Q: India is famous for its fresh food. Why is the government now supporting the development of a food processing industry?
A: Food accounts for about 70% of India’s $600bn retail market. We have a rapidly growing urban middle class which demands ready-to-eat food and other food products that can be found in stores abroad. For the past three years the government has worked to create an environment that is conducive to the development of a food processing industry. India is one of the largest producers of food in the world: it is the largest producer of milk, the second largest producer of fruit and vegetables and so on, but we process only 10% of our food. Therefore we put in place the incentives to create an environment where food processing can progress.
Q: Why does only 10% of fresh food get processed in the country?
A: There are two main reasons here: the lack of infrastructure, which is what the government is now focusing on, and the fact that India’s culture is all about eating fresh food. We still tend to think that anything that has been bought at the market and cooked at home has extra value over anything that is processed and packed. That may not be true any more, as by the time a fresh ingredient reaches the shelves of a shop or market and eventually gets cooked, many of its nutrients may have evaporated, whereas if ingredients are processed as soon as they are fresh they may retain some of those nutrients.
The change in the mindset has not happened yet, but it will happen because 50% of our population is less than 25 years of age. It’s a young population that does not have the time to cook three fresh meals, as it is already the case in the West, which is why the demand for processed food has already started to increase.
Q: What are you doing to change this state of things?
A: Besides a lot of tax incentives and duty drawbacks, we have also allowed 100% foreign ownership in multibrand food retail for food that is produced and manufactured within the country. At the same time, the government has set up programmes to develop mega food parks, cold food chains and more recently infrastructure to provide effective and seamless backward and forward integration for the processed food industry. Today we have 41 of these parks coming up across India, where companies can come and don’t have to set up all the infrastructure, which is already in place, as well as 236 cold chains under development. To develop a food grid we need to have the food processing infrastructure in place: cold chain grids, mega food parks, storage and processing infrastructure.
Q: What role for foreign investors are you envisioning in the development of the industry?
A: Opportunities for foreign investment in India are there along the whole supply chain for any foreign investor who wants to come and make in India for the huge Indian market, or to source, produce, and take it back to their own country, whether it is someone who makes machinery, supplies technology or makes packaging.