Agriculture and Food Processing Sector : Growth Prospects

Topics: Food, Food processing, Food industry Pages: 14 (3090 words) Published: February 7, 2011

and Food processing Sector :
Growth prospects

While the Indian economy’s growth in the recent years, has been propelled by the growth of the service and manufacturing sectors, agriculture still plays a significant role by contributing 17% of the GDP and providing employment to 60% of the population. With the increasing focus and investments from the large national and international food and retail companies, the sector is bound to grow much faster in the coming years. As this sector has a strong social implication, it has also been accorded a high priority status by the Government, which is facilitating its growth by charting favourable initiatives at different policy levels. The changing consumption dynamics coupled with the growth of modern retail, the processed food industryoffers tremendous opportunities for all stakeholders in the areas of production, processing, marketing,supply chain, infrastructure development, technology up gradation and education.


The size of the Indian food industry is estimated at about US$ 236 bn. It is growing at about 5% year on year (YoY) and will reach US$ 314 bn by 2015. The processed food segment’s contribution is currently at about 43% i.e. US$ 120 bn, this is expected to grow much faster, and contribute about 50% to the total food market by 2015. The proportion andvalue of each sector in the Indian food processing industry is shown in Exhibit 1.

The processed food industry is highly fragmented and is dominated by the unorganized sector. The organized food processing segment contributes about 30% of the market; however with the entry of large players both domestic and international, the market is expected to growing at 25% per annum and will account for 40% of the market by the next 5 years. At the moment the Indian food market is still dominated by the staples like wheat, rice and pulses followed by fruits & vegetables and dairy products with minimal value addition before being consumed by the masses. The production of each sector amount and it’s standing in the world is summarised in Exhibit-2.

Though India has a strong agricultural production base, the wastage in the sector is very high. The lack of storage & processing facilities leads to significant wastage, especially in categories like fruit and vegetables with an estimated wastage of about 35% (estimated value of US$ 8 bn annually). The level of food processing varies considerably across sub-sectors in the country. In the case of perishables like fruit and vegetables, only 2% of production is processed, it is more than 90% of non perishable products such as cereals and pulses. However, the processing in staples involves very little value addition, and is mostly confined to grading, cleaning, milling, and packing; with negligible use of additives, preservatives, and flavours etc.

Sector Wise Production Level

The diverse agro-climatic conditions in India, offer huge potential for a wide variety of crops including cereals, pulses, fruits and vegetables all round the year. Also, India is a leading producer of crops like Basmati rice, Alphonso mango, cumin, cardamom, tea, coriander, cashew and a range of vegetables and fruits, which have a global demand. In addition, India has the advantage of the low cost of production, which provides an unbeatable competitive edge in the global market place.

Food Processing Industry

Domestic industry

* One of the strong holds of the Indian Economy
* Accounts for 14.6 % of India’s GDP in 2009-10, and 10.23 % of the total exports. * Provides employment to 55% of the work force.
* Total Geographical area of India is 328.7 Mn hectares of which 140.3 Mn hectares is net sown area, while 193.7 Mn hectares is the gross cropped area. * An amount of US$ 19 billion has been allocated for the Ministry of Agriculture – 11th plan allocation. * Displayed a growth rate of 3.8% during first...
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