Agriculture and Food processing industries

India’s food ecosystem offers huge opportunities for investments with stimulating growth in the food retail sector, favorable economic policies and attractive fiscal incentives. The Food & Grocery market in India is the sixth largest in the world. Food & Grocery retail market in India further constitutes almost 65% of the total retail market in India.

The Government of India through the Ministry of Food Processing Industries (MoFPI) is also taking all necessary steps to boost investments in the food processing industry. The government has sanctioned 41 food parks funded under the Mega Food Parks Scheme of which 38 have final approval; 22 are operational as of 1 August 2021.

By 2025, India’s food processing sector is expected to be worth over half a trillion dollars.

By 2030, Indian annual household consumption to treble, making India 5th largest consumer.

Food processing is defined as transforming agricultural products into food that are in consumable form or transforming one food item into another by adding value to it.

Based on physical properties of the final product, the Ministry of Food Processing Industries categorizes food processing under two sub-categories, viz.,

  • manufactured processes, whereby the original physical properties of the product undergo a change through a process [involving employees, power, machines or money] and the transformed product is edible and has a commercial value and
  • other value added processes where the product does not undergo any manufacturing process, but gains significant value addition like increased shelf life, shelled and ready for consumption.
    • The importance of processed food items in the consumer basket has increased globally over time. With higher income, urbanization, demographic shifts, improved transportation and changed consumer perceptions regarding quality and safety, food consumption patterns have changed over the years.
    • The FPI accounts for a prominent place among sectors in terms of share in employment in the manufacturing sector and because of its labour intensive nature it has higher multiplier effect on the overall economy.
    • Globally, India ranks first in the export of processed and preserved fish and fish products, grain mill products and fourth in the export of sugar. However, even in these products, only about one fourth of the product is exported reflecting high proportion of consumption in the domestic economy.
  • Institutions:
    • Ministry of Food Processing Industries (MOFPI):
      The Ministry is nodal agency for FPI and is concerned with formulation and implementation of the policies & plan.
    • Agricultural and Processed Food Products Export Development Authority (APEDA) under the Ministry of Commerce and Industry:
      Focuses on Development of industries for export by way of providing financial assistance or for undertaking surveys.
    • Department of Animal Husbandry, Dairying & Fisheries:
      The Department is responsible for matters relating to livestock production, preservation, and protection from disease and improvement of stocks and dairy development.
    • National Horticultural Board (NHB) under – Ministry of Agriculture
      It aims for the Development of hi-tech commercial horticulture in identified belts.
  • Credit
    Ensuring availability of adequate credit to the food processing industries is given utmost importance by the Reserve Bank of India. Accordingly, the Reserve Bank has accorded priority sector status to food processing industry. Loans to food and agro-based processing units and cold chain have been classified under agricultural activities for priority sector lending.
  • Government Initiatives:

Recognizing the role that FPI can play in promoting employment and income in the rural sector, the Government of India has identified it as a priority sector under the ‘Make in India’ Programme.

FPI offers an opportunity to reduce dependence on agriculture in the rural areas as the main employment generating sector. Various initiatives have been taken by the Government to promote this sector considering the challenges faced by the sector.

The Ministry of Food Processing Industries has identified six key challenges faced by the food processing industry:

    • gaps in supply chain infrastructure (i.e., lack of primary processing, storage and distribution facilities);
    • inadequate link between production and processing;
    • seasonality of operations and low capacity utilizations;
    • institutional gaps in supply chain, dependence on APMC markets.
    • inadequate focus on quality and safety standards.
    • lack of product development and innovation.
  • Accordingly, the focus has been to smoothen the supply chain by creating infrastructure, promoting exports, improving quality standards, expanding supply of formal credit, particularly to small and medium enterprises, and broadening skilled labour pool in the economy.
  • The Indian Council for Fertilizer and Nutrient Research (ICFNR) will adopt international best practices for research in fertilizer sector, which will enable farmers to get good quality fertilizers at affordable rates and thereby achieve food security for the common man.
  • 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 Centers (FPTC)
    • Training at recognized institutions at State/National level.
  • Mega Food Park:
    • Development of hi-tech commercial horticulture in identified belts.
    • The Ministry has approved 39 Mega Food Park Projects (Final Approval–37 projects and in-principle Approval–2 projects). 7 of these Mega Food Parks have female promotors.
    • Ministry of Food Processing Industries is implementing the Mega Food Park Scheme
    • Mega Food Parks create modern infrastructure facilities for food processing along the value chain from farm to market with strong forward and backward linkages through a cluster-based approach.
    • The Scheme is based on the “Cluster” approach.
    • A Mega food Park typically consists of supply chain infrastructure including collection centers (cc), primary processing centers (ppc) central processing centers (cpc), cold chain and around 25-30 fully developed plots for entrepreneurs to set up food processing units.
    • Presently, 22 Mega Food Parks are operational, which is in line with the ‘Make in India’ and ‘Atma Nirbhar Bharat’ vision of the Government of India.
  • Contribution of Food processing sector to GDP:

Food Processing sector has been growing at an Average Annual Growth Rate (AAGR) of around 10.00% as compared to around 3.11% in Agriculture at 2011-12 Prices. Food Processing Sector has also emerged as an important segment of the Indian economy in terms of its contribution to GDP, employment and investment.

The major challenges facing the sector are illustrated below:

Agriculture and Food processing industries


  • A multi-sectoral approach must be adopted in the establishment of any food fortification programme, encompassing participation of relevant governmental organizations, food industry, trade organizations, consumers, academic and research facilities, marketing specialists and any involved international organizations and agencies.
  • International guidelines to advise food aid donors on acceptable and safe fortification practices should be developed; guidelines should not be so restrictive as to impede the provision of high quality food aid commodities nor hinder communication on fortification between relevant parties.
  • Surveys are required in a country to establish dietary patterns and habits which are critical inputs in determining appropriate vehicles for use in food fortification.
  • Good Transportation facilities, storage and warehouse conditions need to be renovated.