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Indian Food Processing Sector Attracts Increasing FDI
Mar 16, 2010

Backed by continued growth and vast unexploited potential, India’s thriving food processing sector attracts more FDI.

According to Ashok Sinha, Secretary, Food Processing Industries, the food-processing sector in India attracted the all-time high Foreign Direct Investment (FDI) of over Rs 9,000 Crore during April-November 2009, as per the news published by Business Standard on February 19, 2010.

Besides Pepsico, the investments have emerged from the companies engaged in dairy and meat processing, confectioneries, and a great deal from other areas of the concerned sector.

Currently, the Indian food processing industry is in its nascent stage; however, sensing enormous unexploited potential, foreign players are increasingly showing their inclination to be a part of this rapidly rising sector.

On the back of several queries from overseas firms showing interests to either enter into technological ventures or set up their bases in the country, the FDI is projected to shoot up significantly in the upcoming months, thereby indicating a bright future for this sector.

As per the announcements made by the Indian Finance Minister in the budget for FY 2010-11, the Indian food processing industry is set to spur. The budget has granted more schemes and allocation for the agriculture sector. It has granted tax incentives for cold storage, agricultural machinery and refrigeration facilities for the storage of agriculture and food produce.

The budget also commits continued support for establishing food parks in India, which, in turn, will increase the FDI inflow into the food-processing sector.

According to a market research report titled “Indian Food and Drinks Market: Emerging Opportunities” from RNCOS, it has been projected that backed by increased FDI and the contribution of supporting factors like urbanization, organized food retail, food habits and changing lifestyles, food processing and agri-business sector in India will grow at an estimated 9-12%, of which, the share of fruit and vegetable processing is anticipated to shoot up to 10% by 2010 and to 25% in the next 15 years (by 2025). It is noteworthy that in 2008, food and vegetable processing accounted for a mere 4% share.

According to a Research Analyst at RNCOS, “Regardless of the high potential and continued growth, there are a few challenges for the industry to deal with. Being relatively new and unorganized, the industry has various constraints like poor infrastructure in the context of warehousing, unsatisfactory quality control, cold storage and testing infrastructure. To attract more FDI, it’s a must to overcome these constraints.”

Related Market Research Reports:
Indian Wine Industry Forecast to 2012
US Fast Food Market Outlook 2010
Indian Non-Alcoholic Drinks Forecast to 2012