India Country Profile

Market Overview:

Euromonitor reports that India will have another year of strong growth in 2018. Private final consumption is the main driver but exports will also see impressive gains. Consumer spending is aided by a good monsoon season and public pay hikes. Confusion resulting from demonetization has lingering negative effects. Implementation of the new Goods and Services Tax (GST) was introduced in a cumbersome manner but the change should eventually boost consumption and improve the ease of doing business. Private sector investment however is slowing.

  • India should continue to be one of the world’s fastest-growing large economies. Real Gross Domestic Product (real GDP) will increase by 7.5% in 2018 – after gains of 6.4% in 2017
  • The real value of private final consumption grew by 5.6% in 2017 and an increase of 6.2% is expected in 2018
  • Unemployment was 4.8% in 2017 and it will increase to 4.9% in 2018 - India’s job creation is running at less than a tenth of what is needed to get its young people into the job market
  • The outlook for India’s economy is bright. Growth of real GDP will slip to about 5.5% per year by 2030

One of the few disappointing features has been the slow growth of both domestic and foreign investment. Investors are mainly concerned about India’s infrastructure deficit which continued to rise in recent years. Urban planning is also problematic with constraints tightening in transport, sanitation, hotel accommodation, and other facilities typically sought by investors. In response, New Delhi announced plans to invest US$137 billion in its ageing railway network in 2015-2020.

New Delhi’s plan to promote a “made in India” program could ultimately make the manufacturing sector a leading source of growth. Presently, the sector is less than half the size of China’s. It also lags behind the service sector, with limited contribution to exports and job creation. India’s goal is to raise manufacturing’s share of GDP to 25% from 16% today.

In 2012, India was the world’s 9th largest consumer market, roughly equivalent to that of Canada with a population less than 3% of India’s. However, the number of middle-class households will increase by 5.6% to more than 80 million by 2020. Demographic trends are also promising. By 2030, India will overtake China as the world’s most populous country. At that time, India will have more than one billion people of working age. Moreover, India’s working age population (as a share of total population) is expected to keep rising. Euromonitor information indicates there are nearly 960,000 households with annual incomes in excess of $150,000, up from 791,000 in 2010.

USDA’s Office of Agricultural Affairs (OAA) in Mumbai, hereinafter referred to as “Post”, reports that India is a lucrative export market for U.S. agriculture with a large and rapidly expanding middle class, rising disposable incomes, and shifting consumption patterns toward higher-value and processed products. India’s modern retail sector is expanding, food processors want access to a global supply chain, and food service chefs want to innovate and attract consumers. The U.S. is the largest supplier of consumer-oriented exported products to India.

U.S. exports of consumer oriented foods reached US$967.8 million in 2017, an astounding increase of 41% over that of the previous year and naturally a new record high. In 2017 India moved from 16th as an export market for U.S. consumer food products to the 11th slot. India is also a solid importer of processed foods from the U.S. totaling US$171.1 million in 2017, up 26% and also a new record high. Top U.S. processed food exports in 2017 included:

  • Food preparations
  • Chocolate and confectionery
  • Syrups and sweeteners
  • Prepared/preserved seafood
  • Distilled spirits and other alcoholic beverages.
  • Processed fruit
  • Condiments and sauces
  • Fats and oils
  • Processed/prepared dairy products
  • Processed vegetables and pulses
  • Snack foods

There are some competitive advantages U.S. food exporters have in the Indian food market:

  • Expanding number of middle and upper income consumers willing to diversify diets and experiment with various cuisines
  • Increasing urbanization and growing number of working women that has led to dual-income households
  • Increasing exposure to international products and international lifestyle by media and food channels that increase the visibility and awareness around imported food products
  • A gradual transformation of the retail food sector in urban and rural areas
  • U.S. food products are considered safe and of high quality
  • Strong U.S.-India ties and political stability in India
  • Growing domestic and international tourism and rise in food/lifestyle media creating opportunities for niche and high-value products

There are a number of formidable challenges for U.S. food exporters in India

  • Stringent food regulations regarding biotech foods and ingredients and certain food additives
  • Diverse agro-industrial base offering many products at competitive prices and preference for fresh traditional foods
  • Indian food companies (including many multinational companies) produce western-style food products also at competitive prices.
  • High tariffs, persistent sanitary and phyto-sanitary requirements that effectively prohibit or restrict imports and competition from other countries
  • Difficulties in accessing vast semi-urban and rural markets due to infrastructure limitations
  • High income consumers are spread throughout the country – no concentration
  • Competition from countries having geographical proximity and freight advantage
  • Preferential Trade Agreements with some countries e.g., Chile, affords them tariff benefits for a similar range of products

India has a free-trade agreement with Malaysia. Other agreements have been recently signed with Singapore and Japan. The recently concluded free trade agreement with ASEAN on services and investment also should help India’s service providers.

Products Not Present Because They Face Significant Barriers

Currently, there are several trade restrictions that limit market access for U.S. food products. Imports of most animal and livestock-derived food products are effectively banned due to established Indian import requirements. This includes certain sub- categories in the Harmonized Tariff Schedule under Chapters 2, 3, 4, 5, 16 and 21 (e.g., milk and dairy products, poultry meat, certain seafood, sheep and goat products, as well as pork products and pet food). Furthermore, imports of beef are banned due to religious concerns. If allowed, some of these products (e.g., cheeses and poultry) may have good sales potential for the retail sector.

Retail Sector:

According to Euromonitor, retail sales in the packaged food market in India had been estimated to reach US$63.4 billion in 2017, and it has risen to the 10th largest market in the world. That also represents a growth rate of 96.2% or US$31.1 billion since 2013. The forecast for growth in this market is phenomenal. By the year 2022, retail sales in the packaged food market in India is expected to reach US$120.1 billion, with a growth rate of 62.1%, or nearly US$46 billion. Forecast high growth products include:

  • Rice pasta and noodles
  • Breakfast cereals
  • Ice cream and frozen desserts
  • Savory snacks
  • Dairy products
  • Edible oils
  • Baby food
  • Processed meat and seafood
  • Processed fruit and vegetables
  • Spreads

Post reports that India’s food and grocery (F&G) retail business is estimated at US$380 billion out of which the modern food retail sector is valued at 2% of the total market. The F&G retail sector is dominated by traditional trade formats like neighborhood shops or kirana stores, which hold about 98% of the total market share. Modern trade formats like supermarkets and hypermarkets are stepping up to fulfil the needs of consumers and the market is reportedly growing at 15% per year and is estimated to double in the size by 2020.

A Euromonitor report on India’s food retail industry projects steady upward growth of hypermarkets and supermarkets by 15% and 12%, respectively in 2016. This growth has been riding on the sudden demonetization in November 2016, which led to a consumer shift away from cash purchases at kirana shops towards electronic payment options first at organized retailers, but has since returned back as the small shops enrolled in electronic payment programs or allowed e-wallet transfers.

The retail market for imported foods has grown slowly though developments over the past few years indicate a growing number of professional, brand-oriented importers and an increase in the number of modern retail outlets and hotels wanting to carry imported products. Unique labeling requirements, ongoing non-tariff trade restrictions, recently implemented GST, a weaker rupee, and a slow-to-develop distribution infrastructure continue to complicate the import process.

Organized and unorganized retailers supply imported food and beverage items based on their target audience. With the rise in organized retail chains and their expansion across value formats, there is an increasing awareness and specialization among companies to supply these businesses. These firms are equipped to comply with rigorous temperature and quality specifications on behalf of their clients and offer modern warehousing and transportation facilities. Retailers rarely import directly, relying on importers and distributors to handle the clearing and storage of products. However, a few of the larger modern retail chains import directly when they can spread the consignment across stores or value formats. Imported foods enter India from regional trading hubs such as Dubai, Singapore and Hong Kong as well directly from supplying countries.

Post reports that best prospects for U.S. food exporters in the Indian retail sector include:

  • Apples
  • Grapes
  • Almonds and pistachios
  • Whiskies and other alcoholic beverages
  • Sugar and chocolate confections
  • Snack foods
  • Frozen processed potatoes
  • Fruit juices
  • Sauces

Food Service Sector:

Post reports that India’s Hotel, Restaurant, and Institutional (HRI) Service Sector is benefiting from India’s relatively strong economic growth, foreign investment, and rise in dual income earning households, rising incomes, high aspiration levels, a young population, increasing tourism, and changing consumer consumption patterns. While opportunities for foreign food exporters to supply into the HRI sector are improving, the market for imported food products remains relatively small due to high tariffs, ongoing import restrictions, and strong competition from the domestic industry.

India has a vast hotel sector, but only a small percentage of hotels are considered three stars and above. The overwhelming majority of hotels are small, traditional outlets that provide inexpensive accommodations for travelers and source all of their food locally. According to the Government of India (GOI), Ministry of Tourism, there are over 1903 hotels and resorts in India that constitute the “organized” or modern sector. Nevertheless, as foreign and domestic travel has increased in recent years, the number of modern hotels that carry at least small amounts of imported foods on their menus is on the rise. Furthermore, some hotels are able to obtain a special license that enables them to purchase food and beverage items (and other items such as equipment and furniture) duty-free subject to their foreign exchange earnings. Hotels tend to use the duty-free licenses to purchase items with the highest import tariffs and may not use the licenses to purchase food.

Indians have tended to eat at home and the cuisine of choice has been traditional Indian foods. India appears to be in the early stages of a significant transformation in the restaurant sector and Indian consumers are dining out more frequently and shedding biases against international franchises and foreign foods. With an estimated 100,000 modern, organized restaurants (20 or more seats, wait staff, menus) in India, there is plenty of room for industry growth. As per the 2016 India food service report published by the National Restaurant Association of India (NRAI), the total food service market is valued at US$48.3 billion and is expected to grow to US$77.8 billion by 2021.

Of note, India’s quick service and casual dining restaurant sector has regained momentum since 2016. There are an estimated 63 foreign restaurants brands across India compared to 57 in 2015. Indian brands are diversifying into regional cuisines and several are challenging international brands which are busily expanding their footprint. Market opportunities exist for U.S. companies interested in supplying ingredients, processed foods, and non-native fruits and vegetables for this component of the food service sector.

The institutional sector is geared in large part to serving public sector institutions such as the Indian railways and public office canteens. Corporate catering is a relatively new concept, but some large companies are providing meals to their employees at subsidized rates. Catering for parties and special events is a common and longstanding practice in India, but is dominated by traditional caterers providing local foods and cuisines. However, even traditional caterers have expanded their menus to include live cooking stations, pasta bars and other non-Indian cuisines. Cost is a major factor in the institutional sector and the high cost of imported food products limits opportunities for exporters in this sector unless the product is perceived as exceptionally unique and affords the caterer a unique opportunity of product extension and application.

Factors Driving HRI Food Service Growth:

Foreign and Indian fast food and casual dining chains are increasing in number and existing chains are adding outlets. A significant weakening of the rupee over the past year and a half could prompt more Indians traveling within India (versus abroad) and encourage more foreign travelers to visit the country.

The following list outlines some factors expected to facilitate long-term growth:

  • HRI chefs are keen to introduce new cuisines and culinary practices;
  • International hotel chains are penetrating the Indian market and bringing along new cuisine and dining experiences;
  • The increasing number of shopping centers and shopping destinations make food service through retail a more preferred location;
  • The growing trend for convenience in food courts and full-service restaurants in shopping centers;
  • Dine-in locations expanding inside hypermarkets and supermarkets for easy access to attract consumers;
  • Rising numbers of dual earning households, increased urbanization, and a very young population are all expected to lead to lifestyle and eating pattern changes;
  • Strong growth in casual dining and fast food sectors from both domestic and foreign chains which are introducing new dining options and foods;
  • Stable political scenario is expected to act as a catalyst in increased number of business and leisure travelers;

Post reports that best prospect products for U.S. food suppliers for the Indian HRI sector include:

  • Almonds
  • Pistachios
  • Fresh or dried grapes
  • Distilled spirits
  • Fresh apples pears and quinces
  • Cocoa and preparations
  • Fruit juices
  • Wine
  • Sauces, dressings and condiments
  • Cheese

Food-Processing Sector:

Post reports that India’s food processing sector continues to grow in response to changing demographics, evolving preferences for branded and convenient items, retail and food service sector modernization, and government efforts to develop food manufacturing. Increasing health consciousness is influencing the development and sales growth of packaged foods. Imports of non-standardized processed foods and ingredients remain a challenge, though regulatory reforms are supporting progress.

Increasing urbanization, lifestyle changes, greater affluence, and increased rates of women working outside of the home are driving demand for processed foods. According to the India Brand Equity Foundation (IBEF) 2017 Indian Food Processing report, the Indian food processing industry accounts for 32% of the country’s total food market. It contributes around 8.8% and 8.4% of Gross Value Added (GVA) in Manufacturing and Agriculture, respectively. In addition, it accounts for 13% of India’s exports and 6% of total industrial investment.

As per the 2016-2017 Annual Survey of Industries, there are 37,175 registered food processing units in the country that employ approximately 1.7 million people in food and beverage manufacturing. According to an Assocham Grant Thorton study, the Indian food processing sector has the potential to attract US$33 billion in investment and generate employment for 9 million persons by 2024.

The Government of India (GOI) ‘Make in India’ campaign launched in 2014 facilitates investment in manufacturing in various sectors; including, food processing. With the campaign, the government aims to reduce food losses and keep food inflation in check while generating local employment and demand for local agricultural products. Food parks are under development across the country to support domestic demand for processed foods, beverages, and ingredients for food service and retail sale.

The Ministry of Food Processing Industries (MoFPI) is an advocate for investing in India with the goal of exporting processed products as well as catering to domestic demand.

With the spread of cafés, chain restaurants, modern retail and efforts to attract investment in cold chains and food logistics, the food processing industry is expanding. Incentives and subsidies are offered for a variety of programs. A government study entitled “Human Resource and Skill Requirements in the Food Processing Sector (2022)” indicates that MoFPI will provide subsidies and incentive programs for cold chain infrastructure, storage and warehousing facilities, modernizing slaughter houses, as well as food park and laboratory development.

In volume and value terms, sales of every category of processed foods increased significantly between 2012 and 2016. Industry sources estimate that over 400 million consumers consume some type of processed food regularly. Urban areas account for over 75% of sales as consumers seek convenience and quality. For higher-value frozen and refrigerated foods, sales are almost exclusively in urban areas. Rural areas tend to have lower incomes and a preference for fresh ingredients. Nevertheless, rural areas are emerging as a market for well-priced, shelf-stable foods. Consumers in developed markets are more open to the idea of packaged food, which manufacturers often position for convenience, nutrition, and food safety.

Post reports that best prospects in the sector include:

  • Tree nuts (especially almonds)
  • Cocoa and cocoa preparations
  • Products for the milling industry – malt, starches, insulin and wheat gluten
  • Leguminous vegetables - dried shells and pulses
  • Fresh apples and pears and fresh or dried grapes
  • Fruit juices
  • Beverages
  • Spirits
  • Vinegar
  • Essential oils, concentrates


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