Food processing and related industries in India



  • Food processing is the transformation of agricultural products into food, or of one form of food into other forms.
  • Food processing includes many forms of processing foods, from grinding grain to make raw flour to home cooking to complex industrial methods used to make convenience foods.
  • Primary food processing turns agricultural products, such as raw wheat kernels or livestock, into something that can eventually be eaten
    • This category includes ingredients that are produced by ancient processes such as drying, threshing, winnowing and milling grain, shelling nuts, and butchering animals for meat
  • Secondary food processing is the everyday process of creating food from ingredients that are ready to use
    • Baking bread, Fermenting fish and making wine, beer, and other alcoholic products are traditional forms of secondary food processing
  • Tertiary food processing is the commercial production of what is commonly called processed food
    • These are ready-to-eat or heat-and-serve foods, such as TV dinners and re-heated airline meals


  • The need for Food processing in the present World
    • These include toxin removal, preservation, easing marketing and distribution tasks, and increasing food consistency
    • In addition, it increases yearly availability of many foods, enables transportation of delicate perishable foods across long distances and makes many kinds of foods safe to eat by de-activating spoilage and pathogenic micro-organisms
    • The extremely varied modern diet is only truly possible, on a wide scale because of food processing. Transportation of more exotic foods, as well as the elimination of much hard labour gives the modern eater easy access to a wide variety of food unimaginable to their ancestors
    • Mass production of food is much cheaper overall than individual production of meals from raw ingredients
    • Processed food freed people from the large amount of time involved in preparing and cooking “natural” unprocessed foods. The increase in free time allows people much more choice in life style than previously allowed


  • The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year.
    • In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry



  • Market Size
    • The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales.
    • The Indian food processing industry accounts for 32% of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth.
    • It contributes around 8.80 and 8.39% of Gross Value Added (GVA) in Manufacturing and Agriculture respectively, 13% of India’s exports and 6% of total industrial investment.
    • The Indian gourmet food market is currently valued at US$ 1.3 billion and is growing at a Compound Annual Growth Rate (CAGR) of 20 per cent


  • The food processing Industry is significant in India, for the following reasons:
    • Enhance farmer’s income by better utilization and value addition of agricultural produce
    • Minimize wastage at all stages in the food processing chain by the development of infrastructure for storage, transportation and processing of agro-food produce
    • Introduce of modern technology into the food processing industries from both domestic and external sources;
    • Encouraging R&D in food processing for product and process development and improved packaging
    • Provide policy support, and support for creation of Infrastructure, capacity expansion/ Upgradation and other supportive measures form the growth of this sectors
    • Promote export of processed food products
    • Generate Employment : It provides direct and indirect employment opportunities, because it acts as a bridge between Agriculture and Manufacturing
    • Reduce malnutrition: Processed foods when fortified with vitamins and minerals can reduce the nutritional gap in the population
    • Crop-diversification: Food processing will require different types of inputs thus creating an incentive for the farmer to grow and diversify crops


The factors that influence the location of ‘Food Processing’ Industries are:


    • This is vital to management analysis of the Agri-food industry, because it provides the market information to assess an agri-food plant’s viability
    • Since agri-food plants enter existing markets, it is essential that firms know the market conditions
    • Thus, firms analyze the market structure, consumer behaviour and the basis of competition within where the plant is located.
    • Proximity to markets, distribution centres and availability/cost of truck and rail services seem to be more critical to the location of small plants than to the location of larger ones


    • The basic infra structural aspects such as water, electricity, existing food processing facilities etc. In location of a food plant becomes important
    • The firms also assess the transport infrastructure, including roads, availability and cost of truck and rail services and storage terminals
    • In addition, the firm should also consider the social infrastructure including housing, schools and health and recreational facilities because these components may affect the plant’s ability to recruit the necessary personnel

Agricultural raw material

    • For a food processing Industry, a well-organized procurement system is necessary to supply enough raw material with acceptable quality at the appropriate time and at a reasonable cost
    • Example: Availability of raw agricultural supply is most critical for milk and seafood processing plants


    • Since these industries seldom directly employ many workers, they usually are not sensitive to the supply of unskilled labour.
    • In general, skilled labour and managerial talent is more difficult to find, a constraint especially acute if the plant is in a rural area

Environmental factors

    • In this category, existence to handle water and solid waste was the most frequently  cited factor as being very important for the location decisions
    • This is due to the environmental regulations and permits in place



  • The Combination of above elements have resulted in more dominant localisation of Agro-based Industries in North-West India because of following factors:
    • Climatic factors
      • The climate in North-western India is suitable for preserving food based products for a longer duration due to its cooler climates.
      • Other parts of country including peninsular and eastern India are more humid and is not suitable for longevity
    • Economic factors
      • Availability of raw product
        • For an industry to succeed, the raw materials should be easily available at a lower cost. The North-western part is suitable in this regard due to its primarily farm based economy
      • Readily available market
        • Large markets are available nearby for selling the manufactured products in this region due to higher population concentration.
        • This reduces the cost of transportation as well as create for profits for the owners in a short duration
      • Cheap labour
        • Cheaper labour force reduces operating costs of such industries quite drastically. As there is easy availability of such human resource, this region has concentration of agro industries.
    • Geographic factors
      • Connectivity
        • The region is marked with better connectivity to all major places nearby. The transportation can be conducted through both road and rail and hence is easy for marketing products as well as movement of raw materials


  • When the manufacturing production process is pictured like a river, Upstream refers to the material inputs needed for production, while downstream is the opposite end, where products get produced and distributed
  • Upstream Production Elements
    • Using the metaphor of a river, upstream production refers to all the activities needed to gather the materials required to create a product.
    • The upstream stage of the production process involves searching for and extracting raw materials.
    • The upstream part of the production process does not do anything with the material itself, such as processing the material. This part of the process simply finds and extracts the raw material
  • Downstream Production Elements
    • These process involves processing the materials collected during the upstream stage into a finished product
    • The downstream process often includes elements such as distribution, wholesaling and retailing, all of which are involved in ensuring timely delivery to clients
    • Customer service is also part of the downstream process because it is the final bridge between the product and the end user
  • In relevance to Food Processing Industries
    • The basic requirements of Upstream in Food processing industry:
      • Accessibility to raw materials is the first upstream requirement for any industry.
      • The food processing industry also requires modern extraction techniques
      • To make the food processing industry sustainable, it is important to ensure good linkages with farmers.
      • The storage facilities for raw materials like Grains, Meat, Fish etc. are important part of food processing upstream requirements.
      • Food processing industry also requires good quality testing facilities.
      • Transport facilities are essential part of upstream requirements of food processing industry in India.
      • The food industry also requires a sizable amount of work force.
    • The basic requirements of Downstream in Food processing industry are:
      • The downstream stage in the production process involves processing of the materials collected during the upstream stage into a finished product.
      • This stage also includes the actual sale of product to customers like businesses, governments or individuals.
      • Since, this processing has direct contact with customers through the finished product, it requires a large work force


  • Supply chain management (SCM) is the management of the flow of goods. It includes the movement and storage of raw materials, inventory and finished goods from point of origin to point of consumption.


  • In the food industry, the efficiency of the supply chain is vital to profitability and safety.
    • When one link in the food supply chain, such as a farmer or packaging plant, isn’t operating at peak performance, every other link in the chain is negatively affected
  • An estimate of how Supply Chain Management works, in food processing Industry could be as follows:
    • Raw materials like grains, raw meat, fish etc. are collected at different locations by different sources.
    • These sources may do preliminary processing of these to make components of a food product, before passing over them to the main manufacturer through many middlemen
    • The manufacturer does the final processing of these components to make the food product
    • Now the finished product has to be delivered to the consumer. Here also there will be a number of middlemen and stages
    • Further, the manufacturer normally hands over the food product to a wholesale dealer
    • The wholesaler passes the product to a retailer from where the consumer buys the processed food item for his personal use
  • Thus, Supply Chain Management is the management of the upstream and downstream, with value-addition at each stage:

Suppliers→ company→ retailer→ final consumers


  • The Challenges faced by the Food Processing Industries in general include:
    • There exists gaps in supply chain infrastructure which means inadequate primary processing, storage and distribution facilities
    • Insufficient connection between production and processing
    • Seasonality of operations and low capacity utilisations
    • Institutional gaps in the supply chain, for instance, there is dependence on APMC markets
    • Lack of focus on quality and safety standards, and
    • Not having enough of product development and innovation
  • Other constraints faced by the Indian food processing sector are as follows:



Some of the major initiatives taken by the Government of India to improve the food processing sector in India are as follows:

  1. National Mission on food processing
  • Ministry of Food Processing Industries (MOFPI) launched a Centrally Sponsored Scheme(CSS) – National Mission- on Food Processing (NMFP) in 2012 for implementation through States/UTs
  • The NMFP envisages the establishment of a National Mission as well as corresponding Missions in the State and District level.
  • The basic objective of NMFP is the decentralization of implementation of food processing related schemes for ensuring substantial participation of State Governments/UTs.
  • The mission is expected to improve the Ministry’s outreach significantly in terms of planning, supervision, monitoring of various schemes apart from playing a more meaningful role in policy formation
  1. The Government of India aims to boost growth in the food processing sector by leveraging reforms such as 100% Foreign direct investment (FDI) in marketing of food products and various incentives at central and state government level along with a strong focus on supply chain infrastructure
  2. In Union Budget 2017-18, the Government of India has set up a dairy processing infra fund worth Rs 8,000 crore (US$ 1.2 billion).
  3. The Government of India has relaxed foreign direct investment (FDI) norms for the sector, allowing up to 100 per cent FDI in food product e-commerce through automatic route.
  4. The Food Safety and Standards Authority of India (FSSAI) plans to invest around Rs 482 crore (US$ 72.3 million) to strengthen the food testing infrastructure in India, by upgrading 59 existing food testing laboratories and setting up 62 new mobile testing labs across the country.
  5. The Indian Council for Fertilizer and Nutrient Research (ICFNR) will adopt international best practices for research in fertiliser sector, which will enable farmers to get good quality fertilisers at affordable rates and thereby achieve food security for the common man
  6. The Ministry of Food Processing Industries announced a scheme for Human Resource Development (HRD) in the food processing sector. The HRD scheme is being implemented through State Governments under the National Mission on Food Processing. The scheme has the following four components:
    • Creation of infrastructure facilities for degree/diploma courses in food processing sector
    • Entrepreneurship Development Programme (EDP)
    • Food Processing Training Centres (FPTC)
    • Training at recognised institutions at State/National level
  7. PM Kisan Sampada Yojana
    • This scheme is aimed at promoting entrepreneurs in setting up food processing units, closer to agricultural areas.
    • Development of cold storage facilities, specialised packaging units, warehousing facilities, etc and other preservation facilities are eligible for grants under the scheme.
    • The scheme provides a grant in aid of 35% of the eligible project cost in most states and 50% of the project cost in North-east and Himalayan states.
    • The development of agricultural facilities under the scheme intends the benefits investors, entrepreneurs, farmers, farmer organisations, and agriculture cooperatives.
  8. Creation of Mega Food Parks
    • A mega food park is an integrated facility that provides for storage, processing. Additionally, value additions to a large number of players in the food processing industry.
    • Under the Mega Food Park Scheme, the Government of India provides financial assistance up to Rs. 50.00 Crore per Mega Food Park project.
    • Most food parks have the following services – tetra-packaging, food testing laboratories, drying chambers for spices and agricultural produce, cold storage, warehousing, packaging and printing facilities
    • Thus, the food park provides financial incentives to investors. It also provides convenience to processors and companies utilising its facilities, in addition to generating employment and better services
    • The Mega Food Park Scheme is based on the “Cluster” approach and envisages a well-defined Agri/ horticultural-processing zone containing state-of-the-art processing facilities with support infrastructure and well-established supply chain

  1. Operation Greens
    • In the budget 2018-19, the government announced the Operations Greens scheme to promote integrated value chain development for crops. They are tomato, potato, onion.
    • Post-harvest processing facilities will be eligible for a grant in aid of up to 50% of the project cost. It also subjects to the maximum limit of 50 crores
  2. PM Formalization of Micro Food processing Enterprises
    • This scheme aims at helping small micro-units engaged in the food processing industry.
    • Many businesses at the grass-root level such as chilli drying, spice packaging, pickle, and papad making engage directly with farmers.
    • Recognising the role of such micro-units, a 35% subsidy can be availed by such units on their project cost, up to a maximum of ₹10 lacs
  3. Production-linked incentive (PLI) scheme for the food processing sector
      • The Government announced this scheme this year with an outlay of 10,900 crore Rupees
      • This will help create 2.5 lakh jobs by 2026-27, boost exports and facilitate the expansion of food processing capacity to generate processed food output worth Rs 33,494 crore.
      • The effort is to take the country’s food processing to a next level amid the rising global demand for Indian ready to eat foods, organic products, processed fruits and vegetables, marine products
      • The objectives of the scheme are to support food manufacturing entities with stipulated minimum sales and that are willing to make minimum stipulated investment for expansion of processing capacity and branding abroad to incentivise the emergence of strong Indian brands


    • The shortcomings associated with Government schemes are:
      • Lack of adequate infrastructure: Though the government has initiated various measures for the development of the food processing industry related infrastructure, they are not sufficient to meet the growing needs of the sector
      • Credit facilities: Despite the creation of the Food Processing Fund over a couple of years ago, the sector has been facing a resource crunch. Though the foreign investment has picked up now, it is still doesn’t match the requirements of the industry
      • Lack of comprehensive policy: The food processing industry is a sunrise sector. Lack of a comprehensive policy addressing the various needs of the food processing industry is obstructing its growth


  • Processing of food can decrease its nutritional density. The amount of nutrients lost depends on the food and processing method.
  • For example, heat destroys vitamin C. Therefore, canned fruits possess less vitamin C than their fresh alternatives
  • Using some food additives represents another safety concern.
    • For example using sugar as an additive endangers diabetics.
    • Increased consumption of Sodium results in increased risk for heart disease.
  • Food processing is typically a mechanical process that utilizes extrusion, large mixing, grinding, chopping and emulsifying equipment in the production process.
    • These processes introduce a number of contamination risks. Such contaminants are left over material from a previous operation, animal or human bodily fluids, and microorganisms, non-metallic and metallic fragments
    • Further processing of these contaminants will result in downstream equipment failure and the risk of ingestion by the consumer.
    • Example: A mixing bowl or grinder is used over time, metal parts in contact with food will tend to fail and fracture


Road Ahead

  • Considering the Policy shortcomings of the Government, The MoFPI should announce the National Food Processing Policy at the earliest to fill the policy vacuum
  • Given the economic potential of the sector and its capability to address food security, the following measures could be taken:
    • The government needs to regulate its trade liberalisation policy, so that it leaves enough space for its domestic food industry to grow
    • Efforts need to be made to ensure that the scheme benefits reach the intended beneficiaries – small & marginal farmers; and also to increase the collaboration of Industries with farmers
    • Also, the Government needs to ensure fairness by producers so that farmers get a better realization of the money earned across the value chain. A policy intervention or regulation in this regard is the need of the hour.
    • Going forward, the adoption of food safety and quality assurance mechanisms such as Total Quality Management (TQM) including ISO 9000, ISO 22000, Hazard Analysis and Critical Control Points (HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices (GHP) by the food processing industry offers several benefits
  • This would enable adherence to stringent quality and hygiene norms and thereby protect consumer health, prepare the industry to face global competition, enhance product acceptance by overseas buyers and keep the industry technologically abreast of international best practices