Shanlax

International Journal of Economics

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Performance of Food Processing
Industries (FPI) in India
Manuscript ID:
ECO-2023-12016710 Y. Ebenezer
Assistant Professor of Economics, School of Law
Volume: 12 Vel Tech University, Chennai, Tamil Nadu, India
[Link]
Issue: 1
N. Savitha
Month: December Associate Professor of Economics
School of Social Science, VIT, Vellore, Tamil Nadu, India
Year: 2023
Abstract
P-ISSN: 2319-961X Food processing industries are a crucial component of the Indian economy’s industrial sector.
They play a pivotal role in ensuring food security, providing employment opportunities in both
rural and urban areas, contributing significantly to the country’s GDP, and generating significant
E-ISSN: 2582-0192 export revenue. The performance of the food processing industry plays a crucial role in shaping
the Indian economy. The objective of the study is to analyze the Gross Value Added, Revenue, and
Received: 09.09.2023 FDI of the food processing industry in India’s current scenario. The study has been conducted using
secondary information and measurable tools. According to the study, food processing industries
have managed to maintain a similar level of performance in terms of Gross Value Added (GVA)
Accepted: 21.11.2023 and revenue generation. However, the growth value of exports and Foreign Direct Investment
(FDI) inflow has shown a decline in performance during the post-COVID-19 period under review.
Published: 01.12.2023 Finally, the study suggested that the Indian government should make legislative policy and fiscal
policies for assistance to improve the performance of food processing industries.
Citation: Keywords: COVID-19, Food Processing Industries, Export Value, FDI, GVA Indian
Economy.
Ebenezer, Y., and
N. Savitha. “Performance
of Food Processing Introduction
Industries (FPI) in India.” Since ancient times, the food processing industry has been carried out by
Shanlax International the people in India. Over a longer period salt, sun-drying and fermentation had
Journal of Economics, been used by them. Nowadays, the same things are being done by the food
vol. 12, no. 1, 2023, processing industry with the help of advanced technology and better food
pp. 43–49. preservative chemicals. Food processing can be classified into two primary and
secondary products. The products that are prepared from the raw material after
DOI: processing such as vegetables and fruits called as primary products. On the
[Link] other hand, the products are processed from primary food products to obtain
economics.v12i1.6710 new food products like jam, butter sauces etc. The food process will be done
to make new products by using the existing primary food products and also to
enhance their shelf-life to stay fresh for longer.
In the food process, the new products can be done with the help of existing
This work is licensed
primary food products and also to enhance their shelf-life to maintain freshness
under a Creative Commons
Attribution-ShareAlike 4.0
for longer periods. Similarly, in the food processing industry where the food
International License processing will be taking place. It can be either a larger-scale industry or a
small-scale home-based industry. India is a country where more than 50% of its
population has been involved in the agriculture sector. Thus, the food processing
industries have to have surplus raw materials in India. Almost 313.85 million
tonnes of total horticulture products India produced in the year 2018-19.

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International Journal of Economics

India easily processes raw products into processed processing industries and food parked in rural areas
food with the help of food processing industries. in 2014 and 2015.
As the Indian agriculture sector is the major supplier In addition, Indian farmers have been directly
to the Indian economy of the entire allied sector, the selling their crops to the industry for better output
food processing industry is creating employment and with the help of the food processing industries.
also benefiting the economy of the country. Meanwhile, the demand for food items is significantly
The food processing minister has made a increasing with the increased population, the FPIs
report that the food processing industry is being are required more to meet the demand. In this
contributed almost 12.8% to India’s GDP in the connection, The Government of India is making
year 2020-21. Furthermore, it is the next step in important efforts towards the improvement of FPIs.
sustainable development as processed foods have In this context, the paper is going to explore the
been less likely to get rotten, thus reducing food performance of the Food Processing Industries (FPI)
wastage. As it has a longer shelf life, the processed in India in the current scenario.
food will be efficiently exported to different parts of
the world. The Indian food processing sector plays Objective and Methodology of the Study
an essential role in connecting Indian farmers to Objective
consumers in the international and domestic markets. • To examine the Gross Value added and
To encourage investment, the ministry of food Revenue of Food Processing Industries in the
processing industries has been making vital efforts manufacturing sector.
across the value chain. These employ approximately • To assess the trend of Foreign Direct Investment
1.93 million people and account for 12.38% of all In flows in Food Processing Industries.
registered factory sector employment. According to
the NSSO 73rd Round report, 5.1 million workers Methodology
are being supported employment in the unregistered The study is based on subordinate data gathered
food processing sector. In India, the food processing from various reports such as the Ministry of Food
industry has been instituted in key sectors like grains, Processing Industries (MoFPI) 2021, Ministry of
sugar, edible oils, beverages, dairy products etc. Food Processing Industries (GoI)-Annual Report
Globally, India holds the number 1 rank in 2021-2022, Economic Time, and additional web
producing some of the major products such as sources. The study duration is from 2012 to 2022,
mango, papaya, banana, milk, ginger guava etc. and the accessible information has been handled and
Further, the products like sugar, cashew nuts, presented with appropriate tables and pi-charts.
potatoes, rice, wheat, etc. India has been producing
Analysis and Clarification
as a mass producer in the global economy. Despite
Food Processing Industries (FPI)
food products, it also produces a significant amount
Table-1explores the Share of FPI in
of coffee and tobacco every year. With the help of
Manufacturing GVA (in percent) in India in terms of
FPIs, India has been making processed spices that
the pre and post-COVID-19 growth of FPI from the
can easily be transported with a shelf life of more
year 2012 to 2020.
than a year. In a recent post, the spices are one of
the most exported products in India. According to Table 1 Share of FPI in Manufacturing
the data of IBEF (India Brand Equity Foundation), GVA (inpercent)
$4 billion worth of spices is being exported in the Pre – Pandemic Period
financial year 2021 in India.
[Link] Years % of Share
In the rural economy, it is providing a significant
1 2012-13 8.7
amount of resources at the same place along with
2 2013-14 8.3
cheap labour to establish the FPI. In this connection,
the government of India has been issued a fund of 3 2014-15 8.0
Rs 2000 crore via NABARD to support the food 4 2015-16 8.5

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International Journal of Economics

5 2016-17 8.7
6 2017-18 8.7
7 2018-19 10.0
Post - Pandemic-Period
[Link] Years % of Share
8 2019-20 9.9
Figure -2 A indicates the food and beverage
9 2021-22 11.18
manufacturing enterprise in India between the
Source: Based on data received from the Ministry of years 2012 and 2020. From 2018 to 2020, India’s
Food Processing Industries (MoFPI) 2021. total number of registered food and beverage
manufacturing enterprises remained the same
The Share of Food Processing Industry in but there were slight changes in their numbers.
Manufacturing GVA was at an average of 8.7% However, there is a significant improvement in the
per year during the pre-pandemic period and has total revenue generated from the food and beverage
increased to 9.9% per year during the Post-Pandemic industry. It being changed from 75,046 (100 crore
period. Indian Rupees (INR)) to 119,949 (100 crore INR),
(1 USD = 72.45, 28 March 2021). Surprisingly,
in the year 2016, the total revenue generated was
almost 75,000 INR crore, compared to more than
100000 INR crore in the year 2020.
Figure 2B indicates the growth value of exports
(in percent) between the years 2016 to 2020. During
the periods, the growth value of exports remained
almost consistent. However, the value of exports
Figure 1 Share of FPI in Manufacturing GVA declined from 11.60% in 2018 to 10.70% in 2019 and
(in percent) again dropped to 8.90% in 2020. This is because of
the impact of COVID-19 in the country. Remarkably,
Source: Based on data received from the Ministry of
in the post covid-19 scenario, in the year 2020, the
Food Processing Industries (MoFPI).2021
growth value of exports has gone below 8%.
Figure 1 indicates the share of FPI in
manufacturing GVA (in per cent) between the years
FDI in the Food processing Sector
2012 to 2020. Between the periods of study, the
Table 2 FDI Inflows in the Food Processing Sec-
Share of FPI in Manufacturing GVA was below
tor in India (in US$)
10%. However, in the years 2018-19 and 2019-2020,
the share of FPI in manufacturing GVA has received Pre – Pandemic Period
the highest GVA. In the post covid -19, the Share [Link] Years In Million US $
of FPI in Manufacturing GVA has been very low 1 2014-15 515.9
ranging from 10 to 9.9%. Remarkably, from 2012 to 2 2015-16 505.9
2018, the Share of FPI in Manufacturing GVA was 3 2016-17 727.2
just 8% to 9 % during the period of study. 4 2017-18 904.9
5 2018-19 628.2
Food Manufacturing Enterprises And Its Post - Pandemic-Period
Revenue Contribution
[Link] Years In Million US $
Figure-2 bi-chart explores the food and beverage
6 2019-20 904.7
manufacturing enterprise in India (2016-2020).
7 2020-21 393.4
Chart-A reveals the total number of enterprises and
total revenue and Chart- B shows the growth of 8 2021-22* 410.6
exports in percentage Source: Based on data received from the Ministry of
Food Processing Industries (MoFPI).2021
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International Journal of Economics

Table 2 reveals that FDI inflows into the food product, like sugar, in the year 2020-21, 70 LMT,
processing sector were at an average of 565.42 has been exported. Furthermore, the contracts are
million US$ per year during the pre-pandemic period being signed in the sugar season 2021-22 amounting
and have increased to 569.56 million US$ per year to almost 30 LMT for export. In the case of Grocery
during the Post-Pandemic period. retail in India, it has grown at a CAGR of more than
50% and is expected to reach USD 10 billion to
USD 12 billion by 2025. However, Maine products
countries like the United States, China, Japan,
Vietnam, and Thailand, with nearly 74% share, and
the items’ value last fiscal year (March 2020-April,
2021) was USD 5.96 billion the top five export
Figure 3 FDI Inflows in Food Processing Sector destinations. On the other hand for cereals, exports
(in US $ million) have increased from 102 MT in 2019-20 to 521 MT
Source: Based on data received from the Ministry of in 2020-21.
Food Processing Industries (MoFPI). 2021 Meat production in India has increased from
Figure 3 indicates the FDI inflow in the food 6.69 million tonnes in the year 2014-15 to 8.80
processing sector between 2014 and 2021. In years million tonnes in the year 2020-21 and the country
like 2014, 2015, 2020, and 2021, the FDI inflow currently ranks 8th in meat production at the world
was below 650 US $ million. However, in the years level. During the last six years i.e. 2015-16 to
2016, 2017 and 2019, the food processing sector 2020-21, the production of rice, wheat and
received more than 650 US $ million in FDI inflow. nutri-cereals increased at compound annual growth
Surprisingly, inflows have dropped to less than $500 rates (CAGR) of 2.7, 2.9 and 3.5% respectively. In
million in the post-COVID-19 period. This was the the same period, the CAGR for pulses, oilseeds and
very lowest inflow during the period of study. cotton was produced 7.9, 6.1 and 2.8 % as well.

Food Processing Industries In The Post Covid-19 Government Initiatives To Improve The Food
Scenario In India Processing Sector in India
By the year 2025-26, India’s food processing There are major initiatives that have been taken
output is going to reach $535. It has sub-segments by the government of India to enhancethe food
such as fruits and vegetables, poultry and meat processing sector in India.
processing, fisheries, food retail, dairy industry etc. • Leveraging Reforms: to boost the growth
It will become one of the largest sectors in the world. in the food processing sector, the Indian
In the post-COVID-19 scenario 2020–21, total government has allowed 100% FDP in food
horticulture production is estimated to be a record product marketing and various incentives for
334.60 MT, which has an increase of about 14.13 MT supply chain infrastructure by the central and
(4.4%) over that achieved in 2019–20. India’s global state governments.
milk production is almost 23%. It will be growing at • In the 2017-18 Union Budget on Dairy Processing
a CAGR of 6.2 % to reach 209.96 million tonnes in Infra Fund: worth Rs 8,000 crore (US$ 1.2
the years 2020–21. In the case of egg production at billion) was allocated to dairy processing infra
a global level, India ranks 3rd and produced at least by the Government of India.
122.11 billion numbers in the year 2020–21 and the • Relaxed FDI norms: The Government of India
is allowing up to 100 per cent FDI through
per capita availability of eggs was 91 eggs per annum
automatic route in food product e-commerce.
in the same year.
• Plan Investment: The Food Safety and Standards
Fish production increased 10.87 percent from Authority of India (FSSAI) has been allocated
2014–15 to 145 lakh tonnes in FY 2020–21, India around Rs 482 crore as a planned investment
is the world’s second-largest fish producer which (US$ 72.3 million) in order to strengthen the food
accounts for 7.56 percent of global output. The testing infrastructure, advance the 59 existing

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International Journal of Economics

food testing laboratories, and start up almost 62 in agri value chains to deliver digital and high-tech
new mobile testing labs across India. services to farmers. On the procurement of agri-
• National Mission on Food Processing: crops, the government’s procurement of wheat and
The state government’s scheme is being paddy at the minimum support price (MSP) during
announced for Human Resource Development
2021-22 will cover 1,208 lakh tonnes from 163 lakh
(HRD) by the Ministry of Food Processing
farmers. The direct payment of MSP value to their
Industries forthe food processing sector as part
accounts will be Rs 2.37 lakh crore.
of the National Mission on Food Processing.
There are four components to this scheme: The By the year 2023, the government will be
creation of infrastructure facilities for degree/ providing pot harvest support to enhance domestic
diploma courses in the food processing sector, consumption of millet products internationally. For
The Entrepreneurship Development Programme the coming fiscal, the government is being allocated
(EDP), Food Processing Training Centres an estimated budget of Rs 675000 crore for PM-
(FPTC) and Training at recognized institutions KISAN, Rs 15500 crore for thecrop insurance
at the State/National level scheme, Rs 7,183 crore for the Krishonnati Yojana,
Rs 10,433 crore for the Rashtriya Krishi Vikas
Union Budget 2022-23 Yojana (RKVY), and about Rs 1,500 crore for the
In order to boost farmers’ income, The Union Market Intervention Scheme-Price Support Scheme.
budget allocation is largely supported in food
processing sectors. The amount of almost 44 per Findings of the Study
cent to Rs 6,407.31 crore has been increased for • The study indicated that the Share of FPI in
the Ministry of Fisheries, Animal Husbandry and Manufacturing GVA received the highest GVA
Dairying, and Food Processing Industries by the in the years 2018-19 and 2019-2020 and also
next fiscal to Rs 2,941.99 crore. To reduce the decreased from 10 to 9.9% the Share of FPI in
country’s dependence on the import of edible oils in Manufacturing GVA in the post-COVID-19.
India, the government would implement a rational Remarkably, the Share of FPI in Manufacturing
and comprehensive scheme with the vision of GVA was just 8% to 9% between 2012 & 2018.
inclusive development and increase domestic oilseed • It shows that India’s total number of registered
production. Moreover, the government will be food and beverage manufacturing enterprises
making some legislative and policy changes and also remained the same but there were slight changes
adopting suitable varieties of fruits and vegetables In in their numbers from the year 2018 to 2020.
order to promote agro forestry. In addition, through Remarkably, the total revenue generated was
“Kisan Drones” the governance would be promoted almost 75,000 INR crore in the year 2016, as
for the crop assessment, digitisation of land records compared to more than 100,000 INR crore in the
and spraying of insecticide. year 2020.
The government will facilitate a fund with • The study reveals that during the periods of
blended capital raised under the co-investment study, the growth value of exports remained
model through NABARD to start-ups for agriculture almost consistent from 2016 to 2017. However,
and rural enterprises relevant to the farm produce the value of exports dropped by 8.90% in 2020.
value chain. Moreover, the government will Particularly in the post covid-19 scenario, the
encourage chemical-free natural farming throughout growth value of exports has gone below 8% in
the country with a focus on farmers’ lands in the year 2020.
five-kilometre-wide corridors along the river Ganga • The study found that the food processing sector
in the first stage. Also, received more than 650 US $ million FDI in the
The government will initiate a public-private years 2016, 2017 and 2019. Surprisingly, after
partnership (PPP) model with the association of COVID-19, inflows dropped to less than USD
public sector research and extension institutions 500million, the lowest level recorded during the
along with private agri-tech players and stakeholders study period.

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International Journal of Economics

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Author Details
Dr. Y. Ebenezer, Assistant Professor of Economics, School of Law, Vel Tech University, Chennai, Tamil Nadu, India,
Email ID: yebenezer2@[Link]

Dr. N. Savitha, Associate Professor of Economics, School of Social Science, VIT, Vellore, Tamil Nadu, India

[Link] 49