| The food processing industry, despite being a priority sector, has not flourished to its potential for various reasons. The most significant among them are the unfavourable legal regime governing food products and agricultural marketing, and the lack of vital infrastructure, notably cold chains. Any industry dealing basically with perishable products cannot survive, far less thrive, under such circumstances. |
| Besides, the want of the desired degree of interaction between the industry, government and institutions in the past also acted as a formidable deterrent for investment in this sector. Consequently, foreign direct investment (FDI) has not been forthcoming in the measure one would have expected, considering the opportunities this sector has to offer to investors. The cumulative FDI in the food processing industry between 1991, when the process of economic liberalisation began, and September 2006 is reckoned officially at around $1,212 million, constituting merely 3.12 per cent of the total FDI pouring into the country. This is just a fraction of the estimated investment of $28 billion needed for raising the level of processing of farm produce from the present around 2 per cent to the desired 8 to 10 per cent. |
| Fortunately, with the environment gradually turning favourable for the growth of this sector, the situation is changing for the better. The way several industrial houses have begun diversifying their business to include processed foods bears this out. New industries have also started to come up. |
| The rapid expansion of this sector is vital to avert the huge wastage of perishable food, presently assessed at a whopping Rs 7,000 crore annually, as also to ensure higher income for farmers. The growers do not generally get reasonable returns for their produce in the absence of facilities for storage, transportation and value-addition, especially in the case of products with limited shelf-lives. |
| Indeed, the scope for food processing is immense as India is among the largest producers of plants and animal-based foods. In fact, the country is the world's second largest producer of fruits (next to Brazil) and vegetables (next to China). |
| In the livestock sector, it is the sixth largest producer of poultry products and has the world's largest stock of cattle, buffaloes, sheep and goats. In milk production, the country ranks at number one and in marine output, at number seven in the world. Its output of inland fisheries, including export-oriented fisheries, is growing faster than the marine output, which tantamounts to the captive generation of raw material for processing units. |
| This apart, the country possesses a large wealth of spices and aromatic and medicinal produce, much of which currently goes without further processing and value-addition. Besides, a sizeable part of such produce is exported as it is, for upgradation into value-added products abroad. |
| What is all the more significant is that the anticipated growth in demand for processed food is likely to be a major growth driver for the food-based industry. At present, only about 30 million middle and upper middle class people are believed to consume, regularly or occasionally, processed foods. This number is projected to swell by over 200 million in a few years, thanks to rapid urbanisation and changing lifestyles in the wake of a rise in incomes and improved purchasing power. This is bound to generate a huge additional demand for processed and ready-to-consume foods. |
| There have been quite a few significant developments that bode well for the food processing industry. For one, the outmoded agricultural produce marketing laws of the states are now being amended to allow the much-needed backward and forward linkages between processors and growers. Besides, the era of a multiplicity of laws governing the food sector, one of the most significant irritants for prospective investors, is likely to finish once the new integrated food safety law already passed by Parliament becomes operational. |
| Food Processing Industries Minister Subodh Kant Sahai has recently announced that the Food Regulatory Authority would be in place by December-end as a single-window regulator for this sector. This would also mean riddance from the draconian Prevention of Food Adulteration Act. |
| This aside, some other measures, either already taken or on the anvil, also inspire confidence in the future growth of this sector. These include, among others, the setting up of special economic zones and agricultural export zones for food products, promotion of modern abattoirs, tax holidays for food industries, and incentives for investments in the all-important supportive infrastructure. |
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