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Economic Survey 2022 | Huge rise in FDI in food processing sector

FDI in the food processing industry has increased 86 percent during April-September in FY22 to $410.62 million compared to $220.42 million in the corresponding period of the previous year.

January 31, 2022 / 07:53 PM IST
Representative Image: AFP

Representative Image: AFP

The foreign direct investment in the food processing industry has grown by leaps and bounds in FY22, as per the Economic Survey 2021-22.

FDI in the food processing industry has increased 86 percent during April-September in FY22 to $410.62 million compared to $220.42 million in the corresponding period of the previous year. The six months' figure is up by 4.3 percent over the entire 2020-21 figure of $393.4 million.

In FPI, 100 percent FDI is permitted under the automatic route. However, in case of trading in respect of food products manufactured and/or produced in India including through e-commerce, 100 percent FDI is allowed under the government approval route.

The sector has witnessed an FDI equity inflow of US$4.99 billion from April 2014 to September 2021.

fdi inflow 3101Food industry experts believe that the FDI drive will be sustained in the coming years too. "We are the second option after China for the investors. Even that will change as China is now regulating its food market with export curbs and more stocking for local consumption as there is a shortage. The good monsoon and other factors revive our food production on the other hand,’’ said Sreenath Vishnu, head of Confederation of Indian Industry, Kerala chapter.

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The consumption pattern has also changed with people indulging in more self-cooking the world over. Hence, the food industry is poised to grow well. "Many realised that this a sustainable sector only after the pandemic struck," Vishnu said.

The production linked incentive up to 10 percent provided by the government has given a huge impetus to the large manufacturers in the import of equipment and other factors, he said.

The robust growth in the food processing industry during pandemic times may be a factor in attracting more FDI, according to food industry consultant Sunil Kumar. "Other industry sectors have not done well when compared to the food industry. The FMCG sector which is partly dependent on FPI showed 7 percent growth during the last year,’’ he said.

The domestic consumption of food has increased after the outbreak of Covid-19 though the hotel, restaurant, catering, (Horeca) segment has been hit. "The demand for processed food has increased which will spur the growth in FPI further,’’ he said.

FPI share in GVA in manufacturing rises

The Economic Survey 2021-22 has said that the food processing industries (FPI) sector has been growing at an average annual growth rate of around 11.18 percent for the last five years ending 2019-20.

The sector constituted as much as 9.87 percent of gross value added (GVA) in manufacturing in 2019-20 at 2011-12 prices. The percentage remained higher in the last couple of years with the highest of 10 percent in 2018-19.

The food processing industry is one of the major employment-intensive segments having a share of 12.38 percent in the employment generated in all registered factory sector in 2017-18.

According to the latest Annual Survey of Industries (ASI) for 2017-18, the total number of persons engaged in the registered food processing sector was 19.33 lakh. The unregistered food processing sector supports employment to 51.11 lakh worker as per the national sample survey organisation (NSSO) 73rd Round, 2015-16 and thus 14.18 percent of employment in the unregistered manufacturing sector.

food processing 3101 (2)The industry has been progressing well because there is a shift from unorganised market to organised one, according to Navas Meeran, CEO of Eastern Condiments. “The shift has been accelerated by the pandemic. Since people are mostly home-bound, they buy things online and hence go for branded items,” he said.

Considering the huge domestic market and the increasing purchasing power, the growth in FPI will be sustained as the organised segment may grow larger by attracting more FDI. “This is our expectation,” he said.



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PK Krishnakumar is a journalist based in Kochi.
first published: Jan 31, 2022 03:00 pm
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