India is one of the world’s largest producers of food, second only to China, with the potential to overtake it and become the single largest producer of food. The industrial landscape of this sector in the country is characterized by mainly small scale; family owned operations though the organized sector is gaining ground fast, especially in urban regions.
In spite of the fact of massive production, India accounts for only 1.5% of Global food trade, and it contributes only 13% to India’s total exports. Thus, even though the Industry is so large in itself, there is a lot of scope for future growth, especially in the export segment of this high profit sector. In pursuance of these facts, the government through the Ministry of Food Processing Industries (MoFPI) is encouraging greater investments in the sector and increasing ease of entry by relaxing the stringent regulations.
India’s proximity to food importing nations provides a major stimulus to its exports, especially those of processed foods. The government is also driving growth in the sector by making provisions for financial incentives including, but not limited to capital subsidies, tax rebates, depreciation benefits etc. The increasing heed paid by consumers to nutrition and health coupled with greater disposable income and economic growth in general are promoting the growth of the relatively new luxury food market which focuses on the use of premium ingredients and highlights taste, making the entire meal an experience to the consumer.
The rising population and growing affluence of the consumers are causing a rise in the consumption of food. The vast distribution network of around 8 million stores throughout the country is further sought to be strengthened, increasing the accessibility of food to all the people in the country. To attract investments, the government has also allowed 100% FDI in the food processing industry. Additionally, an income tax deduction of 100% of profit for five years and 25% of profit for the next five years is allowed in case of new agro processing industries and machinery used in the installation of cold stores has been fully exempted from excise duty according to a report by the website equity master .
Equitymastercom, ” (www.equitymaster.com, ) <https://www.equitymaster.com/research-it/sector-info/food/Beverages-Food-Tobacco-Sector-Analysis-Report.asp> accessed 30 June 2015