Highlights of the Food Processing Sector in India Report: The food processing sector in India, though still at a nascent stage, has undergone major changes in the last six to seven years. The types, variety, quality and presentation of products have all improved, mainly as a result of economic liberalisation, which has led to foreign direct investment (FDI) in this sector. Several multinational companies, including US companies such as Pepsi, Coca Cola, ConAgra, Cargill, Heinz and Kellogg's, have invested in the Indian food processing industry. Growth in the food processing industry has generated an increasing interest in quality food ingredients to produce higher quality foods.I. MARKET SUMMARY India's food sector, though still developing, contributes 14% to manufacturing GDP (5.5% of aggregate GDP), produces goods worth rs. 2.8 trillion ($64 billion) and employs 13 million people. Much of the Indian food industry is small-scale and involves very limited value addition, although several multinational food processing companies have set up operations in India in recent years (see Section II. C). A variety of domestic restrictions, including (a) bans on foreign direct investment in retail trade, (b) bans on contract farming, (c) barriers to interstate trade based on revenue and food security concerns, (d) some of the highest taxes on processed foods in the world and (and) inefficient marketing infrastructure and networks seriously limit the growth of the sector. The availability of fresh produce nearly year-round across the country, combined with consumer preference for fresh produce and freshly cooked foods, has curbed demand for processed foods. The level of processing varies depending on the segments, from less than 2% of production in the case of fruit and vegetables to over 90% in non-perishable products such as cereals and legumes. In the latter, however, processing involves very limited added value and is mostly limited to grading, cleaning, grinding and packaging; with negligible use of additives, preservatives and flavourings. LEVEL OF PROCESSING OF PERISHABLE PRODUCTS Product Level of processing (% of total production) Organized Sector Unorganized Sector 1/ Total Fruit and vegetables 1.2 0.5 1.7 Milk 15.0 22.0 37.0 Meat 21.0 0 21.0 Poultry 6.0 0 6.0 Marine fishing 1.7 9.0 10.7 Shrimp 0.4 1.0 1.4 Source: Rabobank Analysis1/ “Unorganized” in fruits and vegetables includes pickles, sauces and unbranded chips, but excludes processing by street vendors; “unorganized” in the dairy sector includes processing by sweet food producers; The term “unorganized” in seafood includes processing by small-scale fishermen. According to the Ministry of Food Processing Industries (MFPI), the food processing industry has grown at an average annual rate of 7.