The Indian food industry is poised for rapid growth. It is the 2nd largest producer of food, second only to China. With 127 diverse agro-climatic zones and a share of 11.2% of the total arable land in the world, India ranks second in terms of availability of arable land. In addition, India has the 6th largest food and grocery market and 5th largest retail market in the world. The industrial zones in India have a food processing industry share of 32% of the country’s food market. The Ministry of food processing industries of India (MoFPI) is influential in the growth as it has provided many incentives such as quick approval of proposals for joint ventures (JV), foreign collaborations, industrial licenses, and 100 percent export oriented units.

Maharashtra, the richest state of India, is situated in the western region of the country a long coastline stretching nearly 720 km along the Arabian Sea. Maharashtra’s gross state domestic product (GSDP) accounted for 12.98% of India’s gross domestic product (GDP) in 2015-16, the highest among all states. 45% population of the state is urban. The state is home to the biggest Indian city of Mumbai and a sprawling industrial city of Pune. As such, this is the best time for setting up a food processing business, especially in the pune industrial area , if you are looking for an industrial land in Pune or nearby areas.

The Market

India is the largest producer of milk, bananas, mangoes, guavas, papaya, ginger, & okra with milk production in 2016 rising to 155 Million tonnes. It is the 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 in the world. India also accounts for 6.3% of global fish production. The Indian subcontinent has a geographical advantage from the viewpoint of trade as it is located in close connectivity with Europe, Middle East & Africa from the western coast, and Japan, Singapore, Thailand, Malaysia, Korea, Australia & New Zealand from the eastern coast.

Key drivers of growth in food processing

Change in demand with time

The modern society has become more aware of their health and wellbeing. Although the lifestyles have improved, it is at the expense of the hectic work schedule. This has led to a demand for ready-made and processed food across the world. India too is riding the wave of modernization with rising per capita income and around 60% young population (below 35 years of age). The demand for processed food in India is estimated to reach 9% by 2018.

Consumer spending on food

An average Indian spends around 30% of their total earnings on food and grocery, in contrast to 10% in the US and 23% in China.

The rise in export of processed food

With India’s proximity to global markets and growing integration with global economy, the export rate of processed food from India rose to a CAGR of 11.8% during 2011-16 reaching US$16.2 Billion.

Easy availability of workforce

It is a known fact that India has a relatively cheaper workforce as compared to the rest of the world, which can be effectively employed to set-up a low production base. Production costs in India are lower by about 40 percent in comparison to most developed and developing countries. You can find an industrial land for rent at a cheaper price even in the most developed industrial parks easily.

Government Incentives

The government of India has allocated nearly 1 Billion dollars under the 12th five-year plan (2012-17) to implement various schemes for the promotion and development of the food processing sector. The plans include:

Improved Foreign Direct Investment (FDI) policy: The government has now permitted 100 percent FDI for trading through e-commerce and manufacturing of food products through automatic route.

Additional Fiscal benefits

Small to medium scale enterprises are eligible for several fiscal incentives from the government for setting up food processing facilities such as tax rebates, capital subsidies, and reduced custom and excise duties. The government has also been making steady progress with the launch of a new scheme called SAMPADA or Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters by 2019-20 which involves creation and expansion of food processing and preservation capacities, new agro-processing clusters, and establishing backward and forward linkages