A sparkling business climate and a positive atmosphere propel the world to look at India as a major destination for their investments.

According to the data provided by the Department of Industrial Policies and Promotion (DIPP), in the last 5 years, the Indian food processing industry received around US$ 6.70 billion worth of Foreign Direct Investment (FDI) and the Confederation of Indian Industry (CII) estimates this business potential as capable of attracting even 5 times more in the next 10 years with a positive effect on the employment.

The Indian economy is in its growing phase: in the first quarter of 2016, the Gross Domestic Product (GDP) in India registered a growth of 2,10 percent while the annual rate of growth is 7.90 percent. This data are amazing themselves, but they are even more so if we consider the data coming from the rest of the world: most of the countries are just surviving if not struggling, with the exception of the China market which is still growing with a paste of 6.8-6,9 percent every year.

What are the reasons for such an amazing growth compared to any other international market? Why is India succeeding where many are struggling?

There are many factors for this positive situation, among them the great changes in politics, in the rules, in the Law, in the bureaucracy. In general, India has been involved in a changing process for quite a few years and this is the result of all these changes, improvement, efforts.

To understand why India is a good place in which foreigner companies can invest – actually are already investing a lot – there is no better way then have a look to some data, in particular, let’s check those of one of the main Indian industry, that is to say agriculture and food processing.

  1. The agriculture is the main source of income for around half of the Indian total population and the government is doing a lot to improve the working conditions, the innovation and the productivity of this industry;
  1. Food processing industries are in super healthy: now its current value is around US$40 billion and the forecast expect it to grow 11 percent every year in the near future;
  1. Following the Indian government, the food processing industry (FPI) gives a great contribution to the country’s economy, assuring the 14 percent of the national GDP, the 13% per cent of the entire export of the country and around the 6% of the total investments, and more than 13 millions of people working;
  1. By 2018, it’s estimated that the value of services linked to the food will grow up to US$ 78 billion and, in particular, the organic food will be growing three times bigger within 2020;
  1. In this analysis it is useful to underline that about half of the Indian market has been managed by small and medium enterprises (SME) with a quite old and not up to dated organization and with no innovative tools, and only 25 per cent has modern management and business models;
  1. food start-ups investments, mainly focused on apps to order food, have increased by 93 percent to US$ 130.3 million comprising; in 2015 (until September) the deals were 17 while in 2014 the total deals has been only five.

Last year, the Ministry of Food Processing Industries prepared the Vision Document-2015, with the aim to promote food processing industries, increase the level of processing and exploit the potential of domestic and international market for processed food products. The main initiatives written in the Vision Document 2015 are as follows:

  • opening a FIPB (Foreign Investment Promotion Board) to promote food products produced and manufactured in India;
  • digitalization of all the ration cards ;
  • opening of Mega Food Park: five have already been opened and
  • allowing 100 percent Foreign Direct Investment (FDI) in multi-brand retail with 100 percent local sourcing condition;
  • control of the inflation;
  • uplift the condition of farmers.
  • Jobs creation and knowledge improvement: Creation of a Food Processing Training Centres (FPTC) and of new infrastructure facilities for degree/diploma courses, Entrepreneurship Development Program (EDP)
  • New rule issued by the Food Safety and Standards Authority of India (FSSAI) about food standards of quality and safety
  • The Food Safety and Standards Authority of India (FSSAI) under the Ministry of Health and Family Welfare has issued the Food Safety and Standards (Food Product Standards and Food Additives) Regulations, 2011 and the Food Safety and Standards (Contaminants, Toxins and Residues) Regulations, 2011 which prescribe the quality and safety standards, respectively for food products.
  • development and promotion of Indian spices worldwide,
  • cheaper credit to food processing industry.

Besides that, many other factors can attract foreign investment in agriculture and food processing industry.

The key influencers are:

  • abundance of raw materials
  • wide variety of products
  • increasing disposable income
  • increasingly health consciousness and demand for products that can grant this
  • increasing exports
  • financial support
  • positive atmosphere

The main notable trends that are appearing and started to being noticed and caught not only by local investors but also by foreigners one are as follow:

Healthy food and wellness

Natural sweetener

Food app

Food home-delivery

Restaurant search and discovery platform

So, if your company is in the agriculture or in the food processing industry and you are not in India yet, it is about time to open yourself to this huge market.

If you want to know more about this topic, call us or send an email to info@dandreapartners.com