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Day 35 – Q 1.What are some of the favourable locational factors that should make India a favoured destination for setting up food processing industries by foreign investors? Illustrate.

1. What are some of the favourable locational factors that should make India a favoured destination for setting up food processing industries by foreign investors? Illustrate. 

विदेशी निवेशकों द्वारा खाद्य प्रसंस्करण उद्योग स्थापित करने के लिए भारत को एक पसंदीदा स्थान बनाने वाले कुछ अनुकूल स्थानीय कारक क्या हैं? उदाहरण देकर स्पष्ट करें।


Food processing is the transformation of raw ingredients into food, or of food into other forms. Food processing industry in India is a sunrise sector that has gained prominence in the recent years. This sector serves as a vital link between the agriculture and industrial segments of the economy. 


Stats (remember any 2 data):

  • The Indian food processing industry accounts for 32 per cent of the country’s total food market.
  • It is ranked fifth in terms of production, consumption, export and expected growth. 
  • It contributes around 
    • 14 per cent of manufacturing Gross Domestic Product (GDP).
    • 13 per cent of India’s exports. 
    • six per cent of total industrial investment.
    • Indian food service industry is expected to reach US$ 78 billion by 2018.
    • The Indian gourmet food market is currently valued at US$ 1.3 billion 
    • It is growing at a Compound Annual Growth Rate (CAGR) of 20 per cent.
    • India’s organic food market is expected to increase by three times by 2020

Locational advantages of India:

  • Raw material: India has a large agricultural sector employing half of its labour force. Hence, the raw material required by the food processing industry is readily available and accessible at lower cost. Also, Variety of domestic animals such as cows, buffaloes, goats, chicken, lamb, sheep etc., are reared (livestock in India equals its population). E.g. Milk co operatives established in western Indian states like Gujarat.
  • Coastal region: with around 7500km of coastline, accessibility to marine food processing favours the industry establishment. Similarly, large inland water resources supply the raw material required for the industry. E.g. only 5 coastal states of India accounted for around $4billion export of marine products.
  • Climate location: Having the monsoonal climate, India has favouring climate vis a vis growing the raw materials required for the food processing industries.
    • Further, 46 out of 60 soil types are present in India.
    • More than 26 types of climatic conditions and hence can cultivate large variety of fruits, crops, vegetables.
  • Indian geographical location: India is geographically close to key export destinations like Middle East, South East Asia who are the major importers of processed food. 
  • Being a peninsula and coastal transportation possible in large quantities, it would help in exports. E.g. Mega food parks established in coastal districts like Godavari food park, Satara food park etc., have boosted processed food exports due to low transportation charges.
  • The different locations of India have naturally available food raw material required for the industry. E.g. Minor forest produces like curry leaf, Tendu Patta, gallnut, Cane, Soapnut in states like Jharkhand used in many processed foods.
  • Being densely populated and with large population, India provides a large domestic market for the finished products. E.g. As per the ibef estimation, with proper marketing strategy, upto 60% of the processed food could be consumed domestically.

For all these reasons, FDI in food processing industry is lucrative for foreign investors. Also, rising urban population, increasing household consumption, policy support by government etc., makes India a favourable destination for foreign investors.


Food processing industry is expected to reach $300billion by 2020 as per estimates of the government. Owing to its potential, companies like Zomato, Swiggy, ITC etc., are investing on large scale in India. Government schemes like PM SAMPADA yojana, mega food parks, cold storage schemes etc., and national mission on food processing are steps in right direction. This would help in increasing farmer income as well as generating new jobs.

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