Overseas funds to boost local Indian food processing industry

By Ankush Chibber

- Last updated on GMT

Related tags: Food processing industry, Investment, Food industry

The food processing industry in India will be forced to adopt new technologies and improve their productivity if the foreign direct investment into multi-brand retail is allowed.

According to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), such investments into multi-brand retail would push the local food processing industry to be globally competitive.

Factors like an increasing urbanisation, changing lifestyles, more working women and increasing nutritional needs is boosting the domestic food retail market, making it attractive for foreign investment.

The body also said that the local food processing industry is expected to grow at compounded annual growth rate of nine per cent from US$120 bn in 2011 to US$200 bn by 2015 on the back of this rising demand.

However, for that to be accomplished, more would need to be done in terms of improving the processes in the food processing industry, which is able to process only seven per cent of the total agriculture produce processed in India.

“There exists a huge gap in agriculture output, post-harvest produce and processing,”​ said D S Rawat, the ASSOCHAM secretary general.

Despite high growth and large investments in recent years, the industry is still dominated by small scale and unorganised sector mainly involved in producing low value added products,”​ he said.

According to Rawat, the Indian food processing industry will offer growing significant opportunities or established players, as new nutritional needs and changing lifestyles would grow the market for value added products.

Rawat pointed out how many multinational corporations like Wal-Mart, Pepsi, Cargill, Heinz, Kellogs and ConAgra have already invested in the food processing sector, and many more are expected to invest.

Of the overall food industry, 51 per cent is unprocessed and primary processed leaving a scope of 49 per cent for the processed segment, said Rawat. He added that of this processed segment, 68 per cent is commodity based and value added products account for 32 per cent.

According to ASSOCHAM, the Indian food processing industry is important for the country as a whole as it contributes nine per cent to the GDP, accounts for 14 per cent of industrial output and direct employs to 1.6 m people.

Related topics: Business, South Asia, Industry growth

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