Food processing industry in India has gained prominence in the recent years and is poised to attain greater heights. Availability of raw materials, changing lifestyles, coupled with appropriate fiscal policies has given a considerable push to the industry’s growth. This sector serves as a vital link between the agriculture and industrial segments of the economy, which needs to be strengthened in the future in order prevent the wastage of valuable resources. Adequate focus on this sector could greatly alleviate our concerns on food security in the coming years.
Foreign direct investment (FDI) is an international financial flow with the intention of controlling or participating in the management of an enterprise in a foreign country. FDI plays an important role in India’s growth dynamics. There are several examples of the benefits of FDI in India. FDI in the food retail sector can expand markets by reducing transaction and transformation costs of business through adoption of advanced supply chain and benefit consumers and suppliers i.e. the farmers. India being the second most populous country in the world, has immense scope for retail expansion as along with time, urbanization and consumerism has also been increasing.
Foreign funding has already been approved in India’s food processing industry since 1991. Changing lifestyles, breakdown of the joint-family system, increasing number of working wives and Western influence in the urban areas are fuelling a demand for packaged foods. India already has all the requirements for a head-start in the food-processing industry. Basic materials such as food grains, pulses, vegetables, meat and fish can be sourced locally or easily imported if local availability is inadequate. Foreign investors can own 100 per cent equity in plants they set up, or take on a local partner. Many Indian firms are eagerly seeking foreign partners for joint-ventures to avail of their technological advantage.
Likely Changes in the Food Industry
After the foreign players come into the picture, there are likely to be quite a few changes, for the better, in the long-run:
Technology Transfers: When the foreign players start opening shop in India, tech transfers are very likely to happen, as new technologies brought by them will be transferred to Indian partners. This will help in the rapid growth of the sector.
Harmonization: Along with tech transfers, harmonization of the SOPs of the indigenous companies with those of the global standards, as followed by the foreign players will take place. This will streamline the entire food processing industry.
Mergers and Acquisitions: Mergers and acquisitions will go hand-in-hand with tech transfer. Many of the indigenous companies will merge with the foreign players. Some will be acquired also. This has already started happening. For example, Foodpanda has acquired food ordering portal Just Eat India in an all-stock deal as it plans to strengthen its presence in India. Papa John’s India Inc. plans to merge with the Pizza Corner brand to become the third-largest pizza chain in India.
Public-Private-Partnerships: More Public-Private-Partnerships are very likely to take place. The government will partner with the private players in many aspects of the food processing industry. The Government of India has already invested USD 21.76 million in a Mega International Food Park in Punjab, which has already started operations. The government has also approved the setting up of five more Mega Food Parks in the states of Bihar, Maharashtra, Himachal Pradesh and Chhattisgarh. Ministry of Food Processing Industries has a scheme for human resource development (HRD) in the food processing sector.
Expansion of other segments: Other segments, such as the food packaging industry, storage industry, and transportation industry amongst others, will see a rapid growth and expansion, which will go hand-in-hand with the expansion of the food processing industry.
Employment generation: Employment generation will be a major plus point of FDI. More foreign investments will mean setting up of more food processing units, which will generate more employment opportunities.
Training & Development: The growth in the food processing sector will drive the need for the setting up of institutes such as CFTRI & NEFTM with focus on food safety & quality. The government has already initiated a number of schemes that will run parallel with other programs in the food processing industry. For example, the HRD scheme under the National Mission on Food Processing aims to create infrastructure facilities for degree/diploma courses in the food processing sector, promote entrepreneurship, and develop food processing training centers at National and State recognized institutions.
Therefore, the food processing sector, which is often referred to as the sunshine sector is ready to scale new heights. Prime Minister Modi’s “Make in India” campaign has already attracted foreign investments from multinational giants like Mars (USA), Kraft (USA), Nestle (Switzerland), McCain (Canada), Danone (France), Ferrero (Italy), Kagome (Japan) to name just a few in the long list of investors.
The emerging trend holds a huge promise to the food processing industry and the near future will see several global tie ups in the sector.