Food Processing in India

By BYJU'S Exam Prep

Updated on: September 13th, 2023

Food Processing is an industrial process in which raw materials of agriculture, animal husbandry, dairy, poultry, meat or fishing is transformed into value-added food products. The final processed food is fit for consumption and has greater commercial value. The processing is done through a variety of preservative techniques and food additives which add to the flavour, quality and shelf life of the raw food. Both the age-old traditional methods, as well as the modern scientific processes, are utilised today by food processing industry in the world.

Food processing is not a modern phenomenon but dates back to prehistoric times when early humans began to roast, smoke, bake and steam their raw meal. The Indian tradition of pickling with the use of salt, spices and oil is an example of food processing.


Food Processing Industry (FPI)

With the rapid growth of the industrial economy, a shift is also being seen in the consumption pattern of the people worldwide, from cereals to more varied and nutritious diet of fruits, vegetables, milk, fish, meat and poultry products. This has resulted in the development of the Food Processing Industry which is valued at over $2 trillion globally and is rapidly growing.

Upstream and Downstream requirements in FPIs

Upstream Requirement: It is the requirement of the producer or traders such as raw material, capital and other factors of production.

Downstream Requirement: It involves processing, quality check and sale of processed food to other businesses or retail customers.

Why Food Processing Industry?

The Food Processing Industry all over the world provides vital linkages between the two important pillars of the economy- agriculture and Industry. Thus, it has a direct impact on the lives of the people as well as the environment. The significance of FPI can be understood through the following points:

  • Reducing food wastage: United Nations estimates that more than one-third of food is wasted globally. By diverting extra harvest to FPI, this wastage can be curbed.
  • Reduce malnutrition: Fortification of processed foods with vitamins and minerals raises the nutrition levels of the population.
  • Preserve food quality and increase shelf life: By preventing the spoilage due to fungus, bacteria and pests.
  • Crop Diversification: With a growing market, farmers will be incentivised to grow a variety of crops, practice mixed farming etc
  • Employment generation: FPI provides direct and indirect employment opportunities as it is labour as well as technology-intensive sector.
  • Increasing farmer income: As the demand for processed food increases, so will the demand for raw farm materials, and thus the income of the farmers will increase.
  • Curbs Food Inflation: Since the shelf life is increased, the food is available throughout the year and keep a check on food inflation.
  • Increase exports: High-quality food products are valued all over the world, thus bringing in much-needed forex. For eg: India’s Basmati Rice.

FPI- Indian Scenario

With a domestic consumer market of over 130 million, India is the hotbed for the food processing sector. Indian Food Processing Industry is the world’s 2nd largest producer of food only behind China.

  • India is the world’s second-largest producer of fruits and vegetables just behind China. However, only around 2% of the produce is processed.
  • Marine product processing is around 8%.
  • Dairy and poultry sectors see around 35% and 6% food processing respectively.
  • India has the highest population of Livestock in the world but only about 1% of the processed meat products.
  • India is the hub of Primary food processing which has lower value-addition in comparison to secondary food processing.
  • India’s Agri-Exports are dominated by raw materials and not by high valued processed food products.
  • More than 70% of the FPI is spread in the unorganised sector in the form of the cottage and small industries.

This has resulted in the low value and low-income trap for the agricultural sector which prevents the farmer to improve his living standards.

Scope of FPIs in India

Increasing urbanization, improved standards of living and changing consumption pattern in India along with the development of Food Processing Industries worldwide has created tremendous scope for the food processing and marketing sectors in India. India’s position as a major food producer, Resource advantage of the subcontinent in terms of climate, fertile soil, coasts, livestock, etc, and Government initiatives to boost food processing sector will unlock the huge potential for the Food Processing Industries in India.

With increasing malnutrition and still prevalent hunger issues, the need for Food Security is one of the big reasons for the promotion of FPIs in India.

The Food Processing Sector is also hailed as the future driver of the Indian economy by some experts. With an adequate policy framework, and technological and financial investment India will be set to overtake China soon enough.

Issues in FPIs in India

The biggest concern in the Indian economy at present is the lack of formalisation and high presence of unorganised sectors. The Food Processing sector is no exception to this problem. Since the FPI accounts for about 32% of the total food market of India, it becomes a crucial sector for the socio-economic development of a big chunk of the population. Food Processing sector faces several obstacles in its growth which can be understood under three sections.

  1. Farm-level challenges:
  • Poor agricultural yield.
  • Lack of investment from farmer such as better quality seeds, fertilizers, etc.
  • Unscientific and old farming methods.
  • Frequent crop failures due to a number of reasons.
  • Lack of storage and transportation facilities.
  1. Processing Industry challenges:
  • Financial Investment.
  • The high cost of business.
  • Inadequate and low-quality raw materials.
  • Technological backwardness.
  • High advertisement cost.
  • Lack of cold storage facilities.
  • Inefficiency in production leading to wastage.
  • Bureaucratic level corruption.
  • Lack of R&D and skilled workers in the sector.
  1. Consumer satisfaction challenges:
  • The high cost of processed food
  • Lack of variety and choices due to little competition in the market.
  • Poor quality products.
  • Absence of Supermarket culture in Tier 2 and Tier 3 towns.

These factors have led to slow growth in the Food Processing sector Industry in India. India is a highly price-sensitive market which severely limits the businesses penetration into the lower segment of the consumer market. This requires consistent investment to create and sustain a market for any product. A lack of such investment along with the above-mentioned challenges results in the stagnant or very slow growth of the FPIs. The processed food developed by the unorganized sector is often of lower standards and hence is unfit for exports. This is the reason along with tariff and non-tariff barriers that the Indian Food Processing sector has little contribution to the world food GDP.

Widespread use of pesticides and fertilizers increase risking the quality of processed food. In addition, the lack of fortification leads to the high calorific and low nutritional content in the processed food item leading to diseases such as obesity. The regulatory standards and implementation are not strictly enforced so as to control the quality in the processing sector.

Government Initiatives to Boost FPI Sector

Acknowledging the importance of Food Processing sector, the government is encouraging the FPIs in mission mode. It has allowed 100% FDI in this sector, developing Agri export Zones, and launched a National Mission on Agriculture.

The major approaches and schemes by the government to boost the Food Processing Sector are:

  1. Vision 2015 for Food Processing
  • It is a study sponsored by the Ministry of Food Processing Industries
  • It recommends enhancing the level of processing of perishables from 6% to 20%, enhancing value addition from 20% to 35% and increasing India’s share in global food trade from 1.5% to 3% by the year 2015.
  1. National Mission on Food Processing
  • Launched in 2012 as a Central Sponsored Scheme.
  • The mission envisages the establishment of a National Mission as well as corresponding Missions in the State and District level.
  • The basic objective of the mission is the decentralization of implementation of food processing related schemes for ensuring substantial participation of State Governments/UTs.
  1. Mega Food Parks
  • Based on the “Cluster” approach and envisage a well-defined agri/ horticultural-processing zone that would contain state-of-the-art processing facilities and well-established supply chain.
  • It aims to link agriculture to market by bringing together farmers, processors and retailers. This would ensure maximum value addition, minimum wastages, increase farmers’ income and create employment opportunities particularly in the rural sector.
  1. Cold Chain Infra
  • Scheme for Integrated Cold Chain, Value Addition and Preservation Infrastructure aims to encourage setting up of cold chain facilities without break from the farm gate to the consumer.
  1. PMKSY (Pradhan Mantri Kisan SAMPADA Yojana)
  • SAMPADA: Scheme for Agro Marine Processing and Development of Agro-Processing Clusters.
  • Umbrella scheme to supplement agriculture, modernize food processing and decrease agricultural waste.
  • It aims to promote entrepreneurship and increase employment.

The government has taken a slew of measures such as certificate courses related to food processing for skilling workers and encouraging business with 100% FDI in the sector. The Food Safety and Standards Authority of India (FSSAI) has planned to upgrade 59 food testing factories and set up 62 mobile food testing labs to strengthen the food testing infrastructure in India. On similar lines, the Indian Council for Fertilizer and Nutrient Research (ICFNR) plans to improve research facilities of the fertilizer sector to better the agricultural produce. Agricultural and Processed Food Products Export Development Authority (APEDA) focuses on the export of scheduled products and strives to improve India’s mark on global food trade.

Way Forward

The policymakers in the government need to be streamlined and coherent. The food value chain is divided among various ministries and departments. Therefore there is a need for comprehensive and holistic policy-making which take into account the entire food chain process. This will ensure productivity, availability, access, quality, affordability and safety of food.

Move from Green Revolution to Evergreen revolution which is an ecologically and economically sustainable way of farming.

The issue of food security for a billion people along with good economics both for the citizens as well as the country requires coherent policymaking with all stakeholders. The stakeholders, in this case, our government, food processing industry players, scholars and farmers.

Food Processing sector has immense potential and benefits for India. Along with the ancillary industries, it has the capacity to provide long term employment and improve the living standards of millions of people. It will help to reduce malnutrition. However, since a huge chunk is deployed in the unorganised sector, the government policies must cater to the smaller players and not push them out of the competition by solely focussing on the larger private businesses. An appropriate balance needs to be struck here.

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