FDI in food processing

Topic: Economy

Context:

FDI in food processing surged 86% in April-Sept FY22.

Concept:

The food processing sector witnessed a surge in Foreign Direct Investment (FDI) inflows in FY22 after it had recorded a massive dip in inflows in the previous fiscal.
According to the Survey, FDI in the food processing sector in April-September 2021-22stood at $410.62 million.
This was up 86 per cent compared to the corresponding period in the previous year.
FDI inflows in the sector in the April-September period in 2020-21 was at $220.42 million.
Overall, in FY21, FDI inflows in the sector had declined by about 56 per cent to about $393.4 million from $904.7 million in FY 2019-20. The massive dip was likely due to the pandemic outbreak in the year.
“The sector has witnessed FDI equity inflow of $4.99 billion during the period April2014 to September 2021.
The FDI equity inflow in sector during April to September 2021 was $410.62 million in comparison to $220.42 million in the corresponding period last year,” the Survey said.
The government allows 100 per cent FDI in the food processing sector under the automatic route.
However, in case of trading of food products manufactured or produced in India, including through e-commerce, 100 per cent FDI is allowed under the Government approval route.

Food processing:

Food processing sector in India is a composite sector comprising two broad segments viz. organized and unorganized segments.
There are an estimated 25-lakh micro food processing enterprises in the country, which are unorganized and unregistered.
With 7% of investment in plant & machinery, the unorganized enterprises contribute of 74.3% of employment (a third of which are women), 12% of output and 27% of value addition in the food-processing sector.
Nearly 66 per cent of these units are located in rural areas and about 80 per cent of them are family-based enterprises.
The organized sector with nearly 40,000 units accounts for 93% of the plant & machinery in the sector, in value terms.
This segment accounts for 26% of employment and contributes around 90% of output and 72% GVA

Government initiatives:

The various component schemes under PMKSY being implemented by the Ministry include