Food service industry now India’s third biggest service segment

By RJ Whitehead

- Last updated on GMT

© iStock
© iStock

Related tags: Restaurant, Food

India’s food service industry must face up to a variety of issues from multiple taxation to limited foreign exchange benefits if it is to capitalise on its position as India’s third-biggest service industry, according to a report commissioned by its representative body.

Food service will contribute 2.1% to India’s gross domestic product by 2021, the report found due to an exponential growth in eating out and a rise in interest in new cuisines. 

As we see rapid urbanisation in the country, the gastronomical sector is going to boom in India​,” said Amitabh Kant, chief executive of NITI Aayog, a government-run think tank that looks at national development, as he launched the report. 

The restaurant sector is going to have a very big share in growth. The food sector provides the highest manpower requirement in the hospitality sector, and a huge impetus to other sectors like agriculture, food processing, supply chain, logistics, real estate sector etc. Therefore there is an imperative need for a paper that documents the various developmental parameters of the industry​.”

The National Restaurant Association of India, the powerful industry lobby that commissioned the report, assessed that only the retail and insurance industries were bigger in size than food service.

The total food service market today stands at Rs309tr [US$4.6tr] and has grown at 7.7% since 2013. This is projected to grow to Rs500tr​,” said Riyaaz Amlani, president of the NRAI.

This year alone, the Indian restaurant sector will create direct employment for 5.8m people and contribute Rs224bn [US$3.3bn] by the way of taxes to the Indian economy​.”

Yet the food service industry faces issues such as food commodity prices, increasing rents, unpredictable consumer demand and byzantine liquor licensing and taxation systems.

There should be a registration process rather than licensing procedures​,” Amlani said. “It takes up to 100 working days for restaurant owners to get licenses. There should be a single window licensing system which is completely online and responsive​.”

Multiple taxation, high tax rates and the exclusion of liquor from the planned implementation of GST are also standing in the path of the industry’s development, he said, calling for a uniform tax structure.

Amlani added that the restaurant sector’s problems are exacerbated by it being regulated by a number of ministries, including the tourism, agriculture and finance and commerce ministries.

Related topics: Markets, Industry growth, South Asia

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