Food Processing Sector in IndiaReport Highlights:The food processing sector in India, although still in its infancy, has undergone significant changes over the last six to seven years. The types, variety, quality and presentation of products have all improved, mainly due to economic liberalization, which has led to foreign direct investment (FDI) in this sector. Several multinational companies, including American companies like Pepsi, Coca Cola, ConAgra, Cargill, Heinz and Kellogg's, have invested in the Indian food industry. The growth of the food processing sector has led to increased interest in quality food ingredients to produce higher quality foods.I. MARKET SUMMARYThe Indian agribusiness sector, although still developing, contributes 14 percent to manufacturing GDP (5.5 percent of overall GDP) and produces goods worth Rs. 2.8 trillion ($64 billion) and employs 13 million people. Much of the Indian food processing industry is small and involves very little value addition, although in recent years several multinational food processing companies have started operations in India (see section II. C). A plethora of internal restrictions, including (a) ban on foreign direct investment in retail, (b) ban on contract farming, (c) barriers to interstate commerce based on revenue concerns and food safety, (d) some of the highest taxes on food products. processed foods worldwide, and (e) inefficient infrastructure and marketing networks are seriously hampering the growth of the sector. The availability of fresh produce almost year-round across the country, combined with consumer preference for fresh produce and freshly cooked foods, has dampened the demand for processed food products. The level of processing varies across segments – ranging from less than 2 percent of production in the case of fruits and vegetables to more than 90 percent for non-perishable products such as cereals and pulses. In the latter, however, processing involves very little added value and is mainly limited to grading, cleaning, grinding and packaging; with negligible use of additives, preservatives and flavorings. LEVEL OF PROCESSING OF PERISHABLE PRODUCTS Product processing level (% of total production) Organized Sector Unorganized Sector 1/ Total Fruits and vegetables 1.2 0.5 1.7 Milk 15 .0 22.0 37.0Meat 21.0 0 21.0Poultry 6.0 0 6.0Marine fishing 1.7 9.0 10.7 Shrimp 0.4 1.0 1.4 Source: Rabobank Analysis1/ “Unorganized » in fruits and vegetables includes unbranded pickles, sauces and chips, but excludes processing by street vendors; “unorganized” in the dairy sector includes processing by sweet food manufacturers; “unorganized” in marine products includes processing by small-scale fishermen. According to the Ministry of Agro-Food Industries (MFPI), over the last decade the agri-food industry has experienced average annual growth of 7.