Food Processing Sector In India

PWOnlyIAS

May 27, 2025

Food Processing Sector In India

India, despite being one of the world’s largest producers of milk, fruits, and spices, processes only a small fraction of its agricultural output. With rising urban demand, high post-harvest losses, and untapped export potential, food processing presents a transformative opportunity to link agriculture with industry and global markets.

What Is Food Processing?

  • Definition: Food processing refers to converting raw agricultural produce into usable or edible forms such as turning wheat into flour, mangoes into pulp, or milk into paneer.
  • Key Function: It acts as a crucial bridge between farmers and markets, ensuring that agricultural output is efficiently utilized.
  • India’s Paradox: Although India ranks among the top global producers of agricultural commodities, only about 10% of its produce is processed which is significantly lower compared to 65% in the United States.

Current Status of the Sector

  • Growth Performance: Food processing sector recorded an average annual growth rate of 7.26% between FY14 and FY22.
  • Economic Contribution: It contributed around 1.8% to India’s Gross Value Added (GVA) in 2021–22.
  • Employment Generator: The sector provides employment to approximately 20.05 lakh workers, making up 12.2% of the total manufacturing workforce.
  • Infrastructure Update: Out of the 41 Mega Food Parks approved by the government, 24 are currently functional.
  • Export Relevance: Processed food accounted for 25.6% of India’s agricultural exports in 2022–23, indicating its growing importance in trade.

Why Food Processing Matters

  • Reduces Wastage: It helps reduce post-harvest losses by enabling proper storage, cold chains, and packaging.
  • Farmer Benefit: It creates additional income opportunities for farmers and generates employment in rural areas.
  • Meets Urban Demand: It caters to the growing urban demand for ready-to-cook and processed foods, such as dairy, pulses, spices, and fruits.
  • Global Scope: It opens the door for India to build global food brands, much like Nestlé or Danone, tapping into international markets.
  • Market Stability: It provides price stability for farmers and reduces agricultural volatility by adding value to raw produce.

Major Government Schemes Supporting Food Processing

  • PM Kisan SAMPADA Yojana (Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters): This scheme supports the development of mega food parks, cold chains, and infrastructure for value addition.
  • Operation Greens: Initially launched for Tomato, Onion, and Potato (TOP), the scheme has now been extended to cover 22 perishable commodities to ensure price stability and better processing.
  • PM Formalisation of Micro Food Processing Enterprises (PM-FME): This scheme helps micro food units through credit support, skill training, and branding assistance.
  • One District One Product (ODOP): The initiative objective is  to  convert each District of the country into a manufacturing and Export Hub by identifying products with export potential in the District.
  • PLI Scheme for Food Processing: Similar to the PLI for electronics, this scheme provides financial incentives to large food processing units to encourage investment and scale.

Other Supporting Measures

  • FDI Policy: The government permits 100% Foreign Direct Investment (FDI) in food processing and cold chain infrastructure under the automatic route.
  • Transport Initiatives: Initiatives like Krishi Udan and Krishi Rail help in the speedy transport of perishable agricultural commodities across regions.
  • Export Support: Export promotion agencies such as APEDA, MPEDA, and EIC help ensure compliance with international quality standards and facilitate global market access.
  • Agri Export Policy 2018: The Agri Export Policy 2018 offers institutional support to boost the export of processed agricultural products.

Key Challenges in the Sector

  • Large number of food processing units remain unregistered: This makes them ineligible for government schemes and formal credit.
  • Inadequate cold chain infrastructure, poor logistics, and limited storage facilities hamper the sector’s efficiency.
  • Small players often struggle with inconsistent supply of raw materials and high procurement costs.
  • Access to finance remains a major bottleneck, with many small enterprises facing difficulty in securing working capital.
  • Testing and quality control infrastructure is outdated, affecting the credibility of Indian processed foods—as seen in recent reports of substandard paneer quality in Indian markets.

Structural Bottlenecks

  • Operating in Silos: Research & development bodies, exporters, and processors often operate in isolation, which restricts innovation and market responsiveness.
  • Labour laws remain rigid and licensing processes are often time-consuming and bureaucratic.
  • There is a lack of dedicated skilling institutions for food technology jobs, leading to a shortage of trained professionals.
  • Disintegrated: The sector lacks an integrated farm-to-factory ecosystem that could streamline production, processing, packaging, and marketing.

Solutions and the Way Forward

  • Simplification: The government should simplify labour laws, packaging norms, and food safety standards to encourage ease of doing business.
  • Financial support mechanisms: Such as tax holidays, marketing support for MSMEs, and soft credit access must be enhanced.
  • Investment: In the modern testing labs, warehouses, and cold chains can bridge the current infrastructure gap.
  • Focus shift: It should be shifted from subsistence-level operations to a market-led approach that drives innovation and scale.
  • Promoting direct linkages: Between farmers and processors through Farmer Producer Organisations (FPOs) can ensure steady supply chains and fair prices.

Conclusion

Food processing offers a strategic opportunity to transform India’s agriculture from a production-driven model to a value-added, market-oriented one. With rising domestic demand and export potential, it holds the key to rural transformation, job creation, and economic growth. A comprehensive, integrated policy approach focusing on infrastructure, ease of doing business, and skill development which can help India emerge as a global hub for processed foods.

Mains Practice

Q. Examine the effectiveness of India’s policy framework in promoting value addition and reducing wastage in the food supply chain. What reforms are necessary to make the sector globally competitive?”(15 Marks, 250 Words)

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UDAAN PRELIMS WALLAH
Comprehensive coverage with a concise format
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Designed as per recent trends of Prelims questions
हिंदी में भी उपलब्ध

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