India has shifted its gear by reforming the Foreign Direct Investment (FDI) norms to speed up the process. The government has recently relaxed the norms and allowed 100 per cent FDI in manufacturing under automatic route and 100 per cent FDI in trading in respect of food products manufactured and produced in India. The industry experts feel that this is a masterstroke which will not only help in growth of the food industry but will also provide an international platform. NuFFooDS Spectrum analyses the new FDI norms, feels the pulse of the market on the issue and gives the overview on how this bold step can change the entire face of Indian Food Industry.
Indias food processing industry is growing exponentially with a market size which is around $39.70 billion. It is ranked fifth in the world in terms of production, consumption, and exports. The Indian food industry is expected to grow at a Compounded Annual Growth Rate (CAGR) of 11 per cent to $ 65.4 billion by 2018. Food and grocery account for around 31 per cent of Indias consumption basket. The Government of India has been instrumental in the growth and development of the food processing industry.
The government through the Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments in the sector. It has approved proposals for joint ventures (JV), foreign collaborations, industrial licenses, and 100 per cent export oriented units. Recently, MoFPI held three meetings with Ambassadors and High Commissioners in India of various foreign countries, namely Australia, China, Canada, France, Indonesia, Japan, Korea, Netherland, Poland, Russia, Singapore, UK, New Zealand, UAE, Thailand, Germany, Belgium, Brazil, USA, Malaysia, Mexico, Switzerland, Spain and Italy.
These meetings were facilitated by the External Affairs Ministry. In the first two meetings, the foreign missions were appraised about the recent path breaking policy initiatives of Government of India allowing 100 per cent FDI in manufacturing under automatic route and 100 per cent FDI in trading, including e-commerce, in respect of food products manufactured and/or produced in India.
The MoFPI further explained them the opportunities will be available as a result of these policies for the investors in their countries to invest in Indias Food Processing sector for exploring new food business tie-ups as well as the expansion of their food business already existing in India.
They were also requested to disseminate this information to the investors of their countries. Recently, the Government of India has allowed 100 per cent FDI in the marketing of foods products produced and manufactured in India. This initiative has opened up vast opportunities for international companies to invest in India in the food processing, manufacturing, supply, and marketing. Additionally, attractive incentives have been offered by state and central governments to include capital subsidies, tax rebates, and reduced custom and excise duties, said Harsimrat Kaur Badal, Union Minister of Food Processing Industries.
The government is taking various steps to attract more FDI as it expects that expenditure level of food is expected to double in next 6 years (from $ 386 billion to $772 billion). According to the estimation of the Confederation of Indian Industry (CII), Indian food processing sector has a great potential and since FDI norms are now relaxed, it will attract an investment of $33 billion in the coming years.
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