Food manufacturing offering higher revenue rise than IT

Monday, 16 February 2004, 20:30 IST
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NEW DELHI: The Indian food industry, which has grown 2.5 times faster than agriculture, is offering revenue increase in absolute terms over IT and pharmaceuticals, according to an updated CII-Mckinsey FAIDA report. The Foods and Agriculture Integrated Development Action (FAIDA) report states that the level of value addition in food in India has gone up, driven by changing consumer preferences. "The absolute revenue increase in food manufacturing at 900 billion between 1993 and 2000 is significantly greater than that in IT and pharmaceuticals," the Confederation of Indian Industry (CII) stated in the report released Sunday. While pharmaceuticals and IT witnessed 150 billion and 300 billion in revenue addition respectively between 1993 and 2000 at current prices, the food sector saw a rise of 900 billion, the report said. Despite being one of the largest agricultural producers, including in fruits and vegetables, the growth in India's food processing sector has been slower than anticipated. The worth of the Indian food industry has gone up from 3.09 trillion in 1993-94 to 3.99 trillion in 2000-01. As a part of the agriculture sector, the value addition segment has recorded a 7.1 percent growth in the last seven years, compared to 3.1 percent for farm and livestock segment. While overall products like as wheat flour, fruit juices, ready-to-eat foods, soft drinks, pickles and savouries have grown at over 10 percent annually, the growth is over 20 percent in the organised sector for products like pickles, savouries and 'papad'. According to the CII-McKinsey FAIDA report, if India is to achieve the 5 trillion food processing potential by 2005, it will have to create market driven linkages across the entire chain through partnerships and virtual linkages, rather than do-it-alone or build infrastructure. The report suggests that the success of companies in this sector lies in developing innovative products driven by consumer insights and delivery with quality, convenience and the right price in mind. "A distributed, asset-light manufacturing model and an innovative distribution system are essential elements of this system," the report states. It adds that while the direction and potential were clear, the pace of change towards realising this potential is uncertain. Direct access to agricultural produce, a level playing field through tax reform and a revised food law are among prerequisites sought by the industry for faster growth of the food industry potential. This would "push growth of key enablers such as retail, reduce market interference and proactively facilitate industry initiatives and exports", the report states. According to it, integrated action from the government and corporate sector would bring "greater returns and lower risk for farmers, improved quality and variety at lower price to the consumer, new and profitable business opportunities for the industry, and employment creation and demand growth for the country". While mass-market basic foods were expected to remain the largest segment, value-added products like 'rotis' and ready-to-cook/eat products and condiments were also growing rapidly. In addition there was a growing niche market for exotic product categories in addition to exports. "Exports of food products can become a valuable growth driver for the industry, leveraging the historic base, new specialty categories and other areas where India can build a distinctive advantage and a strong brand," the report stated. In addition to manufacturing, the report sees significant growth in terms of input providers, logistics suppliers and retail.
Source: IANS