Government Support for Agribusiness and Food Processing in India

India is the world’s second-largest producer of fruits and vegetables, a top producer of milk, food grains, and livestock – yet a staggering share of this agricultural wealth is lost before it ever reaches a consumer’s plate. This paradox sits at the heart of why the Indian government has made agribusiness and food processing a national policy priority. Over the past decade, a series of well-funded schemes, regulatory reforms, and infrastructure investments have reshaped this sector – but significant ground remains to be covered.

The role of the Ministry of Food Processing Industries 🔗

The Ministry of Food Processing Industries (MoFPI) is the nodal agency responsible for driving the growth of India’s food processing sector. Established with the mandate to reduce post-harvest losses, enhance value addition, and boost farmer incomes, MoFPI formulates and implements policies that link agricultural production with industrial processing. It coordinates with allied ministries – including agriculture, commerce, and finance – to ensure that food processing is treated as a strategic economic sector rather than a peripheral activity.

The food processing sector plays an important role in increasing farm income and creating off-farm jobs, and in reducing post-harvest losses through on- and off-farm investments in preservation and processing infrastructure. MoFPI has been central to translating this vision into funded, time-bound programs.

Key government schemes supporting the sector 🔗

The government’s support to agribusiness and food processing rests on three flagship schemes, each targeting a different segment of the value chain.

Pradhan Mantri Kisan SAMPADA Yojana (PMKSY) 🔗

Pradhan Mantri Kisan SAMPADA Yojana was envisaged as a comprehensive package to create modern infrastructure with efficient supply chain management from farm gate to retail outlet. The scheme includes components such as Integrated Cold Chain and Value Addition Infrastructure, Creation/Expansion of Food Processing and Preservation Capacities, and Operation Greens – which was later expanded from Tomato, Onion and Potato (TOP) crops to 22 perishable products including Mango, Banana, Apple, Pineapple, Carrot, and Cauliflower.

As of February 28, 2025, MoFPI has sanctioned 1,608 projects including 41 Mega Food Parks, 394 Cold Chain projects, 75 Agro-processing Clusters, 536 Food Processing Units, 61 Backward and Forward Linkages projects, and 44 Operation Greens projects under PMKSY. A total of ₹6,198.76 crore has been disbursed as grants-in-aid since the scheme’s inception.

PM Formalisation of Micro Food Processing Enterprises (PMFME) 🔗

Launched in June 2020 under the Atma Nirbhar Bharat initiative, the PMFME scheme aims to encourage ‘Vocal for Local’ in the sector with a total outlay of ₹10,000 crore for the period FY 2020-2025, and has since been extended to FY 2025-26. It is the first-ever government scheme specifically targeting micro food processing enterprises, aimed at benefiting 2 lakh enterprises through credit-linked subsidy and the One District One Product (ODOP) approach. Since January 2024 alone, 46,643 loans have been sanctioned under the credit-linked subsidy component of PMFME.

Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) 🔗

The PLISFPI was approved by the Union Cabinet with an outlay of ₹10,900 crore to support the creation of global food manufacturing champions and promote Indian brands of food products in international markets. The scheme covers three components: incentivizing manufacturing in four major food product segments, promoting innovative and organic products of SMEs, and supporting branding and marketing abroad for Indian brands.

The scheme has led to an increase in food processing capacity of 35 lakh metric tonnes per annum. Approximately 3.39 lakh direct and indirect jobs have been generated so far under PLISFPI, and total exports of agricultural processed food products approved under the scheme have grown at a CAGR of 13.23% as of 2024-25 with reference to 2019-20.

FDI liberalisation and investment promotion 🔗

Attracting foreign investment has been a core plank of the government’s agribusiness policy. India allows 100% FDI in the food processing sector and retail trading of food products, including through e-commerce, through both the automatic and government routes. Between April 2000 and June 2025, the sector has attracted cumulative FDI equity inflows of $13.49 billion.

Mega Food Parks with essential utilities and common processing facilities are being established in agriculturally rich areas, offering a plug-and-play model for entrepreneurs. Investment in these parks is recognised under the Harmonised List of Infrastructure Sub-sectors (HLIS), enabling easier access to infrastructure lending. The government has also launched an Investors Portal to consolidate information on policies, resources, and incentives, while collaborating with Invest India to facilitate regulatory approvals and investor support.

Budget allocation and economic contribution 🔗

The Government of India has allocated ₹3,290 crore to MoFPI for the development of the food processing sector in 2024-25, marking an increase of approximately 30.19% from the revised estimate of ₹2,527.06 crore in 2023-24. This rising budgetary commitment reflects the sector’s growing economic weight.

The gross value added (GVA) of India’s food processing sector rose from ₹1.34 lakh crore in 2014-15 to ₹2.24 lakh crore in 2023-24, reflecting sustained growth and increasing contribution to the economy. In FY 2024-25, India’s food exports crossed USD 49 billion. The share of processed food in agri-food exports has climbed substantially from 13.7% in 2014-15 to 23.4% in 2023-24.

The processing gap: where India stands globally 🔗

Despite these gains, India’s food processing levels remain low compared to other major economies – and that gap represents both a challenge and an opportunity.

Processing levels in India are 4.5% for fruits, 2.7% for vegetables, 21.1% for milk, 34.2% for meat, and 15.4% for fisheries. In contrast, countries like the USA (65%) and China (23%) are far ahead of India in reducing wastage and enhancing the value addition and shelf life of farm products. This gap is most stark in the horticulture segment, where India leads the world in production but processes a negligible fraction of its output.

Post-harvest losses: the cost of low processing 🔗

Low processing levels have a direct economic cost. Nearly 40% of perishables go to waste in India. A national-level study by CIPHET estimated that 4.65-5.99% of cereals are wasted, and 4.58-15.88% of fruits and vegetables are lost. The total value of post-harvest losses is estimated at ₹92,651 crore.

According to a study by NABARD Consultancy Services conducted between 2020 and 2022, India suffers food losses amounting to approximately $17.7 billion annually. In developing economies like India, 40% of losses occur at the post-harvest and processing level, whereas in developed economies, over 40% of losses happen at the retail and consumer level. Scaling up processing is therefore not just an economic goal – it is a food security imperative.

MoFPI is specifically mandated to create post-harvest infrastructure and processing facilities to boost the overall development of the food processing sector, including reduction of post-harvest losses and enhancement of value addition.

Streamlining regulation: GST, FDI, and ease of doing business 🔗

Regulatory simplification has accompanied the investment push. The majority of food products fall in the 0% and 5% GST slabs, with nil GST applied on milk and its products, meat, fish, vegetables, nuts, and fruits. Services that do not alter the essential characteristics of fruits and vegetables also attract nil GST. These concessions directly reduce input costs and improve the competitiveness of domestic processors.

In 2016, the government allowed 100% FDI in the food processing sector through the automatic route. Existing infrastructure such as Kisan Rail and Krishi Udan, as well as the vast networks of SHGs and FPOs under the DAY-NRLM scheme, offers opportunities to bolster food processing efforts while also promoting local foods and traditional products such as pickles and papads.

Challenges that remain 🔗

Government support has created a strong foundation, but structural bottlenecks continue to limit the sector’s potential. Gaps remain in execution and outreach, particularly for smallholder farmers. Policies must focus more on addressing systemic issues such as fragmented supply chains, limited credit access, and poor infrastructure in rural areas. Robust monitoring and evaluation mechanisms are also required to ensure that government schemes translate into tangible benefits on the ground.

The key issue facing the food and agribusiness sector is the viability and scalability factor, which in turn is linked to the absence of efficient food supply chain mechanics. Most micro and small processors still lack access to reliable cold storage, quality testing facilities, and market linkages. Bridging this last-mile gap is critical if the government’s infrastructure investments are to yield their full returns.

India today hosts one of the world’s most dynamic agri-startup ecosystems, with over 7,000 enterprises supported by incubators, accelerators, and an increasingly confident investor community. Channeling this entrepreneurial energy into food processing – especially in underserved rural districts – can help unlock value that currently walks out through the back door as spoilage.

The road ahead 🔗

India is uniquely positioned to lead the next phase of global agri-food transformation. The country’s growing competitiveness is reflected in its export performance, and its evolution from a primary producer to a value-oriented participant in global food supply chains is well underway. The government’s layered approach – combining infrastructure grants through PMKSY, credit support through PMFME, production incentives through PLISFPI, and FDI liberalisation – addresses multiple nodes of the value chain simultaneously.

What remains is closing the gap between policy design and field-level outcomes, particularly for the millions of small and marginal farmers whose produce forms the raw material base of the entire sector. As budget allocations rise and institutional frameworks mature, the trajectory is positive – but the pace needs to accelerate if India is to match the processing levels of its global peers.

What do you think? Given that India processes only about 4.5% of its fruits and 2.7% of its vegetables despite being the world’s second-largest producer, which aspect of the system – infrastructure, credit access, or market linkages – do you think needs the most urgent attention? And with the government consistently increasing its budget for food processing year on year, what metrics should be used to evaluate whether this investment is truly reaching smallholder farmers?

References

1. https://www.mofpi.gov.in/
2. https://www.foodprocessingindia.gov.in/
3. https://www.investindia.gov.in/sector/food-processing