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India Incents Foreign Food Business in the Country

Since the turn of the century, direct investment from the U.S. into India business has significantly increased, and Union Food Processing Industries Minister Pashupati Kumar Paras recently urged foreign investors to continue this trend in the country’s food processing sector. The address from the minister was made at India’s World Food India 2023 event in November, held for the purpose of introducing the world to its food culture and promoting investments in the country’s diverse food processing sector.

Citing India’s food processing sector as emerging as a “sunrise” industry, Prime Minister Narendra Modi noted the sector has attracted ₹50,000 crore ($6 billion) in foreign direct investment in the past nine years as a result of the government’s pro-industry and pro-farmer policies. Exports of processed food also have increased 150% in the last nine years, and with the domestic processing capacity expanding as well. The event at which the two spoke providing education and networking for government bodies, industry professionals, farmers, entrepreneurs and other stakeholders, and CEOs roundtables were held to focus on investment and ease of doing business. Its success was evidenced by the signing of Memorandums of Understanding (MOUs) worth Rs 33,129 crore ($4 million), with a number of foreign companies including Mondelez, Kellogg’s, and AB InBev.

But the event is just one factor in India’s recent focus on expansion of its food processing sector, as the country recently announced further production-linked incentives in five key industries, including food processing, with $24 billion industrial incentives aimed at boosting local manufacturing in the sectors.

India also is making it easier for export-oriented food businesses to do business in the country, as evidenced by a recent advisory by the Food Safety and Standards Authority of India (FSSAI) stating that the customs department would no longer be obligated to secure FSSAI clearances for food ingredients or items that are brought into India with the intent of re-export or for the production of value-added items specifically destined for export markets. The FSSAI also waived the need for clearances for food ingredients or items imported by manufacturers or processors for their captive use or production of value-added products for 100%  exports. The move to waive clearances is being seen as a “catalyst for a more efficient, accessible, and globally competitive food industry in India” as importers and manufacturers derive a number of benefits including:

  • Streamlined import process due to the removal of the clearance requirement, which reduces both time and costs associated with food importing.
  • Enhanced access to raw materials, with the waiver benefiting manufacturers by enabling easier access to raw materials essential for the production of value-added goods intended for export.
  • Increase export opportunities are gained as hurdles in importing essential ingredients are removed, enabling businesses to scale up production of high-quality food products for international markets.

While the moves benefit individual businesses, they also are expected to significantly increase India’s food exports, as they enable Indian businesses to more effectively cater to global demand.

According to Harvard Business Review, a number of global analysts have begun declaring India to be the next “great economic power.” Goldman Sachs, for example, has predicted India will become the world’s second largest economy by 2075, and Financial Times suggested that by 2050, India’s purchasing power will be 30% larger than that of the U.S. While there has been similar “Indo-optimism” in the past, the Review sees several positive new (and converging older) trends that could fuel its success this time.

Given that, however, it is critical that companies seeking to do business in, or with, India first understand the country, its people and its culture, as well as the business benefits and challenges of doing so – as  companies such as Amazon, Disney and MacDonald’s have successfully shown … but others, such as Netflix, fell far short.

TAG recognized the growth potential in India and the growing number of companies that are importing products from India or setting up operations in the country. To that end we have establish a presence there and now have full-time employees located in India.  With this “boots on the ground” presence, experience in assisting food exporters and importers, and extensive and active expertise in import and export regulations in the U.S., Canada and other countries, TAG is well-suited to assist companies who are interested in India food businesses. Give us a call to help you get in on the ground floor of India’s escalating growth!

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