PLI scheme predicts big bucks for the food industry

INSIGHT
Female workers seen creating long columns of rice before walking along and spreading the piles with their feet and rakes. The Indian food and grocery market is the sixth largest in the world.
Female workers seen creating long columns of rice before walking along and spreading the piles with their feet and rakes. The Indian food and grocery market is the sixth largest in the world.Courtesy: Getty Images
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The new PLI scheme for the food processing sector will expand existing industrial capacity to generate output of processed food worth US$4.4 billion amongst other benefits.

Here’s some food for thought: The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales.

What’s more, the Indian food processing industry accounts for 32 per cent of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. It contributes around 8.80 and 8.39 per cent of Gross Value Added (GVA) in Manufacturing and Agriculture respectively, 13 per cent of India’s exports and six per cent of total industrial investment.

The Indian gourmet food market is currently valued at US$ 1.3 billion and is growing at a Compound Annual Growth Rate (CAGR) of 20 per cent.

The Indian organic food market stood at a value of USD 849.5 million in 2020. The market is further expected to grow at a CAGR of about 20.5 per cent in the forecast period of 2021 and 2026 to reach a value of about USD 2601 million by 2026.

So, when the Modi government recently approved a new PLI scheme for the food processing sector, with a budget outlay of US$1.46 billion, businesses and investors alike had much to cheer about.

Tea leaves processing at tea factory in Assam. The latest PLI scheme in the food processing factory will expand existing industrial capacity to generate output of processed food worth US$4.4 billion.
Tea leaves processing at tea factory in Assam. The latest PLI scheme in the food processing factory will expand existing industrial capacity to generate output of processed food worth US$4.4 billion.Courtesy: Getty Images

Why the PLI scheme matters

The PLI scheme for the food processing industry will create 250,000 jobs, expand existing industrial capacity to generate output of processed food worth US$4.4 billion, and boost exports, Incentives under the scheme will be disbursed for six years to 2026-27.

The scheme is made up of two components:

The first component under the scheme relates to incentivising the manufacturing of four major food product segments: ready-to-cook/ready-to-eat foods, processed fruits and vegetables, marine products and mozzarella cheese. Innovative and organic products of small-to-medium enterprise (SMEs), including eggs, poultry meat, egg products in these segments, are also covered under the first component.

The second component relates to support for branding and marketing abroad to incentivise emergence of strong Indian brands.

" The decision is a fitting tribute to our farmers," Food Minister Piyush Goyal said while briefing the media about the cabinet decisions.

The effort is to take the country's food processing to a next level amid the rising global demand for Indian ready to eat foods, organic products, processed fruits and vegetables, marine products and mozzarella cheese.”

A huge government push

The PLI scheme is just the latest in the many steps the Modi Government has taken to boost investments in the food processing industry. On 13 January 2021, the government has sanctioned 37 food parks funded under the Mega Food Parks Scheme, 21 are operational and 16 are under implementation. According to Invest India, the Indian government further sanctioned over 134 food processing projects last year across different states. Out of which there were 21 Agro-Processing Clusters, 47 Cold Chain, 43 Food processing unit, 8 Backward and Forward Linkages, 3 Operation Greens and 12 Food Testing Laboratories across various states. This will create additional processing and preservation capacity of agricultural produce.

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