequate skillset at the different levels of food processing industry clubbed with the lack of specialised skill development programmes presents a challenge for this sector.
- Innovation:Factors like Industry-Academia disconnect, lack of state of the art technology etc, makes the sector dependent on import of technologies and the cost of production goes upwards.
- Branding and Standardisation: There is a huge shortage of laboratories, trained manpower, and certification agencies for branding and quality standardisation of the processed food in India.
- Credit Access:This sector is a capital intensive one and requires affordable credit. Lack of dedicated venture capital funds for the sector and growing NPA problem of the banking sector presents a challenge here.
To overcome the challenges and maintain the growth momentum of the food processing sector, the government has taken steps like PM Kisan SAMPADA scheme and allowing 100% FDI under the automatic route.
Subjects : Economy