Managerial Economics

Role and Prospects of Food

Processing Industries in Indian
Economy

Submitted to: Prof. REENU KALANI Submitted by: ARUSH SAXENA (21BSP0755)

DEVIKA TANDON (21BSP0794)

GAURAV ARORA (21BSP0819)

HIMALI ANEJA (21BSP0837)

HIMANSHU DWIVEDI (21BSP0840)

HIMANSHU RAWAT (21BSP0842)

ISHANK DHAMIJA (21BSP0844)

KAUSTUM VERMA (21BSP0861)

 Table of Contents

[Link] Topics Page No.

1. Introduction 3

2. Objectives 4

3. Current Scenario 4

4. Government Policies 5

5. Issues of Sector 6-7

6. Analysis 8-10

7. Conclusion 11

Introduction

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The Indian food processing sector, which accounts for 32 percent of the country's overall food
market and is rated fifth in terms of production, consumption, export, and predicted growth, is
one of the country's largest industries. It contributes about 8.80 and 8.39 percent of GVA in
manufacturing and agriculture, respectively, as well as 13% of India's exports and 6% of overall
industrial investment. In India, the food processing and retail business accounts for over 65
percent of the total retail market.

Attracts Investments: FPIs in India attract millions of dollars in FDI and local investment from
the world's largest investors.

Job Creation: In India, the food processing industry employs roughly 11.5 percent of the entire
workforce (19 lakh persons) through registered firms or organisations. Agriculture, operating
machinery, transportation, labour, and other activities all require manpower.

Improved Food Nutrition: Some foods, such as packaged drinks, milk, and grains, are fortified
with key nutrients such as iron, minerals, and vitamins. This aids in the reduction of issues such
as malnutrition in India by increasing the nutritious value of food that is available to all.

Increase Trade: India exports several processed food goods that are in high demand in other
countries. Local businesses and farmers will benefit from increased trade and foreign exchange
opportunities. This industry accounts for nearly a quarter of overall goods and commodity
exports.

The food processing industry accounts for up to 10% of the country's gross domestic product.
Food Processing Industries in the Indian Economy that it is emerging as an essential part for the
growth of the country by generating the GDP and providing employment to the people of the
nation.

Share of food processing industries in India – 32%

Total employment share – 11.6%

Share in Exports – 10.4%

Objectives

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Objectives for this report are:

● Taking up different companies under the food processing industry and discussing the
current scenario for the same.
● Major Government Policies for these Industries which are implemented, and which are to
be executed.
● Analysis through Economic Principles and its applications.
● To assess the major problems faced by FPI.
● suggests some remedial measures for improving their performance.

Current Scenario of Food Processing industry

Britannia

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Britannia Industries on feb 5 2021 reported a 22 per cent jump in consolidated net profit to ₹453
crore for the quarter ending December 31, 2020. The net profit in the year-ago period was ₹370
crore.

On a standalone basis, it reported a net profit of ₹428 crore for Q3 FY21.

Government Policies

● Pradhan Mantri Kisan Sampada Yojana (PMKSY): In August 2017, the CCEA gave
its gesture for the PMKSY. It is an umbrella plan that consolidates different progressing
plans like Mega Food Parks, Integrated Cold Chain, Value Addition Infrastructure, Food
Safety, and Quality Assurance Infrastructure, Infrastructure for Agro-processing Clusters,
Creation of Backward and Forward Linkages and Creation and Expansion of Food
Processing and Preservation Capacities.

● Production Linked Incentive Scheme for Food Processing Industry (PLISFPI): The
primary objective of the scheme is to support the creation of global food manufacturing
champions commensurate with India’s natural resource endowment and support Indian
brands of food products in the international markets
1. To create global food manufacturing champions
2. To strengthen the Indian brand of food products for global visibility and wider
acceptance in the international markets
3. To Increase the employment opportunities of off-farm jobs
4. For ensuring remunerative prices of farm produce and higher income to farmers

● Pradhan Mantri Formalization of Micro food processing Enterprises (PMFME):

Ministry of Food Processing Industry (MoFPI) has launched the Pradhan Mantri
Formalization of Micro food processing Enterprises (PMFME) scheme under the
Aatmanirbhar Bharat Abhiyan with the aim to enhance the competitiveness of existing
individual micro-enterprises in the unorganized segment of the food processing industry
and promote formalization of the sector. The scheme to be implemented over a period of
five years from 2020-21 to 2024-25 with a total outlay of Rupees 10,000 crore.

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Issues of the sector

● Availability of raw materials:

Most oilseed producers are marginal farmers who lack access to proper resources such as
fertilizers and manure. This makes oil production difficult.

Due to the seasonal availability of various crops, the processing industry faces a shortage
of supply. This can affect the profitability of their operations.

Winter crops like oats and barley are also sown around November. These seasonal crops
are dependent on the weather and their natural forces.

● Storage Constraints:

Many of these issues can be solved by following the proper storage guidelines for raw
materials. However, the lack of proper infrastructure for storing these commodities can
lead to a reduction in the quality and availability of the finished product.

There are two ways for proper storage – warehousing and cold storage.

The layout and utilization of the warehouse are two main factors that affect the efficiency
of the warehouse. Space constraints and over-reliance on commodities are some of the
factors that cause warehouse problems.

Cold storage for frozen food is an integral part of the food industry. Due to the increasing
popularity of various food products, it has become a specialized sub-industry.

The lack of availability of these types of facilities pose a major constraint for the food
processing sector.

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 ● Transportation Issues:

Perishable food items should be shipped in containers that are designed to prevent
damage and breakage. Also, timely delivery is very important to avoid lost or damaged
goods.

● Technological equipment:

Conventional inspection methods are commonly used in India's food processing industry
to check the quality of products. However, this process involves manual inspection of
finished products. It is very labor-intensive and prone to human error.

● High competition:

With many players competing for a share of the pie, the food processing industry is
highly competitive. This is the reason why it can be challenging for new entrants to enter
the industry

The sector will continue to witness increases in the number of food processing units.
Some key drivers include the entry of international companies, availability of cheap work
force, rising demand of Indian products in international markets, and demand for
processed food.

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Analysis

The food industry in India includes many activities like agriculture, farming, crops and fishing.
Department of Food Processing Industry, Government of India divides food processing into the
following:

• Preparation of milk, fruit and vegetable consumption

• Grain processing

• Processing meat and poultry

• Fishermen

• Consumer food includes mixed foods, beverages and mixed beverages.

The food processing industry is one among the mills and starch products followed by vegetable
and animal fats and oils. There is also a significant supply of fruits and vegetables and animal
feed, indicating that agriculture and agriculture still form the mainstay of the food industry.

(Source: Ministry of Food Processing Industries, Annual Report, 2014-15)

India's food processing industry ranks fifth in terms of production, consumption, exports and
expected growth, accounting for about 32% of the country's food market. (CCI, 2015) The food
processing industry plays a crucial role within the country's GDP. The table shows that the food
processing sector is growing faster than the agricultural sector. The food processing sector is the
link between agriculture and manufacturing, the table confirms that the food processing industry
has a significant share in the GDP of the agricultural and manufacturing sector.

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Table: Contribution of Food Processing Industry to GDP @ 2004-05 Prices ([Link]
Crore)

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S. Description 2008-09 2009-10 2010-11 2011-12 2012-13
No

GDP at 41,58,676 45,16,071 49,18,533 52,47,530 54,82,111

Factor Cost,
of which

1. GDP- 5,88,757 5,92,110 6,47,305 6,82,016 6,90,646

Agriculture*

2. GDP- 6,56,302 7,30,435 7,95,152 8,54,098 8,63,876

Manufacturing

3. GDP-FPI 60,378 58,752 67,508 82,063 84,522

Growth (%) AAGR**

4. GDP at Factor 6.7 8.6 8.9 6.7 4.5 7.1

Cost

5. GDP- -0.1 0.6 9.3 5.4 1.3 3.3

Agriculture*

6. GDP- 4.3 11.3 8.9 7.4 1.1 6.6

Manufacturing

7. GDP-FPI 5.3 -2.7 14.9 21.6 3.0 8.4

Share of FPI in GDP (%) Average

8. GDP FPI as a 10.3 9.9 10.4 12.0 12.2 11.0

share of GDP

in
Agriculture*

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 9. GDP FPI as a 9.2 8.0 8.5 9.6 9.8 9.0
share of GDP

in
Manufacturing

Source: MOFPI Annual Report, 2014-15: *Excludes Forestry and Logging: **Five Year
Average Annual Growth Rate

In the 2011-12 financial year FPI showed a record growth of 21.6%, although in the last financial
year there was a significant decline in FPI growth rate, however higher than the manufacturing
and agricultural sector. Looking at this growth rate trend FPI has given its due importance to the
new Make in India program.

The size of India's food processing industry is estimated at 2675 billion rupees, growing at a rate
of 10%. Growth in food production, which is expected to double by 2025, is expected to benefit
the economy with the full development of the sector.

(Source: Annual Report 2014-15 Ministry of Food Processing Industries)

India's food industry is an important part of the country's economy. There is a huge range of
product improvement, introducing new food products to suit the changing consumer preferences
of the Indian consumer and future exports. The food processing industry is one of the largest
industries in India, ranked fifth in terms of production, consumption, exports and expected
growth. The CII estimates that by the year 2020 the food processing industry has the potential to
attract US $ 33 billion in investment and generate day-to-day employment of 9 million people.

(Source: MOFPI, Annual Report, 2014-15)

It can be concluded that India's food industry is still in its infancy, with great potential for growth
and development. The focus should be on increasing the amount of food consumed by a
complete agricultural product.

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Conclusion

India is the moment biggest maker and customer of nourishment, with farming segment playing
a critical part within the financial advancement of the nation. The nourishment preparing
segment is the interfacing interface between the horticulture and fabricating division becomes of
crucial significance within the by and large financial advancement of the nation. From the over
consider it is obvious that the nourishment preparing industry is huge in measure positioning
fifth in industries having a share of around 9 per cent and 11 per cent within the share of
fabricating and farming, individually (ASSOCHAM, 2015), still with as it were 2.2% of the
entire nourishment create being prepared appears the innovative and infrastructural downsides.

With the start of Make in India arrangement it appears that these bottlenecks will be tended to by
the increased investment form both household and remote players. The arrangement of the
government to permit 100 per cent FDI within the prepared nourishment division may be an
invited step, but at the same time the government should moreover secure the intrigued of the
residential players. Separated from this there are numerous bottlenecks that require critical
consideration, like supply chain administration, gifted man control, and approach ought to be
made to connect the agriculturists with the corporate players within the shape of contract
cultivating, but the intrigued of the rancher ought to be taken care of.

The challenges for the nourishment preparing division are diverse and demanding and must be
tended to on a few fronts to determine greatest showcase benefits. A combination of wild and
controllable components has influenced the development of the segment and has acted as an
obstacle in accomplishing its potential. With nourishment handling segment being included
among the 25 chosen divisions in Make in India, the division appears sufficient opportunity and
potential for development. A well created nourishment preparing industry is anticipated to
extend cultivate door costs, decrease wastages, guarantee esteem expansion, advance edit
expansion, produce work openings as well as trade earning.

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