FDI Opportunities in India: the Food Processing Industry

The liberalization and development of the food processing industry in India has made the local market truly attractive for foreign investors. Indeed, such promising investment field is currently considered of primary importance in the context of the overall modernization and development of the Indian industry, and collected investments for 6.82 billion USD, which are expected to rise to 33 billion within the next 10 years.


With its large scale agricultural sector, India is promoting itself as a global hub for the food processing industry. Among the positive factors in this respect, it should be mentioned in particular about the great availability of arable soils and raw materials, the low labour costs, the presence of at least 127 different agro-climatic areas and a strategic geographic position.


Whereas the Country holds a leading position as for the production of staple foodstuff, it suffers the inadequacy and inefficiency of the processing industry, which is capable of handling only 10% of the overall perishable foods, with huge wastes and negative consequences on the consumer prices. To promote the development of the food production industry is thus of primary importance for a Country that counts 1.3 billion inhabitants, 30% of which still lives below the poverty threshold.


Given these circumstances the Indian Government, and the Union Cabinet Minister of Food Processing Harsimrat Kaur Badal in particular, have introduced extremely favourable measures to promote Foreign Direct Investments in the food processing industry: the Government in fact allows 100% FDI in this field of business, with automatic approval.


This is even more significant in light of the ambitious Food Mega Industrial Parks project. The Scheme of Mega Food Park aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers so as to ensure maximizing value addition, minimizing wastage, increasing farmers’ income and creating employment opportunities particularly in rural sector. In particular, on the basis of the project, the harvest stage will be centralized together with the production and the storage phase, in order to reduce wastes during the process and to optimize costs. The food parks can then be described as a network of Collection centres and Primary processing centres, which involves utilization of shared infrastructures (such as cold storage rooms and warehouses) and an integrated logistic support. The overall investment is expected to reach 900 million USD, of which 800 should come from third States and private investors.


As a consequence of the aforementioned factors, food processing machinery is in very high demand, which will inevitably be covered by foreign imports. Given this context, Italian industries, among other Countries, are indeed capable to satisfy such demand and thus to acquire a decisive role, in account of their leadership position in this industry. It is worth mentioning that, in 2016, the export of Italian machinery for food processing in India raised up to 17% in comparison to the previous year.


Italian enterprises, despite the strong German competition, still hold a worldwide primacy in the field of food processing equipment (with a global market share of 17%), and the second place as food packaging machinery (with a global market share of 23%). Moreover, Italian mechanic industry has been key influential towards the volume, growth rate (in particular during the last five years) and export levels, with an overall balance of sales of nearly 5 billion Euros.


These companies, as highlighted by the chief-economist of Sace Alessandro Terzulli, can indeed offer the know how and technologies, necessary for India to be capable of “pursuing the qualitative leap” it is looking for. This is particularly true for the cold chain and cold storage sectors, in which Indian industries are really weak, as referred by Francesco Pensabene, India Coordinator and Chief of the New Delhi Office of the ICE Agency.

D’Andrea and Partners law firm will continue to keep you updated on the FDI opportunities in India. For any enquiry, please write to info@dandreapartners.com