Food, Agriculture and Agro Business - India Date April 2011

Our ref. PD

Prepared by Trade Council India, New Delhi

Abstract:

India is one of the world’s biggest producers within food and

agriculture, but food processing is still at a relatively nascent stage.
The lack of agri-infrastructure has so far hindered the growth of
value-based agri-business, but there is a vast growth potential due
to increased urbanisation, the volume of the population and the
fact that the sector is a key government priority in order to sustain
India’s continued overall economic growth.

Overall India brings great market opportunities and should be

viewed in a long perspective.

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Table of Contents

Market size ............................................................................................................................ 3

Market trend.......................................................................................................................... 4
Market opportunities ........................................................................................................... 4

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Market size
India is the third largest producer of agricultural commodities in the world (e.g.
milk: no. 1 in the world; livestock: no. 1 in the world; tea: no. 1 in the world; rice:
no. 1 in the world and sugarcane: no. 1 in the world) and the food processing
industry1 is one of the largest industries in India. The sector is ranked fifth in size in
the country and contributes around 7% to India’s GDP and 13% of the country’s
export. The industry size has been estimated at USD 70 billion. The industry
employs around 1.6 million workers directly.

While agricultural production is significant, the food processing industry is still at a

nascent stage in terms of development. Of the country’s total agriculture and food
produce, only around 2% is processed. The highest share of the processed food is
in the dairy sector, where 37% of the total produce is processed, of this only 15% is
processed by the organised sector.

Level of processing in food processing sector

Item Level of Level of Processing Total processing
Processing in in Unorganised (%)
Organized sector sector (%)
(%)
Fruits & 1.2 0.5 1.7
Vegetables
Dairy Products 15 22 37
Meat 21 - 21
Poultry 6 - 6
Marine Fisheries 1.7 9 10.7
Shrimps 0.4 1 1.4

Primary food processing is a major industry with a highly fragmented structure that
includes hundreds of thousands of rice-mills and hullers, flour mills, pulse mills and
oil-seed mills, several thousands of bakeries, traditional food units and fruits,
vegetable and spice processing units in the unorganised sector. In comparison, the
organised sector is relatively small, with around 516 flourmills, 568 fish processing
units, 5,293 fruit and vegetable processing units, 171 meat-processing units and
numerous dairy processing units at state and district levels.

At the same time the agri-infrastructure in India is inadequate and insufficient when
compared to its large food and agriculture production. This has led to huge losses
in the supply chain right from the fields, storage and transportation networks to the

1Food processing is a large sector that covers activities such as agriculture, horticulture, plantation,
animal husbandry and fisheries. Generally one operates with the following segments: 1) Dairy, 2)
Fruits & Vegetables, 3) Grains & Cereals, 4) Fisheries, 5) Meat & Poultry and 6) Consumer Foods.

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retail stores. The lack of agri-infrastructure has hindered the growth of value-based
agri-business.

Market trend
The next couple of years, the industry is estimated to grow at 9-12% if India’s
current growth rate continues. However, value addition of food products is
expected to increase from the current 8% to 35% by the end of 2025. Fruit &
vegetable processing, which is currently around 2% of total production will increase
to 10% by 2010 and to 25% by 2025. Given the size of the industry and the nascent
development stage, the food-processing sector is a key focus area for the
Government of India. The importance of the sector is further enhanced by the fact
that over 70% of the population depends upon agricultural activity for livelihood.
The government has therefore been focusing on commercialisation and value
addition in agricultural produce, minimising pre/post harvest wastage, generating
employment and export growth in this sector, through a number of regulatory and
fiscal incentives, including i.e. zero duty import of capital goods and raw materials
for export oriented units and allowing full repatriation of profits and capital.

A number of different factors support the growth potential of the Indian food-
processing sector:

 A growing middle-class of around 300 million

 Growing urbanisation – more than 30 cities with more than a million
population
 Changing lifestyles and family patterns where more and more women work
 “Westernisation” of the Indian retail market where both domestic and MNCs
are also planning to invest in the food processing industry in order to secure a
reliable supply chain
 India’s huge natural resource base and relatively cheap labour offer a great
export potential for the Indian food processing industry

Market opportunities
The Indian food processing sector offers a number of interesting business
opportunities. However, it is important to underline that the sector should be
viewed in a longer perspective and that due consideration should be given to adapt
to the Indian context with respect to price and technology level. Thus besides
exporting, other entry strategies such as setting up local production or finding local
joint venture partners should also be considered.

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The following summarises the existing investment opportunities in India and
thereby also areas where Danish companies could try and promote their equipment
and know-how:

 Fruits:
1. beverages,
2. fruit juices and pulp
3. dehydrated and frozen products and wine
 Vegetables:
1. tomato products like sauces and purees
2. processed mushrooms
3. Vegetarian spice paste
4. potato wafers
 Fishing and fish products: frozen & canned products mainly in fresh form
 Poultry:
1. frozen and packed mainly in fresh form
2. egg powder
 Grains:
1. flour and bakeries
2. cornflakes
3. beer and grain based alcohol
4. vermicelli and pasta foods
5. biscuits starch glucose
 Diary:
1. whole milk and skimmed milk powder
2. condensed milk
3. ice cream
4. Ghee (clarified butter)
5. butter
 Grading and packaging for increasing shelf life and purity
 Cold chains and storage facilities

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Contact

Trade Council in India

Embassy of Denmark
11, Aurangzeb Road
New Delhi-110011

Paolo Drostby, Minister Counsellor

Food, Agriculture and Fisheries,
paodro@um.dk
+91 11 42090 728

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 The Trade Council is a part of the Ministry of Foreign Affairs and is the official export and investment
promotion agency of Denmark. The Trade Council benefits from around ninety Danish Embassies,
Consulates General and Trade Commissions abroad. The Trade Council advises and assists Danish
companies in their export activities and internationalisation process according to the vision: Creating
Value All the Way.

The work in the Trade Council follows specific procedures and quality guidelines. In this way our
customers are secured the best possible quality under the varying working and market conditions at any
given point of time.

Ministry of Foreign Affairs of Denmark

The Trade Council, Embassy of Denmark, India

11, Aurangzeb Road, New Delhi 110 011
Phone no: (91) 11 4209 0700
Fax: (91) 11 2379 2019
E-mail: delamb@um.dk
www.ambnewdelhi.um.dk

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