INVEST INDIA : Opportunities in the World's Largest Democracy

Food & Agro Products

OVERVIEW

SIZE

India consumes about US$200 billion worth of food products p.a.; 53% of this is processed food – mostly primary processing
India has a huge output of agricultural produce, with the second largest arable land area in the world
- The largest producer of milk, pulses, sugarcane and tea in the world
- The second largest producer of wheat, rice, fruits and vegetables in the world
Primary food processing (packaged fruit and vegetables, milk, milled flour and rice, tea, spices, etc.) constitutes around 60% of processed foods
- Processing of perishables is only about 6% of the total output
- Only 2% of fruits and vegetables is processed compared to up to 80% in many developing countries

STRUCTURE

The Indian food processing industry has limited private sector participation and has few plants with scale economies
Some co-operatives, such as the Gujarat Co-operative Milk Marketing Federation in milk with its Amul brand of dairy products, have transformed certain sub-sectors.
Major international companies such as Nestle, Cargill, Kellogs, Unilever, Danone, General Mills, PepsiCo and Cadbury are already present in India

POLICY

100% FDI is permitted under the automatic route for the Agro-processing industry
The policy framework is being made more investment friendly with several steps taken and more underway, such as:
- De-licensing, establishment of food parks and exemption from Excise Duty
- Establishment of a regulatory authority and implementation of a unified Food Standards and Safety Law
- Contract farming is already permitted in 19 states/UTs, while other states/UTs are in different stages of implementation
- 12 states have modified the APMC Act that earlier restricted trade in agri-produce to select market yards. Most states are expected to modify the APMC Act over the next 2-3 years

OPPORTUNITY


Agro-based industries are growing rapidly in India	Food processing is set to grow at over 12% p.a.

OUTLOOK

The domestic processed-food market, at US$115 billion in FY 06, is expected to grow to US$310 billion by FY 15
India aims to increase its share of world trade in this sector from 1.7% currently (US$7.5 billion) to 3% by 2015 (US$20 billion)

POTENTIAL

Factors that are likely to fuel rapid growth in demand for processed foods in the domestic market are:
- Changing lifestyles and growth in disposable income
- Rising double-income families and proportion of women in the workforce
- Decreasing prices of processed foods, making them more affordable thereby accessing a much larger market
- Rapid growth in organised retail (> 20% p.a.) with a variety of retail formats being developed
Estimated investment opportunity of about US$24 billion in the next 8 years
Major investment opportunities lie in processing milk, sugar, fruit, vegetables, grain-based snacks and marine products
- An estimated 30% of new capacity could be for the export market

Targets for Processed Food (% of total production)

Source: Ministry of Food Processing - Vision Document

For additional information: Ministry of Consumer Affairs, Food and Public Distribution (http://fcamin.nic.in)