Beginning this year, the Indian government is trying to create a unique brand which will be called “Make in India” which can be applied to 25 sectors such as space, tourism and hospitality, wellness, and many more. Food processing is also one the area of focus. India is ideal for a food processing investment as it has 127 agro-climatic zones and 195 million ha of gross cropped area. It also is the number one producer of some of the exotic food commodities such as mangoes, goat milk, chickpeas, and papayas; it has high cropping intensity; it has a low cost of skilled labor; and it has a great geographic location for trade across the world. By promoting food processing in India, it would be able to trade in a variety of products that are not currently possible due to spoilage and infrastructure constraints.The government is already promoting 42 Mega Food Parks set up through a Public Private Partnership with an investment of US$ 1.46 billion. A Mega Food Park is a processing unit with a minimum area of 50 acres that works in a cluster-based approach on a hub and spokes model with primary processing and storage near the farm in the form of Primary Processing Centers (PPCs) with the Collection Centers (CCs) located in production areas. The parks have around 1,200 developed plots with infrastructure enabled that entrepreneurs can lease for setting up of food processing units. The first mega food park was inaugurated in Jharkhand on Feb 15, 2016.
With a current population of 1.22 billion and 604 million Indians under the age of 24 in 2011, the rising youth population is likely to increase India’s overall food consumption. The consumer preferences are also changing with increasing incomes of the middle class and a rise in the urban population with current projections of one third of population living in the urban areas. Due to the economic and cultural transformation, this population will soon demanding easy to eat and easy to cook foods as well as foods that meet their increased awareness and concern for health.
Other advantages of development in the food processing sector will better marketing with promotion of contract farming, reducing of food waste and loss at each stage, work with farmer producer organizations with the involvement of smallholders, availability in food for prolonged periods of time (and out of peak season), generation of jobs in the service sector, and increasingly organized formal markets for commodities such as milk which is desperately needed. The processing of foods will accompany grading and quality controls which will increase the reliability of Indian foods in international markets and boost exports. Last but not the least, it mayl help stabilize food prices and tackle inflation to a certain extent.
There are a number of challenges that this area will face including the following: infrastructure such as cold chains, intensive road systems, modernized management capabilities, regular electricity supply, and organized supply chains and markets. Current consumer preferences are also more inclined towards the use of fresh foods instead of processed foods. Thus, without evidence of the acceptance of processed foods within India so these endeavorscould be risky.
There is also a lack of involvement of smallholders unless it is through FPOs (Farmer Producer Organizations) so there should be more promotions and organization of FPOs. Thus, India’s food industry is on the path of growth but still there are impediments that need to addressed before it becomes a reality. However, there is much potential in this sector that can be explored.
By: Jaspreet Aulakh, IFPRI