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FDI inflows in food processing sector in Maharashtra and Gujarat
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Tuesday, 29 June, 2021, 14 : 00 PM [IST]
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Karan Chechi
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An investment made by a company or individual in another country upon the business interests is called Foreign Direct Investment (FDI). FDI is a crucial driver for the economic growth of a country.
The total FDI inflows in the food processing sector in India amounted to $10.20 billion as of September 2020. 100% FDI in the food processing sector in India is permitted under the automatic route. Government approval route for trading has allowed 100% FDI in food processing. 100% FDI is allowed for companies undertaking Single Brand Retail Trading in India.
Federation of Indian Chambers of Commerce and Industry (FICCI) stated,
“Indian food processing industry’s share is 32% of the country’s total food market, the industry is one of the major industries in India. In terms of production, consumption, export, and expected growth, India’s Food Processing Sector is ranked fifth. The food processing industry contributes around 8.80% of Gross Value Added (GVA) in Manufacturing and 8.39% of Gross Value Added (GVA) in Agriculture.”
India has attracted the highest ever total FDI inflow of $81.72 billion during the financial year 2020-21. The Ministry of Commerce and Industry’s latest data shows a 10% rise on a year-on-year basis. Among states, Gujarat received the highest FDI at 30% of the total equity inflows. Maharashtra is ranked second highest with a share of 28% of the total equity inflows. FDI is considered to be the most important factor encouraging the development of an economy.
Gujarat has experienced a huge inflow of FDI in the past two and half decades. Gujarat is ranked among the top five states in India to attract FDI. This is certainly possible because of its strategic location, the network of transport, approachable train route and a very long coastline. However, the inflow of FDI has been concentrated in few industries. For four consecutive years, Gujarat achieved the highest level of FDI accounting for 30%. In 2021, Gujarat received a total of USD30.23 billion FDI inflow.
In March 2021, Maharashtra attained 28% of FDI equity inflows and is ranked second in India. It is also famous as the economic capital of the country because major corporate and financial institution headquarters are situated in the state. Status report of National Bank for Agriculture and Rural Development (NABARD) for the financial year 2015-16 says
“Maharashtra will greatly be helped by the food processing units, as it can process 40% fruits and 30% vegetables, which are usually ruined because of the lack of infrastructure. Farmers get poor compensations due to the inefficient food processing sector and they cannot negotiate for their remunerations because of weak market connections.” FDI inflow of Maharashtra was $8,429 million between October 2019 and June 2020, which was the highest amongst all states in the country. Sugarcanes and pomegranates are largely produced in Maharashtra with sugarcane production reaching 73.08 million tons in FY2019-20.
According to the estimates, the food processing sector in Maharashtra has attracted 173 projects from 1991-2012. Maharashtra has come up with specific policies like the Grapes Processing Industry Policy to give motivation to grape processing and wine industry in the state. The state has nine agro-climatic zones, favouring the cultivation of a multitude of crops, fruits, and vegetables around the year. A recent report by the Maharashtra Government states, Maharashtra’s food processing sector contributes 12.5% to Gross State Domestic Product (GSDP), the food processing sector has drawn cumulative FDI of nearly $160 million in Maharashtra. In the past five years, 10,000 jobs are created by 41 newly set up food processing units, worth Rs 3,500 crore investments. Maharashtra food processing sector’s infrastructure has 12 food processing clusters across the state. In coming times, the government aims to create new mini food parks for micro, small and medium enterprises with a minimum area of 10 acres in each district of Maharashtra.
The major food processing hubs are food parks, wine parks, and floriculture. The facilities in eight specialised food parks are cold storage, warehousing, advanced packaging, tera packaging and food testing laboratory. The food parks are located at Butibori (Nagur), Shandra (Aurangabad), Nevasa (Ahmednagar), Latur, Osmanabad, Nanded, Chiplun (Ratnagiri). There are three wine parks set up by Maharashtra Industrial Development Corporation, which are situated at Vinchur, near Nashik, Addn Vinchur near Nashik, Palus near Sangli. To facilitate the production of flowers of different types and varieties three floriculture parks are developed with world class facility. Maharashtra Industrial Development Corporation provides nursery, infrastructure, post-harvest and logistic facilities to the floriculture parks.
The parks are in Talegaon (Pune), Mudkhed (Nanded) and Osmanabad. Two dedicated institutes are made for food processing technology, business development, research and development to enhance the skills of workforce. The infrastructure has 14 food testing laboratories, 118 soil testing labs, 6 national research centers, 8 food processing units for the implementation of HACCP/ISO.
India is moving forward from scarcity level to surplus in terms of food production, so there are infinite opportunities in the sector to grow. Food processing sector of India is witnessing significant growth and high profits, hence every year it has increased its contribution to world food trade. The rural economy requires initiatives such as proper planning for setting up the infrastructure to boost the growth of food processing sector. Pradhan Mantri Kisan Sampada Yojna is a wide-range program targeting to build modern and innovative infrastructure with effective supply chain management from the farmer’s fields to retail shops.
The Indian market is quickly developing and has seen some significant changes as far as changing utilisation patterns because of urbanisation, changes in the gender composition of the labor force. The overall development of the sector would require intensive efforts covering all related aspects such as development of supply chain infrastructure, creation of processing capacity, improving access and provision of cheaper credit, promoting investment, both domestic and FDI, research and development in product innovation, product development including development of traditional Indian food products, quality improvement, food safety, testing, standardisation, marketing support including export, skill training and up-gradation and focused attention for the promotion of unorganised segment of the sector.
(The author is research director at TechSci. He can be reached at sales@techsciresearch.com)
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