6foodagricultureandagrobusiness

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The Trade Council, Embassy of Denmark, India Page 1 of 7 The Trade Council

Food, Agriculture and Agro Business - India

Prepared by Trade Council India, New Delhi

Abstract:

India is one of the worlds biggest producer s within food andagriculture, 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 dueto increased urbanisation, the volume of the population and thefact that the sector is a key government priority in order to sustainIndias continued overall economic growth .

Overall India brings great market opportunities and should be viewed in a long perspective.

Date April 2011Our ref. PD


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Table of Contents

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

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

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


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Market sizeIndia 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 industry 1 is one of the largest industries in India. The sector is ranked fifth in size inthe country and contributes around 7% to Indias GDP and 13% of the countrysexport. 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 anascent stage in terms of development. Of the countrys total agriculture and foodproduce, only around 2% is processed. The highest share of the processed food isin the dairy sector, where 37% of the total produce is processed, of this only 15% isprocessed by the organised sector.

Level of processing in food processing sector

Item Level of Processing inOrganized sector(%)

Level of Processing in Unorganisedsector (%)

Total processing (%)

Fruits & Vegetables

1.2 0.5 1.7

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 thatincludes hundreds of thousands of rice-mills and hullers, flour mills, pulse mills andoil-seed mills, several thousands of bakeries, traditional food units and fruits,

vegetable and spice processing units in the unorganised sector. In comparison, theorganised sector is relatively small, with around 516 flourmills, 568 fish processing units, 5,293 fruit and vegetable processing units, 171 meat-processing units andnumerous dairy processing units at state and district levels.

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

1 Food 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-basedagri-business.

Market trend The next couple of years, the industry is estimated to grow at 9-12% if Indiascurrent growth rate continues. However, value addition of food products isexpected 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 increaseto 10% by 2010 and to 25% by 2025. Given the size of the industry and the nascentdevelopment stage, the food-processing sector is a key focus area for theGovernment of India. The importance of the sector is further enhanced by the factthat 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 andfiscal incentives, including i.e. zero duty import of capital goods and raw materialsfor 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 millionpopulation 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 areliable supply chain

Indias huge nat ural resource base and relatively cheap labour offer a greatexport potential for the Indian food processing industry

Market opportunities The Indian food processing sector offers a number of interesting businessopportunities. However, it is important to underline that the sector should be

viewed in a longer perspective and that due consideration should be given to adaptto the Indian context with respect to price and technology level. Thus besidesexporting, other entry strategies such as setting up local production or finding localjoint venture partners should also be considered.


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

Fruits:1. beverages,2. fruit juices and pulp3. dehydrated and frozen products and wine

Vegetables:1. tomato products like sauces and purees2. processed mushrooms3. Vegetarian spice paste4. potato wafers

Fishing and fish products: frozen & canned products mainly in fresh form Poultry:

1. frozen and packed mainly in fresh form2. egg powder

Grains:1. flour and bakeries

2.

cornflakes3. beer and grain based alcohol4. vermicelli and pasta foods5. biscuits starch glucose

Diary:1. whole milk and skimmed milk powder2. 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 RoadNew Delhi-110011

Paolo Drostby, Minister CounsellorFood, Agriculture and Fisheries,[email protected] +91 11 42090 728
mailto:[email protected]:[email protected]:[email protected]


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The Trade Council is a part of the Ministry of Foreign Affairs and is the official export and investmentpromotion agency of Denmark. The Trade Council benefits from around ninety Danish Embassies,Consulates General and Trade Commissions abroad. The Trade Council advises and assists Danishcompanies 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 ourcustomers 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, India11, Aurangzeb Road, New Delhi 110 011Phone no: (91) 11 4209 0700Fax: (91) 11 2379 2019

E-mail: [email protected] www.ambnewdelhi.um.dk
http://www.ambnewdelhi.um.dk/http://www.ambnewdelhi.um.dk/http://www.ambnewdelhi.um.dk/

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