The Food Processing Industry (FPI) acts as a crucial link between agriculture and industry, driving economic growth and employment in India. With rising demand for processed foods and supportive government initiatives, the sector is poised for significant expansion.

"There is a need for post-harvest revolution or food processing revolution, and value additions." - PM MODI (while inauguration of PM SAMPADA Scheme)

The food processing Industry (FPI) provides a vital linkage between agriculture and Industry. 

Significance of Food Processing Industry

• A Sunrise Sector: India’s food processing sector is one of the largest in the world and its output is expected to reach $535 Bn by 2025-26.
• Economic Growth: The Indian food sector contributes about 8% of GDP.
• Export potential - accounts for 13% of GDP .
• Employment generation- both direct and indirect employment.
• Farmers income - by adding value to the product.
• Reduce wastage - UN stated that 40 % of production is lost through food wastage .
• Reduce malnutrition - by fortifying with minerals and vitamins.
• Rural development - FPI directly contributes to development to the rural economy.
• Crop diversification - different inputs required hence scope to crop diversification.
• MSME's- accelerate their growth and scale

Scope of Food Processing Industry 

• Huge Production base to become leading food supplier - India ranks 1st in the world in the production of Milk, Ghee, Ginger, spices, Bananas, Guavas, Papayas and Mangoes. 
• It ranks 2nd in the production of Rice, Wheat and other vegetables & fruits.
• Geographical advantage – Diverse agro-climatic zones, soil types, and largest arable land in the world.
• Increase in Demand for processed food – that is convenient, hygienic and high quality, due to socio-economic transition i.e. rising disposable income, changing consumption and demographic patterns, increase in nuclear families, working women, media penetration etc.
• Rapid growth in Organised retail – Ensuring productivity gains across the supply chain through disintermediation and superior technology. Emergence of tier 1 & 2 cities and “shopping mall culture”.
• Exponential growth of Online food delivery industry – Estimated to grow at 30%, especially buoyed by COVID induced preference for ‘no-contact delivery’. For eg. Zomato, Swiggy, FoodPanda etc.
• Favourable Government Policies and incentives – To boost the “sunrise” food processing Industry. For eg. Relaxation of FDI limits, tax breaks, introduction of new schemes, reforms in agriculture sector etc.
• Rising demand of Indian products in international market – For eg. Companies like Haldiram’s & Bikarnervala have a presence in over 70 countries.
• Abundant agriculture produce - by setting up processing units closer to agriculture hubs, post-harvest losses can be minimized. 

Upstream and Downstrean Requirements of Food Processing Industry

• The upstream stage of the production process deals with procurement of raw materials. 
• This stage is not concerned with the processing of the product but simply with searching and extracting of the raw material.
• The downstream stage consists of processing the materials collected during the upstream stage into a finished product. 
• The downstream stage further includes the actual sale of that product to other businesses, governments or private individuals.

Reasons for Low Performance of Food Processing Industry

• Lack of cutting-edge infrastructure: Many operate in the small and medium enterprises (SMEs), which often lacks the resources needed to upgrade their facilities and machinery to the latest technology.
• Inefficient supply chains: Lack of adequate infrastructure leads to wastage. The NITI Aayog cited a study that estimated annual post-harvest losses close to Rs 90,000 crores.
• Lack of access to credit and financing: Traditional banks and financial institutions often have stringent lending criteria, making it difficult for SMEs to access funding.
• Informalisation: The sector is very unorganized and every unorganized sector comes with its own set of challenges like employment is subject to high degree of insecurity.
• Lack of organized retail – 90% of retail consists of “mom & pop” shops ????low quality products, lack of variety & choice, poor shopping experience, etc.
• Export problems – fragmented supplier base & non-uniform quality, high import duties on raw material, poor adherence to food safety laws, etc. leading to high cost & low competitiveness in global markets.
• Small size of food processing units – >40% of FP sector is unorganised ???? poor economies of scale, high production costs, difficulty in access to credit, inability to compete with MNCs???? Low profits ???? inability to spend on marketing, R&D, Technology, Quality improvement etc.
• Skills and technical know-how deficit - As per report of National Skill Development Corporation the industry faces skill gap of 10 million workers. 

Key Initiatives of Government for Food Processing Industry

• Pradhan Mantri Kisan Sampada Yojana (PMKSY): 
• Mega Food Parks Scheme:  modern food processing infrastructure for the processing units based on a cluster approach. 
• Integrated Cold Chain: Promotion of cold chain facilities without any break from the farm gate to the consumer
• Scheme for Creation of Infrastructure for Agro Processing Clusters:  Two basic components i.e., Basic Enabling Infrastructure (roads, water supply, power supply, drainage, ETP etc.) and Core Infrastructure/Common facilities.
• Production Linked Incentive Scheme for Food Processing Industry (PLISFPI): to support creation of global food manufacturing champions 
• Pradhan Mantri Formalisation of Micro food processing Enterprises (PMFME) Scheme: Basic Enabling Infrastructure (roads, water supply, power supply, drainage, ETP, etc.) and Core Infrastructure/Common Facilities.
• One District One Product- to leverage scale in input procurement, common services, and district-level product marketing.
• Inclusion of food & agro-based processing units and cold chain as agricultural activity under Priority Sector Lending (PSL)
• 100 percent Foreign Direct Investment (FDI) approval under automatic route has been permitted for the food processing sector.
• Marketing reforms - Operation Greens (‘Top to Total’), Developing & upgrading existing rural haats into Gramin Agricultural Markets (GrAMs), One District, One Product (ODOP), Agri Law Reforms, e-NAM, etc.
• Food Standards - rationalization of food laws & enactment of Food Safety & Standards Act, 2006.
• Investment facilitation - Nivesh Bandhu portal, developed by the MoFPI to assist investors.
• Credit & finance - Special ‘Food processing Fund’ in NABARD to make available affordable credit. 100% FDI under the automatic route is allowed in the sector and inclusion of food and agro-based processing units  as agricultural activity under Priority Sector Lending. 

Way Forward 

• Efficient infrastructure- efficient supply chain that, inter alia, include cold storages, refrigerated vans, better road facilities, and uninterrupted power supply is a prerequisite
• Boost export- in respect of production and quality of processed foods, consumer safety and public health.
• Regulation- business-friendly administration and customer-oriented promotional measures.
• Formalization of FPI- technology up-gradation and improvement in infrastructural facility. 

Food processing sector has been identified as one of the key and priority sector of the Government’s ambitious “Make in India” campaign. Special efforts are being undertaken to improve the competitiveness of the private and public sector units, so that they can integrate well with global value chain and global markets.