According to a report, the Indian food processing industry is on the verge of a transformation, with a strong agricultural background and several favourable trends supporting its progress. The industry could potentially grow at a CAGR of 10-11 percent to reach $500-530 billion by FY27.
According to the report, by addressing immediate challenges and focusing on reducing food waste, increasing food processing penetration, and increasing exports, the sector could potentially double in size to $600-650 billion in the same period.
According to McKinsey & Company, the report's Knowledge Partners, India has emerged as a global agricultural powerhouse, and it is now the world's second-largest agricultural producer, leading in the production of cereals, pulses, fruits and vegetables, sugar, and milk.
The agricultural sector not only accounts for 19% of India's GDP, but it also employs nearly half of the population. Between 2000-01 and 2020-21, the per capita agricultural GDP increased at a CAGR of 6% to $15,056 per year. Between FY 15-20, the country's food processing industry grew at an 11 percent CAGR to USD 300-320 billion. In terms of growth, it outperformed Brazil, the United States, and China in 2021, particularly in cereals.
Despite these accomplishments, the potential remains unrealized. It stated that a greater emphasis on food processing could significantly increase farmer income while also creating thousands of jobs and successful businesses on its shores.
Because different crops are grown in each state, processing in India will continue to be an issue.
In Maharashtra, for example, 77% of the product goes through primary processing, whereas it is close to 50% in Gujarat and Andhra Pradesh. It is 60% in Tamil Nadu and Madhya Pradesh. In nearly all states, less than 40% of the product goes through secondary or tertiary processing.
Furthermore, the unorganized sector complicates matters. In fact, it dominates the country's environments/soils, producing goods of varying quality. As a result, the amount of processing required for each category varies by state.
The report makes some recommendations for actions that industry players, in collaboration with the government and other stakeholders, could take. These include encouraging demand-backed production, raising consumer awareness to generate demand, improving processing efficiency, constructing a strong logistics infrastructure, and ensuring export quality and traceability standards.
(Source: Ministry of Food Processing Industries’ FY21 Annual Report)
