Scope of Food Processing in India with National and

International Perspective

1.0 Introduction
Food processing encompasses all the steps that food goes through from the time it is
harvested to the time it arrives on consumer’s plate. According to Food and Agriculture
Organization (FAO), processed foods can be classified into three types (1) Primary (2)
Secondary and (3) Tertiary. The primary processing includes basic cleaning, grading and
packaging as in case of fruits and vegetables. Secondary processing includes alteration of
the basic product to a stage just before the final preparation as in case of milling of paddy
to rice. Tertiary processing leads to a high value-added ready-to eat food like bakery
products, instant foods, health drinks, etc.

Traditional food processing had two functions: to make food more digestible and to
preserve food during times of scarcity. Most crops are seasonal. There are times of the
year when either glut can result in high levels of wastage or shortages can arise if adequate
measures are not taken to preserve and store the foods. This is particularly important in
areas that have a dry season or winter period when crops cannot be grown and animals
are slaughtered because of a lack of fodder. In these situations stored dry grains or root
crops provide energy; dried, salted or smoked meats, or cheeses provide a source of
protein, vitamins and minerals; and processed fruits and vegetables such as pickles,
chutneys or dried fruits or leaves provide vitamins and minerals. A few crops, including
cassava and some types of beans also contain poisons or anti-nutritional components,
which must be removed by processing to make the food safe to eat. Hence, Food
processing enables to maintain the health of the human beings throughout the year by
increasing its food security.

By processing food, it can be customized to suit the nutritional requirements of groups

such as the elderly, pregnant women, infants, young children and athletes. Such foods are
characterized by a balanced composition of energy suppliers in the form of fats,
carbohydrates and proteins, and by a cocktail of vitamins and minerals composed
 according to the current state of scientific knowledge. Food processing is a route to
creating sustainable livelihoods and economic development for rural communities.

Modern food processing has three major aims:

1. To make food safe (microbiologically, chemically).
2. To provide products of the highest quality (flavor, color, texture)
3. To make food into forms that are convenient (ease of use)

The following table summarizes the item to be controlled in food processing and
comments on the major approaches involved in this control.

To be
Heat Cold Chemicals Active water Mechanical
Controlled

Micro- Prevents growth Reduces Preservatives Do not grow Reduces

organisms growth rate retard growth below Aw of 0.6 numbers

Enzymes Decrease Modify

Destroyed by Alters rate of increase ES
reaction activity
heat activity enzyme activity complex
rate

formation

Chemical Increases Reduces May inhibit or Not

Can alter rate
Reactions chemical rate, reaction activate applicable
of reaction,
browning, rate
like oxidation
oxidation

Physical Increases effects Decreases May modify High. Aw may Can destroy
Structure effects structure cause caking structures

However, the art and science of food processing has come a long way in the last few
decades. The ever changing lifestyles, food habits and tastes of customers’ world over are
making the food plate look different from what it was yesterday. The world food
production and consumption pattern is evolving with the change in the needs of the
customer. Increasing demand for ethnic and different foods from customers across the
world has redefined the market canvas for food processors across the world. With these
changes, producers, processors, retailers and suppliers of food, world over, are reorienting
their business plans to meet the new demands of the customers. The significant benefits
for different stakeholders involved in food processing are:
§ Farmer – higher yield, better farm realization, lower risk
§ Consumer – greater variety, lower prices, new products
§ Companies – new business opportunities, demand growth
§ Economy/Government – Employment generation, reduced rural migration

The emerging opportunities in food processing are interesting and challenging as well.

1.1 Global Food Processing Industry:

The global processed food industry is estimated to be valued around EUR 2.5 trillion and
accounts for three-fourth of the global food sales. The global food industry is ever
changing and evolving. However, health, convenience and value continue to be the key
value propositions in this industry.

Despite the large size of the industry, only 6 percent of processed foods are traded across
borders compared to 16 percent of major bulk agricultural commodities. The United
States and European Union together account for over 60 percent of total retail processed
food sales in the world.

Trade liberalization policies through multi-lateral and regional trade agreements have led
to a rapid growth in food processing. In the Asian region, Japan is the largest food
processing market, but India and China are likely to grow at a faster rate in the next
decade. The processed food industry is strong in Japan and South Korea, as they are the
leading meat importing countries in the world and consumption of meat is high in these
countries. The Australian processed food industry is one of the most technically advanced
in the world and it produces products of international standards at comparatively lower
prices for the world market. The U.S. continues to live up to its reputation as the
“breadbasket to the world”. Countries in the Sub-Sahara African region, Latin America
and parts of Asia continue to be on the lower-end of technology prowess in food items
and are inclined to their staple diets, whereas, those in Europe, North America, and Japan
are on the higher-end of technology, with a sharper shift towards convenience and diet
foods.

1.2 Indian Food Processing Industry:

The food processing industry is one of the largest industries in India and ranks fifth in
size.
The Indian food processing industry has an estimated size of $70 bn (Ministry of Food
Processing, Government of India). The industry’s contribution to the country’s GDP in
2005 was about 7.3% and had a share of 7% in the total industrial production. It employs
1.6 million workers directly. India is endowed with the second largest arable land, second
largest irrigated land under cultivation in the world and advantage of diverse agro-
climatic zones across its geographical spread. The country’s world ranking as a producer
vis-à-vis other nations is indicated in table below.
# Product Production (Mn India’s Rank
Mt)
1 Wheat 72 2
2 Rice, Paddy 124 2
3 Coarse grains (including 29 3
maize)
4 Milk 97 1
5 Fruits 60 2
6 Vegetables 115 1
7 Edible Oilseeds 25 3
8 Pulses 15 1
9 Sugarcane 245 2
10 Tea 0.85 1

India can become the leading food supplier to the world and at the same time it has vast
growing domestic market with over a billion people and population growing at a rate of
1.6% per annum with food being the single largest component of private consumption
expenditure accounting for 53% of the total expenditure. India’s large market size,
ravenous appetite for food with growing incomes and changing life styles create
incredible market opportunities for food producers, Food processors, machinery makers,
food technology and service providers Food processing Industry offers distinct benefits
to both the producers as well as processors.

The following four fundamental shifts in the market conditions reaffirm the potential for
the sector.
1. Rapid growth in organized retail, a catalyst for the food industry
§ Increased consumer spend as organized retail and hypermarkets can drive cost
down by 35-40%
§ Employment generation and higher tax revenue
§ Productivity gains across entire supply chain through dis-intermediation and
superior technology

2. Consumer trend towards convenience and ‘enjoying life’ driven by demographic

trends in age, income-levels and more women in the workforce
§ Explosion of convenience foods, value-added foods and eating-out
§ Increasing willingness to pay premium for quality products

3. Global shift to outsourcing from India across products/ services including food
§ High-margin businesses possible in niche export markets (e.g. organic foods,
herbal products)
§ Quality improvement and spill-over to domestic markets, as producers meet
stringent export requirements
§ Investments in cold chain and transport infrastructure

4. De-regulation and liberalization of the Indian economy, driven by central and

state governments
§ Ease of entry for new businesses and capacity addition
§ Demand-growth 21 from economy
growth and rising 35
incomes
§ Potential to bring in global
6
technology, know-how and investments
2.2

0 5 10 15 20 25 30 35 40
Percentage
 India is the world's second largest producer of food next to China, but accounts for only
1.6 percent of international food trade. The Government aims at increasing this share to
3 percent in the next 8 years. This indicates vast potential for both investors and exporters.

With only 2.2 percent of processing levels for Fruit and Vegetable (F&V), 35 percent for
milk, 21 percent for meat, 6 percent for poultry products and 38 percent for agri-produce.

India's food processing levels are significantly low compared to international levels.
Processing of agriculture produce is around 40 percent in China, 30 percent in Thailand,
70 percent in Brazil, 78 percent in the Philippines and 80 percent in Malaysia. India's
consumption of processed food products is also low, considering a population of 1.1
billion and a strong 350 million urban middle class.

1.3 Food Processing Industry - Key Segments

The food processing industry in India is large and includes segments such as agriculture,
horticulture, plantation, animal husbandry and fisheries. These segments also incorporate
other industries that use agricultural inputs for manufacturing edible products. As per
Ministry of Food Processing Industries indicates the segments within the food processing
industries as listed in the table below.

Segment Products
Pasteurized and packed milk, Whole milk powder, Skimmed milk
Dairy
powder, Condensed milk, Ice cream, Butter, Ghee and Cheese etc
Beverages,
Fruits Juice and Concentrates, Pulps, Slices, Frozen and Dehydrated
products, Potato Wafers/Chips, etc.
Vegetables
Flour, Bakeries, Starch Glucose, Cornflakes, Malted Foods, Vermicelli,
Grains and Cereals
Beer, Grain based alcohol
Fisheries
Meat and Poultry Frozen and packed-mainly fresh form
 Snack food, Namkeens, Biscuits, Ready to eat food, Alcoholic and
Consumer Foods
Nonalcoholic beverages
Source: www.apeda.com

Though the Food Processing Industry has been growing at an average rate of 7 percent,
it has the potential to achieve double digit growth.. Value-addition in food products is
expected to increase from the current 8 percent to 35 percent by the end of 2025. Total
exports of the Food Processing Industries have jumped from EUR 4.7 billion in 2002-
03, to EUR 13.8 billion in 2006-07.

According to a recent “Food and Beverages” Survey conducted by FICCI, the segments
which are expected to record high growth i.e., between 10-20 percent include branded
flour (atta) (16 percent), bakery items like bread, cakes (11 percent), biscuits (16
percent), fruit juices, pulp and concentrates (18 percent) and sauces/ketchups (17
percent). Segments like semi processed/cooked ready to- eat, ice-cream, wine and sugar
are expected to achieve 24 percent, 30 percent, 22 percent and 25 percent growth
respectively. The market for branded foods across different segments of the industry is
growing by 15 to 20 percent.