Unleash India’s Food Processing Potential

What’s for dinner? The answer concerns every living being. Food connects us all and is tied to our community, our traditions, our past and our future. The challenge of feeding the 10 billion inhabitants by the middle of the century is therefore debated on several fronts. It requires efficient production methods that are both economically viable and environmentally sustainable. Fortunately, technologies are emerging that renew the traditional farm-to-fork approach and with a lower environmental footprint. India, one of the world’s largest fruit and vegetable producers to boost high-volume processed foods, has formulated a unique Production Linked Incentive Scheme (PLIS) that aims to encourage incremental sales.

Progress so far

A sum of ₹10,900 crore has been earmarked for the program and so far, 60 applicants have already been shortlisted under Category 1 (https://bit.ly/3rMdqTc) which incentivizes businesses to increase sales and marketing initiatives. brand/marketing taken overseas. Beneficiaries were required to commit to a minimum investment when applying for participation in the scheme. Assuming the committed investment is a fixed ratio of their sales and undertakes the execution of at least 75% of the projects, the industry is expected to see at least ₹6,500 crore of investment in the next two years.

A study in the United States concluded that a 1% increase in public infrastructure increased agri-food production by 0.06% in the longer term (https://bit.ly/3rOeE0l). This correlation is also valid for India, as more investment is concentrated in states such as Andhra Pradesh, Gujarat, Maharashtra, Tamil Nadu and Uttar Pradesh. These states, as reported by the Good Governance Index 2020-21, are ranked among the highest for the parameter “Public infrastructure and services”, with “Connectivity to rural dwellings” showing the greatest improvement (https:// bit.ly/3nZ98Xz). For the export market, it is now established that sales promotion is positively related to increased sales volume, but inversely related to profitability. To bridge this gap, among the 13 key sectors announced under the PLIS, the “Fournal Processing PLIS” designates a dedicated Category 3 to support branding and marketing activities in overseas markets. This ensures that India’s share of value-added products in the export basket is enhanced, and it can leverage its unique geographic proximity to untapped markets in Europe, Middle East/West Asia , Africa, Oceania and Japan.

Facilitate access to credit

Due to the novel coronavirus pandemic, the past two years have seen a significant number of people working from home. This has accelerated the demand for products from the ready-to-eat market which saw an increase of around 170% in sales volume between March and June 2020, as reported by Netscribes (global data and insights company) . The pandemic has heightened consumer awareness of functional foods, which should provide a launch pad for start-ups and health-focused micro-food processing units. However, Micro, Small and Medium Enterprises (MSMEs) access to finance is an ongoing problem in the country, predominating due to a lack of proper credit history mechanism for MSMEs.

Smart financing alternatives such as peer-to-peer (P2P) lending hold potential for micro-food processors, as observed by the UK government-owned British Business Bank (similar to India’s MUDRA Bank or the Micro Units Development and Refinance Agency Bank) which has helped over 1,18,000 small businesses access over US$17.88 billion (https://bit.ly/3Aziz4T). Access to working capital has in theory been addressed by the Trade Claims Discounting System (TReDS), a platform to facilitate the financing/discounting of trade receivables of MSMEs through multiple financiers.

However, the platform requires considerable scaling and the simultaneous application of strict measures that companies must comply with. The integration of the TReDS platform with the electronic invoicing portal of the Goods and Services Tax Network will make TReDS more attractive and relieve financiers.

A sustainable food ecosystem

With growing populations, changing dietary habits and unrestricted use of natural resources, nations need to come together and chart a roadmap for a common and efficient food value chain. New alternatives are being explored that have immense potential to replace the staples of rice and wheat in the form of nutri-cereals, plant-based proteins, fermented foods, health bars, and even fortified fresh foods. for pets. By welcoming new brands in the category, PLIS aims to create an ecosystem conducive to innovation in food products and processes. After the Great Depression of 1929, the hemlines of a skirt were indexed to predict financial status. Nearly a century later, nighttime light and illumination data obtained from satellites indicate the extent of economic progress. No wonder that, in 50 years, the progress of nations will be measured by their ability to sustainably feed their populations.

Harsh Vardhan, a graduate of IIM-Ahmedabad, is a Thought Leader for Invest India (under Department of Promotion of Industry and Internal Trade, Ministry of Commerce and Industry, Government of India)