'A very progressive and efficient move'
Ashok Prasad, March 27, 2016
Indian food industry is poised for huge growth and contributes to the world’s food trade every year. In India, the food sector, over the years, has emerged as a highly growing and profit making sector, due to its immense potential for value addition, particularly within the industry.
The food processing industry (FPI) in India accounts for about 32% of the country’s total food market, and is one of the largest industries in India. It is ranked fifth in terms of production, consumption, export and expected growth.
The total food production in India is estimated to be doubled in the next 10 years, for which the Government of India has been instrumental in the growth and development of the food processing industry.
FDI to play catalyst
The 100% Foreign Direct Investment (FDI) in food processing and production, announced in Budget 2016-17 will play a catalytic role in the industry of agriculture and food processing. Such a move will contribute to ‘Make in India’ program and is a much needed policy, which will enable us to realize a dream of consuming and utilizing the produce that we have been growing in our fields. With this new policy frame work of 100% FDI, it will open our agriculture sector not only for receiving equity but the critical component of food processing, preservation and marketing.
India is an agrarian country and the food processing sector contributes 26% to agriculture GDP. Therefore, allowing 100% FDI into marketing of food products made in India is a welcome measure as it will modernize Indian food supply chain and will lead to the development of cold storages and warehouses. This move will benefit farmers and give an impetus to the food processing industry. The training and development will take place as growth in FPIs will drive the need of setting more universities related to food processing, food quality and safety standards thus, help in our food security and reduce food inflation as well. This will help in imparting skills and encouraging entrepreneurship. It will create huge employment opportunity as more investment means setting up of more FPIs thus creating employment opportunities especially for rural youth and decrease disguised employment in agriculture.
Public-private partnerships in the industry will take place thereby leading to the creation of food processing infrastructure such as food parks, packaging centers other segments will also see rapid expansion such as food packaging industries, transportation industry etc. This will lead to development of contract farming, land leasing and thus addressing issue of small land holdings and pave way for agriculture modernisation.
Huge retail stores can be harmful
Advent of huge retail stores which offer processed food products can prove to be harmful for the interest of small scale grocery stores can lead to legal tussle for the government because the move is being perceived as backdoor entry for multi-brand retailing. Overall, the new move is well intended and the successful outcomes can set as criteria for allowing 100% FDI in all segments of food processing sector.
Currently, India allows up to 51% of foreign direct investment but it comes with several additions such as $100 million in upfront investment and 30% mandatory local sourcing. The new proposal will encourage foreign retailers such as Walmart, IKEA and Marks & Spencer to setup their own food products’ stores without restrictions, as long as the products are manufactured in the country.
Finance minister has allocated an approximate Rs 480 billion ($7.4 billion) amount for agriculture and irrigation—an increase of 84% over last year’s Budget. Union minister for food processing, Harsimrat Kaur Badal, has been batting in favour of 100% FDI in retailing of processed food items that are indigenously sourced.
The move is very progressive and will help in reducing wastage, helping farm diversification and en courage industry to produce locally within the country and from the consumer’s perspective the new move will open doors for foreign retailers especially relating to fresh produce and can get quality food at the possible price.
(The author is the Co-founder of Akshamala Solutions)
The food processing industry (FPI) in India accounts for about 32% of the country’s total food market, and is one of the largest industries in India. It is ranked fifth in terms of production, consumption, export and expected growth.
The total food production in India is estimated to be doubled in the next 10 years, for which the Government of India has been instrumental in the growth and development of the food processing industry.
FDI to play catalyst
The 100% Foreign Direct Investment (FDI) in food processing and production, announced in Budget 2016-17 will play a catalytic role in the industry of agriculture and food processing. Such a move will contribute to ‘Make in India’ program and is a much needed policy, which will enable us to realize a dream of consuming and utilizing the produce that we have been growing in our fields. With this new policy frame work of 100% FDI, it will open our agriculture sector not only for receiving equity but the critical component of food processing, preservation and marketing.
India is an agrarian country and the food processing sector contributes 26% to agriculture GDP. Therefore, allowing 100% FDI into marketing of food products made in India is a welcome measure as it will modernize Indian food supply chain and will lead to the development of cold storages and warehouses. This move will benefit farmers and give an impetus to the food processing industry. The training and development will take place as growth in FPIs will drive the need of setting more universities related to food processing, food quality and safety standards thus, help in our food security and reduce food inflation as well. This will help in imparting skills and encouraging entrepreneurship. It will create huge employment opportunity as more investment means setting up of more FPIs thus creating employment opportunities especially for rural youth and decrease disguised employment in agriculture.
Public-private partnerships in the industry will take place thereby leading to the creation of food processing infrastructure such as food parks, packaging centers other segments will also see rapid expansion such as food packaging industries, transportation industry etc. This will lead to development of contract farming, land leasing and thus addressing issue of small land holdings and pave way for agriculture modernisation.
Huge retail stores can be harmful
Advent of huge retail stores which offer processed food products can prove to be harmful for the interest of small scale grocery stores can lead to legal tussle for the government because the move is being perceived as backdoor entry for multi-brand retailing. Overall, the new move is well intended and the successful outcomes can set as criteria for allowing 100% FDI in all segments of food processing sector.
Currently, India allows up to 51% of foreign direct investment but it comes with several additions such as $100 million in upfront investment and 30% mandatory local sourcing. The new proposal will encourage foreign retailers such as Walmart, IKEA and Marks & Spencer to setup their own food products’ stores without restrictions, as long as the products are manufactured in the country.
Finance minister has allocated an approximate Rs 480 billion ($7.4 billion) amount for agriculture and irrigation—an increase of 84% over last year’s Budget. Union minister for food processing, Harsimrat Kaur Badal, has been batting in favour of 100% FDI in retailing of processed food items that are indigenously sourced.
The move is very progressive and will help in reducing wastage, helping farm diversification and en courage industry to produce locally within the country and from the consumer’s perspective the new move will open doors for foreign retailers especially relating to fresh produce and can get quality food at the possible price.
(The author is the Co-founder of Akshamala Solutions)
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