Increased Investment Opportunities for Food Processing in India

25 August 2021admin

In a bid to weigh opportunities for conducting and expanding business in the food processing industry of India, Nexdigm organized a knowledge-sharing webinar titled "India’s Attractiveness and Opportunities – Food Processing Industry" under its banner series "Diversify to Differentiate – Think India, Think Next!"

The webinar, hosted under the aegis of the Consulate General of India, Chicago, brought to light various policies and investor incentives. The commencement was followed by significant and strategic insights from The Consul General of India and the Director of Agricultural and Processed Food Products Export Development Authority (APEDA), a sub-division of the Government of India.

The dignitaries present for the webinar included the Honourable Amit Kumar, the Consul General of India in Chicago, Dr. Tarun Bajaj, Director of APEDA; Bhupinder Singh, CEO and Managing Director of Vista Processed Foods (a subsidiary of US-headquartered OSI Group, a global leader in the food market) and Suresh Chitturi, Vice-Chairman and Managing Director of Srinivasa Farms, a leader in the Indian Poultry Industry.

The discussion started with an overview of the Indian landscape related to the food processing industry.

Experts spoke about the major initiatives strengthening the growth of the Indian economy, including "Atmanirbhar Bharat" or a "self-reliant India," which focuses on developing India as a global manufacturing hub. The thought leaders pointed out that other country-wide economic drivers included Infrastructure Development, the Digital India transformation, a noticeable enhancement in the Ease of Doing Business, and significantly streamlined processes for foreign investors.

Talking more about these aspects, the Honourable Amit Kumar said, “I just wanted to add a word about Atmanirbhar Bharat. We are, of course, looking to bolster our manufacturing capacity so that we are more self-reliant in many ways. But this does not mean in any way that we are shirking away from our global engagements. Instead, our objective is to strengthen capacities so that we can be more active players in the global supply chain.”

One interesting statistic mentioned that the food processing industry is expected to grow at the compound annual growth rate of over 15%. While India is a global leader in food production, the actual processing of food averaged out to only 10% throughout the industry. So, while India has a strong production position, there is a significant investment opportunity on the processing front. Further, the food processing sector allows 100% investment via the automatic route, meaning no government approvals are required. As a result, the sector has realized cumulative investments (until today) in excess of USD 10 billion.

Taking the discussion further, Tarun Bajaj pointed out, “There are three important sectors as far as the economy is concerned, one is agriculture, another is industry and third is the retail sector (consumers). And the processed food sector links all three. India is the sixth-largest retail market in the world, and out of that, the food sector accounts for 65%. Large sections of the middle-class and working population that are coming up require processed food; they require items that are easy to use. We call it the sunrise industry because every year, there is a growth of 6-8%, and sometimes it is up to 8-10%, depending on the product category. The most important part is the production base. We are first, second, or third in terms of the production of many food items. This, coupled with the large land area, makes us an important destination. We also export a significant amount. India exported USD 41 billion of food products last year. This was an increase of around 29% as compared to the previous year, despite COVID-19.”

Talking about how the processing industry has matured over the years, Bhupinder Singh said, “We have been in the industry for last 25 years, and we have seen growth, especially in technology. When we started, the chicken birds weight was only 1.5 kg. Now, we see bird weight going to 2.4 kg, and this is a huge efficiency improvement; this has helped the industry to add value to a lot of products. We have also seen food safety and quality systems coming in this supply chain that has helped India export. As a company, OSI believes there is significant business potential in India. We have been investing every year for growth to bring capacity up to the requirement. But, it is not only for customers here (India) but also for exports.”

Talking about how foreign companies can benefit from the food processing ecosystem, Suresh Chitturi said, “The government is moving; there are some very good policies now, but it takes time. You can’t hatch an egg in a day; it takes 21 days. Similarly, it takes time for some of these things to come to fruition. I think the government can still do more on the policy front and the financing front especially, because I think we are heavily disadvantaged in how Indian banks finance and fund Indian businesses. That’s actually a huge advantage for people investing in India who can get foreign funds. There are huge opportunities for people with capital because most Indian players struggle with that, and we do not have access to significant capital. And unlike in other forms of agriculture, the government is very welcoming for FDI in terms of processing.”

The new PLI scheme aims to bridge the gap for local demand and enhance value addition for select target segments, such as ready-to-cook or eat foods, processed fruits and vegetables, value-added marine products, and mozzarella cheese. Incentives are provided on incremental net sales ranging from 4-10%. Additionally, it also benefits small- and medium-sized enterprises engaged in innovation for organic foods and commitments to promoting Indian food in international markets. Some Indian states also consider food processing a thrust or focal sector and provide for additional incentives in the range of 10-15%. There are also incentives for new manufacturing setups in the form of a reduced corporate tax rate to 15%, which will boost investments further.

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