FACILITATING FOREIGN DIRECT INVESTMENTS IN INDIAN BUSINESS AND INDUSTRY
FACILITATING FOREIGN DIRECT INVESTMENTS IN INDIAN BUSINESS AND INDUSTRY
The food processing industry is one of the largest in terms of production, consumption, export and growth prospects. Users can get detailed information on the food industry, food productions, food producers and opportunities in food processing sector in the country. It offers huge opportunities for investments with stimulating growth in the food retail sector, favorable economic policies and attractive fiscal incentives. The Food & Grocery market in India is the sixth largest in the world. Food & Grocery retail market in India further constitutes almost 65% of the total retail market in India.
The Government of India through the Ministry of Food Processing Industries (MoFPI) is also taking all necessary steps to boost investments in the food processing industry. The government has sanctioned 39 Mega Food Parks (MFPs) to be set up in the country under the Mega Food Park Scheme. Currently, 18 Mega Food Parks have become functional.
· By 2020, Indian Food and Retail market is projected to touch $828.92 bn
· By 2020, the Indian Dairy industry is expected to double to $140 bn
· By 2024, the Food Processing industry will potentially attract $33 bn investments and generate employment for 9 million people
· By 2030, Indian annual household consumption to treble, making India 5th largest consumer
100% FDI is permitted under the automatic route in Food processing industries.
100% FDI is allowed through government approval route for trading, including through e-commerce in respect of food products manufactured or produced in India.
The Processed food market is expected to grow to $ 543 bn by 2020 from $ 322 bn in 2016, at a CAGR of 14.6%.
Food processing has an important role to play in linking Indian farmers to consumers in the domestic and international markets. The Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments across the value chain. The industry engages approximately 1.85 mn people in around 39,748 registered units with fixed capital of $ 32.75 bn and aggregate output of around $ 158.69 bn. Major industries constituting the Food processing industry are grains, sugar, edible oils, beverages and dairy products.
The key sub-segments of the Food Processing industry in India are: Dairy, Fruits & Vegetables, Poultry & Meat processing, Fisheries, Food retail etc.
· 311.71 mn tonnes of horticulture crop production in 2017-18
· Milk production of 176.3 mn tonnes during 2017-18 with per capita availability of milk at a level of 375 grams per day in 2017-18
· Egg production of around 95.2 bn during 2017-18
· Total fish production was 12.6 mn tonnes during 2017-18
· Food Retail market is majorly dominated by Food Grocery (growing at CAGR 25%) and Food Services (growing at CAGR 15%) segments.
The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year. In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry.
Accounting for about 32 per cent of the country’s total food market, The Government of India has been instrumental in the growth and development of the food processing industry. The government through the Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments in the business. It has approved proposals for joint ventures (JV), foreign collaborations, industrial licenses, and 100 per cent export oriented units.
The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales. The Indian food processing industry accounts for 32 per cent of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. It contributes around 8.80 and 8.39 per cent of Gross Value Added (GVA) in Manufacturing and Agriculture respectively, 13 per cent of India’s exports and six per cent of total industrial investment. The Indian gourmet food market is currently valued at US$ 1.3 billion and is growing at a Compound Annual Growth Rate (CAGR) of 20 per cent. India's organic food market is expected to increase by three times by 2020#.
The online food ordering business in India is in its nascent stage, but witnessing exponential growth. With online food delivery players like FoodPanda, Zomato, TinyOwl and Swiggy building scale through partnerships, the organised food business has a huge potential and a promising future. The online food delivery industry grew at 150 per cent year-on-year with an estimated Gross Merchandise Value (GMV) of US$ 300 million in 2016.
According to the data provided by the Department of Industrial Policies and Promotion (DIPP), the food processing sector in India has received around US$ 7.54 billion worth of Foreign Direct Investment (FDI) during the period April 2000-March 2017. The Confederation of Indian Industry (CII) estimates that the food processing sectors have the potential to attract as much as US$ 33 billion of investment over the next 10 years and also to generate employment of nine million person-days.
Some of the major investments in this sector in the recent past are:
Some of the major initiatives taken by the Government of India to improve the food processing sector in India are as follows:
· Fruits and vegetables: preserved, candied, glazed and crystallized fruits and vegetables, juices, jams, jellies, purees, soups, powders, dehydrated vegetables, flakes, shreds and ready-to-eat curries.
· Food preservation by fermentation: wine, beer, vinegar, yeast preparation, alcoholic beverages. Beverages: fruit-based, cereal-based.
· Dairy: liquid milk, curd, flavored yogurt, processed cheese, cottage cheese, Swiss cheese, blue cheese, ice cream, milk-based sweets.
· Food additives and nutraceuticals.
· Confectionery and bakery: cookies and crackers, biscuits, bread, cakes and frozen dough.
· Meat and poultry: eggs, egg powder, cut meats, sausages and other value-added products. Fish, seafood and fish processing – processing and freezing units.
· Grain processing – oil milling sector, rice, pulse milling and flour milling sectors.
· Food preservation and packaging: metal cans, aseptic packs.
· Food processing equipment: canning, dairy and food processing, specialty processing, packaging, frozen food/refrigeration and thermo-processing.
· Consumer food: packaged food, aerated soft drinks and packaged drinking water. Spice pastes.
· Supply chain infrastructure – this niche has investment potential in food processing infrastructure, the government’s focus is on supply chain related infrastructures like cold storage, abattoirs and food parks.
· The establishment of food parks – a unique opportunity for entrepreneurs, including foreign investors to enter in the Food Processing industry in India.
· Kraft (USA)
· Mars (USA)
· Nestle (Switzerland)
· McCain (Canada)
· Danone (France)
· Ferrero (Italy)
· Del Monte (USA)
· Kagome (Japan)
· Kelloggs (USA)
· Pepsi (USA)
· Unilever (United Kingdom)
· Perfetti (Italy)
· Cargill (USA)
· Coca Cola (USA)
· Hershey (USA)
· Metro Cash & Carry (Germany)
· Walmart (US)
· Yakult (Japan)
· Amazon (USA)
India ranks second in terms of availability of arable land with 127 diverse agro-climatic zones, having a share of 11.2% of the total arable land in the world. In addition, the resource-rich country has the sixth largest food and grocery market and fifth largest retail market globally. Thus, India can provide a perfect blend of traditional and hygienic food, processed and packaged according to modern technology.
· The Food processing industry in India is indigenous because simple home-based techniques such as fermentation have resulted in the creation of worldwide acknowledgment of Indian pickles, papads, chutneys and murabba.
· The Gross Cropped Area accounting for around 60.3% of the total geographical area stands at 198.4 mn ha, as per the land use statistics (2014-15). In a similar period, the net sown period is 140.1 mn ha, with a cropping intensity of 141.6%.
· The total area sown under Rabi crops in 2017-18 stands at 63.23 mn ha. The total area sown under Kharif crops in 2017-18 stands at 21.08 mn ha, whereas, the area under wheat and rice stands at 30.59 and 43.20 mn ha.
· Benefiting from such a geographical advantage, India is the largest producer of milk, bananas, mangoes, guavas, papaya, ginger, okra, second largest producer of wheat, rice, fruits, vegetables, tea, sugarcane and cashew nut and the third largest producer of cereals, coconut, lettuce, chicory, nutmeg, mace, cardamom and pepper globally.
· India is also globally acknowledged as the leading producer of agriculturally allied products. India is the world's biggest milk producer. Milk production in India in 2017-18 stood at 176.35 mn tonnes.
· India makes for around 6.3% of the global fish production with a total fish production of 12.60 mn metric tonnes in 2017-18. More than 50 different types of fish and shellfish products are being exported to 75 countries around the world. Fish and fish products have presently emerged as the largest group in agricultural exports from India.
· The Horticulture sector has recorded a production of 306.82 mn tonnes in 2017-18, which is 2% higher than 2016-17.
· India has a locational advantage from the viewpoint of trade, as it has close connectivity with Europe, Middle East & Africa from the western coast, and Japan, Singapore, Thailand, Malaysia, Korea, Australia and New Zealand.
· World Food India, a mega food event that took place in November 2017, brought together 75,000 business visitors, from 61 countries, 75 International & National policymakers and Heads of State, 60 Global CEOs and 100 Indian CEOs; resulting in 5,000 B2B meetings over a span of three days. It helped India showcase itself as a preferred investment destination, with MoU’s worth $13.56 Bn signed by domestic & foreign investors. At present, Global industry players such as GEA Group, Tetra Laval, Buhlar, Alfa Laval, Heat and Control and HRS process are reaping the benefits.
· Nivesh Bandhu, an investor-friendly portal launched recently brings together Central and State Government policies and incentives provided for the food processing sector. It is a one-stop platform for all stakeholders of the industry, including farmers, processors, traders, and logistics operators. To further help an investor make strategic decision, the portal also includes a Food Map that can help investors take decision relating to the project location.
· An Investor tracking and facilitation desk has also been set up with a dual objective to identify new potential investors and help the Ministry to organize trade shows both on domestic as well as the international front. Such an initiative will help India to meet its investment needs.
· Private Sector participation has been on a continuous rise in many segments of the value chain. There exist huge opportunities for investments in the fields of contract farming, raw material sourcing and creation of agri linkages. Many international companies have gained a major foothold in contract farming initiatives.
· Under the scheme of Mega Food Parks, Government has sanctioned 42 parks, and out of these 17 have been made operational so far. Additionally, under the scheme of Integrated Cold Chain and Value Addition Infrastructure, the Ministry is presently assisting 228 such projects , and in 2017, 16 projects got operationalized, creating an additional capacity of 0.24 MMT of cold storage, 210.75 metric tonnes per hour of individual Quick Freezing (IQF), 3.45 mn litres per day of milk of processing/ storage and 472 reefer vans during 2014 - 2017.
· Food Safety & Standards Authority of India (FSSAI), the apex regulatory body has taken wide steps aiming to simplify product approval along with the creation of a single-interface portal, “The Food Regulatory Portal” for effective and transparent implementation of the food safety laws in the country.
· Product-specific developments are also being undertaken, for example, setting up of a Common Food Processing Incubation Centre for Shallots in Perambalur.
· Under the scheme of Modernization of Abattoirs, one project at Panaji (Goa) has been operationalized.
· During the year 2016, 10 Food Testing Labs were completed.
· Sector-specific Skill Development Initiatives are also being taken up, with National Institute of Food Technology, Entrepreneurship and Management (NIFTEM) and Indian Institute of Food Processing Technology (IIFPT) being recognized as Centres of Excellence.
· With such major developments, the market for plant and machinery in the Food Processing industry in the year 2024-25 is poised to stand at $51.41 Bn. High growth food segments within the Food & Beverage Industry are Breakfast Cereals, Savory Snacks, Ingredients such as seasonings and dressings and pet food.
· Apart from growing population and burgeoning purchasing power, rising urbanization, rising retail trade due to initiatives such as Digital India, together with the presence of global players of the industry can be considered as the major growth drivers for the segment. India has a population base of 1.3 bn offering a large demand-driven market, with the retail sector expected to treble by 2020. Hence, the total consumption of the food and beverage segment domestically is expected to reach $1.142 Tn by 2025.