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.

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.

Approach:

  • 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.
Model Answer :

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.

Challenges:

  • 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

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