Most of the financial press seemed to get an early look at the recent KPMG report on the Indian food processing industry officially released in May 2021 and subtitled – ‘Growth opportunities post the Covid-19 pandemic.’ The press has generally headlined a quote from the overview, “The Indian food processing market is expected to double from US$ 263 billion (2019-20) to US$ 535 billion (2025).” This is approximately Rs.195,000 crore in FY 19-20, growing to Rs.390,000 crore in what one can presume means FY 25-26.
If the authors of the report mean the six years, including FY 2025-26, the growth forecast for the Indian food processing market would be at a CAGR of 12.5%. This forecast is not rocket science for six years since even the economy’s nominal growth could be that high.
With food price inflation and the report talking about the market value of food processing, the figure might reflect the retail value, including logistics and sales overheads, and not the production value of raw food into sorted, processed, or packaged products. In other words, this type of forecast is likely to come true even if the central or state governments or their promotional and scientific institutions do little beyond what they are already doing.
The real opportunity
However, in case the authors of the report mean the five years including FY 2024-25, the growth they are forecasting from US$ 263 billion to US$ 535 billion would have to be at a CAGR of 15.25%. Even with all the caveats that this is a retail value and not the value of food processing production, this should be the target. It presents both the opportunity and the challenge for the industry and the country’s infrastructure. I have thus far discussed just the first two paragraphs of the overview 28-page report, including some full-page pictures and diagrams.
From ambiguity to courage
With due respect to KPMG and the authors of the report, let me acknowledge that this is a valuable document, especially in the several insights that it contains. I cite some of these below based on my admittedly brief first reading. However, it includes the usual few grains of rice thrown at every concept, including the obligatory ‘Atmanirbharbharat‘ – the government’s catchword for self-reliance. Fortunately, only a few breaths are wasted on this since the country is already self-reliant in terms of food production but scores poorly on wastage at the farm end and on equitable distribution of protein and calories to millions unable to afford these.
The KPMG mainly sees the growth opportunity in processed and packaged food, which has, according to the KPMG report, received a boost from the Covid-19 pandemic and is the hook or justification for its insights. The implication is that improvements in sorting, processing, packaging, logistics, and most all, exports, will trickle down to less wastage, better income for farmers, and nutrition for the poorest. The improvements in hygienic processing and packaging will help food exports where the report says India’s is the world’s 14th largest with a 2.6% share in 2010. (This outdated data gives us an idea of the quality of the data available.)
Moving beyond the first page, at this time, I will only point to a couple of insights that struck me in my first cursory reading. Meat, marine, dairy, and packaged foods grew the fastest in Indian consumer processed food preference from 2007-08 to 2017-18. Cereal, grains, oilseeds, and beverages declined while fruit and vegetables, where Indians retain their preference for ‘fresh,’ have only doubled from a measly 1% to a still measly 2%.
The report of KPMG says that in terms of the Covid-19 pandemic impact, the consumption of meat and marine has reduced while the consumption of packaged foods and beverages has increased. Other categories such as fruit and vegetables, cereals, grains and oilseeds, and dairy have felt an insignificant or little net impact because direct-to-consumer or household increases have been neutralized by the decline in the hotel, restaurant, and other out of home consumption.
Uttar Pradesh is a crucial player in food production and processing
In the six categories of food processing discussed in the report, the northern state of Uttar Pradesh, with a population of 270 million, ranks either first or second in five. It ranks third in only one – meat and marine processing, where Andhra Pradesh is first, and West Bengal is second. UP ranks first in the processing of dairy, cereals, grains and oilseeds, and fruit and vegetables. It ranks second to Maharashtra in both non-alcoholic beverages and packaged food.
A two-page spread in the report looks at India’s ten leading potential markets for food processing exports. In five of these, Japan, the UK, France, Italy, and Spain, the scenario for India is declining or losing market share. Among the top five potential processed food products in demand in these markets are either marine or meat or both. Fruit and nuts are also among the top five likely processed products exports to these markets where the industry is losing or declining. In nine of the top ten food markets for India, marine or meat or both are among those leading in market potential.
The challenge of modernity
The KPMG report is commendable for bringing quite a bit of the available information together, and I hope to review it once again at the soonest opportunity. Its flaws are not those of the analysts or authors but ours – as governments, institutions, researchers, and cheerleaders.
To achieve progress instead of disaster in the food supply chain is a complex scientific and cultural project of modernity. It presents the most significant economic and social opportunity, as reports from multinational consulting organizations have been telling us for the past 21 years and something our politicians have understood and acted on since independence in 1947.