Current Trends in the Indian Food Processing Industry

India’s food processing industry is one of the largest in the world – and it’s growing faster than ever. According to the India Brand Equity Foundation (IBEF), the sector was valued at US$ 354.5 billion in 2024 and is projected to reach US$ 535 billion by the end of FY26. Driven by a vast agricultural base, a young and urbanizing population, and an increasingly proactive government, the industry is undergoing a structural shift – from simply supplying raw agricultural commodities to becoming a significant source of value-added, export-ready food products. But growth alone doesn’t tell the full story. Persistent infrastructure gaps, low processing levels in key segments, and supply chain fragmentation continue to hold the sector back from realizing its full potential.

India’s position in global food processing 🔗

India ranks as the 6th largest food processing nation in the world, a standing backed by its unmatched agricultural diversity. The country is the world’s largest producer of milk, spices, and pulses, and one of the top producers of fruits, vegetables, rice, wheat, and fish. According to Invest India, horticulture production alone reached approximately 368 million metric tonnes (MMT) in 2024-25, including 114 MMT of fruits and 220 MMT of vegetables. This raw material abundance gives India a natural competitive advantage in food processing – one that the country is now actively working to leverage.

The sector’s economic contribution is equally significant. The Gross Value Added (GVA) of the food processing sector grew from US$ 19.22 billion in 2015-16 to US$ 22.92 billion in 2022-23, and has continued expanding since. Employment in the organized segment alone rose from 17.73 lakh workers in 2014-15 to 20.68 lakh in 2021-22, while the unregistered sector employs an additional 5.1 million people. The share of processed food in total agri-food exports has also climbed – from 13.7% in 2014-15 to 23.4% in 2023-24.

Key growth drivers 🔗

Demographics and changing consumer demand 🔗

With 65% of India’s population under the age of 35, rising incomes, urban lifestyles, and time-constrained routines are fuelling demand for ready-to-eat meals, packaged foods, and processed snacks. The Indian packaged food and beverage industry is projected to grow from US$ 33.7 billion in 2023 to US$ 46.3 billion by 2028, driven by this shift in consumption habits. The organic food segment is also gaining ground, with the Indian organic market projected to reach US$ 9 billion by 2025, growing at a CAGR of 20%.

Strong agricultural raw material base 🔗

India’s diverse agro-climatic conditions ensure a year-round supply of raw materials across multiple food categories. The country is the largest producer of bananas, mangoes, and ginger globally, and ranks second in rice, wheat, fruits, and vegetables. Rice – both Basmati and non-Basmati – accounts for nearly 95% of total cereal exports, with key destinations including Saudi Arabia, the UAE, Iran, Iraq, and Vietnam. This resource depth underpins the sector’s cost competitiveness and export readiness.

Technology and supply chain modernization 🔗

Automation, Artificial Intelligence, and digital supply chain tools are increasingly being adopted across India’s food processing plants. Over 60% of food manufacturers in India are expected to adopt AI and automation technologies by 2025, according to estimates cited by McKinsey & Company. E-commerce and online grocery platforms are also expanding access to processed food products in both urban and semi-urban markets, further broadening the consumer base.

Government initiatives driving the sector 🔗

The central government, through the Ministry of Food Processing Industries (MoFPI), has rolled out several flagship schemes to build infrastructure, attract investment, and formalize the sector. These initiatives collectively form the backbone of India’s strategy to scale up food processing capacity.

Pradhan Mantri Kisan Sampada Yojana (PMKSY) 🔗

PMKSY is the central umbrella scheme that ties together multiple sub-programmes aimed at building supply chain infrastructure from farm gate to retail outlet. As of mid-2024, MoFPI had approved 41 Mega Food Parks, 399 Cold Chain projects, 76 Agro-processing Clusters, and 588 Food Processing Units under this scheme. In 2025, 36 new projects were sanctioned and 94 operationalized under PMKSY, adding 28.48 lakh MT of processing and preservation capacity – with projected benefits for around 1.4 lakh farmers and significant local employment generation. Cumulatively, 1,185 out of 1,618 approved PMKSY projects are now operational, driving over ₹21,900 crore in investment and impacting 51 lakh farmers.

Mega Food Parks scheme 🔗

The Mega Food Parks scheme is designed to create integrated, cluster-based food processing zones that link farmers directly to processors and retailers. Each park typically features collection centres, primary and central processing centres, cold chain infrastructure, and 25-30 developed plots for food processing enterprises. The government provides financial support of up to Rs. 50 crore per project, with the goal of reducing wastage at the supply stage while creating rural employment. Of the 41 approved Mega Food Parks, 24 are now fully operational, with a combined processing capacity exceeding 4 MMT.

Cold Chain projects 🔗

Cold chain infrastructure is critical to reducing India’s notoriously high post-harvest losses. A special fund of ₹2,000 crore was established under NABARD to provide affordable credit for setting up, modernizing, and expanding food processing units and cold chain facilities within designated food parks. Under the Integrated Cold Chain and Value Addition Infrastructure scheme, MoFPI provides grants-in-aid ranging from 35% to 75% of project costs depending on the location – with higher rates for North East states, Himalayan regions, and island territories. The cold chain infrastructure built so far includes over 10.3 lakh MT of cold and controlled atmosphere storage and 1,860 refrigerated vehicles.

Production Linked Incentive (PLI) scheme 🔗

The Production Linked Incentive Scheme for Food Processing (PLISFPI) runs over six years from 2021-22 to 2026-27 with a total outlay of Rs. 10,900 crore. It supports the creation of globally competitive food manufacturing brands, promotes international branding and marketing, and backs Indian food products in export markets. As of June 2024, 172 food processing companies have been approved for assistance under the scheme. The Union Budget 2025-26 also allocated Rs. 1,444 crore specifically towards this scheme to promote further innovation in the sector.

PM Formalisation of Micro Food Processing Enterprises (PMFME) 🔗

The PMFME scheme is a ₹10,000 crore initiative under Atmanirbhar Bharat that targets the large unorganized base of micro food processing enterprises. It offers a 35% capital subsidy on project costs (up to Rs. 10 lakh per unit) and provides technical, financial, and business development support to small units and Self-Help Groups (SHGs). This scheme is particularly important because it recognizes that grassroots processors are critical links in connecting farmers to the food supply chain.

Export performance and global ambitions 🔗

India’s processed food exports are growing strongly. In FY 2024-25, processed food accounted for US$ 10.09 billion – nearly 20% of total agri-food exports. Total food exports crossed US$ 49 billion in that year. Exports of processed foods rose at a CAGR of 11.74%, reaching US$ 16.2 billion in recent estimates. Despite this, food processing products still make up only 16% of India’s agricultural exports – compared to 25% for the United States and 49% for China. This gap points to both a challenge and a significant opportunity, particularly in processed fruits and vegetables, seafood, and dairy.

India’s participation in global trade events underscores this ambition. At Gulfood 2026, India emerged as the Country Partner with the largest presence globally, showcasing a wide range of agri-food products and innovations aimed at deepening trade with the Gulf Cooperation Council (GCC) region.

Challenges that still need to be addressed 🔗

Low processing levels in fruits and vegetables 🔗

Despite being among the world’s largest producers, India processes only a small fraction of its horticultural output. Processing penetration stands at just 4.5% for fruits and 2.7% for vegetables, even as processing levels for food grains (68%), meat (34.2%), milk (21.1%), and fisheries (15.4%) are considerably higher. The government’s own target has been to push processing in fruits and vegetables towards 35% – but progress has been slow, and the gap compared to global standards remains significant.

Infrastructure gaps and post-harvest losses 🔗

More than 30% of India’s agricultural produce is lost due to inadequate cold chain infrastructure, with NITI Aayog estimating annual post-harvest losses at around Rs. 90,000 crore (US$ 10.79 billion). Poor road connectivity in rural areas compounds the problem – perishable produce spoils before it can reach processing centres. Mega Food Park projects have also faced delays due to difficulty in obtaining state government clearances, lack of special incentives for processing units within parks, and co-promoter equity contribution issues.

Fragmented supply chains and smallholder constraints 🔗

Around 86% of India’s farmers are small or marginal landholders, making aggregation and supply chain integration extremely difficult. Farmers currently receive only 30-35% of the value of their produce – compared to 65-70% in developed countries. The fragmented nature of the supply chain leads to inconsistencies in quality and volume, making it harder to meet the standards required by large processors and export markets.

Quality and export compliance 🔗

Inconsistent quality remains a serious concern. Between 2020 and 2024, 527 Indian food products were flagged by the European Union for non-compliance with safety and quality standards – damaging India’s credibility in premium export markets. Addressing this will require not just better processing facilities but also stronger quality assurance systems, food safety training, and regulatory coordination across FSSAI, APEDA, and BIS.

Skilled workforce deficit 🔗

The food processing sector suffers from a significant human capital gap. Only about 3% of the food processing workforce is formally trained, which affects product quality, safety, and the sector’s ability to adopt new technologies. This deficit is particularly pronounced among micro and small enterprises that lack resources to invest in workforce development independently.

The road ahead: investment, innovation, and policy 🔗

The Indian food processing sector has attracted cumulative FDI equity inflows of approximately US$ 13.49 billion from April 2000 to June 2025, reflecting sustained investor confidence. The Union Budget 2025-26 allocated Rs. 4,364 crore to MoFPI – an envelope that spans PMKSY, PLI, and PMFME schemes. Looking forward, the market is projected to expand at a CAGR of 8.38% through 2033, potentially reaching INR 65,244 billion by then.

Several forward-looking interventions are being planned or piloted. Budget 2024-25 included provisions for 50 irradiation units and 100 NABL-accredited food labs to strengthen export readiness. The government has also initiated cluster-based development near farm zones with shared cold chains and logistics infrastructure to reduce processing costs by 25-30%. Technology-enabled supply chains using blockchain, IoT, and AI are being promoted for traceability and quality assurance. And efforts to create single-window clearance systems aim to cut regulatory approval timelines significantly – a change that would particularly benefit MSMEs entering the sector.

India’s long-term aspiration is to position itself as a global food processing hub by 2047. That goal is achievable, but it demands more than policy announcements. It requires consistent execution on infrastructure, farmer integration, quality compliance, and skills development – across every link in the value chain.

What do you think? Given India’s vast agricultural output, why do you think the processing level for fruits and vegetables remains as low as 2-4% – and what single intervention do you believe would have the greatest impact in closing that gap? With export quality flagged repeatedly by international regulators, how should India balance the urgency of scaling up processing volumes with the equally pressing need to raise and standardize product quality?

References

1. https://www.ibef.org/industry/food-processing
2. https://www.pmfias.com/indias-food-processing-industry/
3. https://www.investindia.gov.in/sector/food-processing
4. https://www.ibef.org/news/the-ministry-of-food-processing-industries-mofpi-approved-41-mega-food-parks-399-cold-chain-projects-76-agro-processing-clusters-588-food-processing-units-under-pmksy
5. https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Food+Processing+Ingredients+Annual_New+Delhi_India_IN2024-0014
6. https://www.ibef.org/blogs/the-future-of-food-processing-in-india-growth-opportunities-and-challenges
7. https://mofpi.gov.in/en/Schemes/mega-food-parks
8. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2036980&reg=3&lang=2
9. https://www.investindia.gov.in/team-india-blogs/indias-food-processing-sector-shaping-future-global-agri-food-value-chains
10. https://www.investindia.gov.in/blogs/cold-chain-infrastructure-india-and-its-future-potential
11. https://www.pib.gov.in/newsite/printrelease.aspx?relid=174346&reg=3&lang=2
12. https://prsindia.org/theprsblog/food-processing-infrastructure-in-india
13. https://www.imarcgroup.com/indian-food-processing-market