Impact of India Budget 2023–24 on Food & Beverages Industry

  • Published | 03 February 2023

The government’s intended primary focus on the development of 50 tourism destinations and improving connectivity, infrastructure and skill development initiatives, and income tax measures increasing people’s disposable income to spend on travel and leisure are expected to boost the growth of India food and beverages (F&B) industry indirectly, even though the industry’s expected relief measures are not directly addressed.

Impact of Budget Food & BeveragesThe food and beverages (F&B) industry feeds and provides employment and source of income to a significant number of people in India, the world’s most populous democratic country with more than 130 crore people. According to estimates, the India F&B industry contributes about 3% of the country’s GDP (gross domestic product). The F&B industry, as a single largest employer, has the workforce of about 75 lakh people in India. Among them, more than 60% belong to unorganized segment of business entities with one to less than 10 employees. Hence, the health and growth of the F&B industry is crucial for the growth of Indian economy.

India Food & Beverages (F&B) Industry – An Overview

The F&B industry, as a definition by global EDGE of US Commercial Services, comprises all companies business entities “involved in processing, packaging, and distributing raw food materials. In addition to packaged foods, the F&B industry includes fresh, prepared foods and alcoholic and nonalcoholic beverages. Any product meant for human consumption, aside from pharmaceuticals, passes through the F&B industry.”

The F&B service industry consists of dine-in restaurants, quick service restaurants (QSRs), cafes, cafeterias, fast food joints, catering businesses, and food transportation and delivery services.

Major Segments

Production and Distribution of food items are two major business segments of the F&B industry. The production segment includes the processing of agricultural produces, packaged food items, meats, milk and dairy products, fish and seafood, manufacturing of fruit-based and soft drinks, alcoholic and non-alcoholic beverages, and other value-added food products. The distribution segment consists of the activities of transporting and delivering finished food products to consumers.

Trends in India F&B Industry

Growing population and an increasing income in the urban and rural areas are two major drivers for the growth of India food industry. The India food processing industry has the 1.77 million-strong workforce. As per the estimates by the Ministry of Commerce and Industry, India exported about USD 10-billion worth of agriculture and processed food products in FY2022-23 (April–July 2022), up by 30% YoY. India processed food market is forecast to grow from Rs. 19.3 lakh crore (USD 263 billion) in FY2019-2020 to Rs. 34.5 lakh crore (USD 470 billion) by 2025. The rapid expansion of the market is due to the India government’s planned infrastructure worth USD one trillion and Pradhan Mantri Kisan Sampada Yojna. Under the automatic route, the Government of India allows 100% FDI (foreign direct investment) to the food processing sector. According to Department for Promotion of Industry and Internal Trade (DIPP), the India food processing industry received FDI worth about USD 7.5 billion between April 2000 and March 2017.

As per industry estimates, the India packaged food market size is forecast to boom reaching a value of USD 70 billion by 2025. Major growth factors for the India packaged food market include increasing hectic work schedules, the growing number of women in the workforce, and a shift toward on-the-go consumption.

Technology Advancements in India F&B Industry

Prominent players in the India F&B market are rapidly adopting innovative techniques (cloud kitchens) and technologies, such as blockchain, artificial intelligence (AI), geographic information systems (GIS), and various food delivery applications. Food delivery, adopting cutting-edge technologies and methods rapidly, is a courier service in which food is delivered to customers on demand by retailers, restaurants, or third-party mobile applications. Orders are now placed through mobile apps, websites, or over the phone. A retail food delivery service delivers meals from a restaurant, store, or independent food delivery company directly to clients. Food delivery services or a restaurant's website or mobile app are the most common methods of placing orders. These services can also transport a variety of foods, including restaurant food, desserts, salads, meal packages, groceries, and even vegetables. Orders can be placed through the outlets' websites or mobile apps, and they can also be reached directly by phone. Third-party food delivery applications or aggregators, such as Swiggy and Zomato, have also bolstered the India food delivery market. These trends are expected to boost the adoption of innovative and sustainable packaging across the India F&B industry. Nanofabrication technologies are emerging as innovative solutions, with the goal of developing active materials for use in the design of packages, coatings, and packaging technologies, which assist in preserving and improving the sensorial and nutritional characteristics and safety of food items, as well as increasing their shelf life. During COVID-19 pandemic's initial phase, e-commerce platforms and click-and-collect transactions increased. After the transition from offline to online and the development of new types of online shopping experiences with various touch points for consumers, sales of food packaging solutions utilized in the e-commerce business soared.

Impact of COVID-19 on India Food and Beverages Industry

During the first half of 2020, the India F&B industry has seen a dual impact on product demand because of the lockdown due to the COVID-19 pandemic outbreak in December 2019. The supply chain problems caused by the COVID-19 pandemic adversely affected the industry growth rate. Fluctuations in raw material prices, as well as rigorous government regulations on the use of plastic, further dampened the growth. India underwent curfew-like situations in which all businesses (except essential services) were prohibited from operating. The USD 50-billion restaurant industry in India was adversely affected by COVID-19 pandemic and resultant lockdowns and travel restrictions, as the industry is highly dependent on the human interactions and gatherings. The National Restaurant Association of India (NRAI) estimated that the India restaurant industry shrank almost half, recorded a heavy loss of about USD 9 billion, and more than two million people were at the risk of losing their jobs. Most of the restaurants shifted their focus from in-restaurant dining to delivery services and followed COVID-19 protocols. Post COVID-19 period, most of the restaurants continue to follow many of the covid protocols, such as more space and QR coded menu and payment options for contactless ordering and bill payments by digital payment platforms.

Due to uncertainties surrounding the COVID-19 scenario, customers engaged in impulse shopping and stockpiling foods and necessities, including food products with extended shelf lives. Products require packaging, and manufacturing is higher than ever. Consumers prefer packaged products over loose products, such as fruits and vegetables. Furthermore, consumers have preferred to purchase their food and beverages through channels other than those they used before to the pandemic.

Budget 2023-24: F&B Industry’s Expectations

          The India F&B industry, slowly recovering from the huge losses during COVID-19 pandemic, is facing the twin challengers of impending economic slowdown, job and income losses, and increasing inflation and food prices. In this backdrop, the industry was expecting that the India Budget 2023-24 would

  • reintroduce input tax credit (ITC) for the F&B sector. The industry experts opined that ITC could be a much needed relief for the sector, as the rising inflation resulting in high operating costs,
  • provide industry status to catering,
  • announce supportive policies with growth-oriented measures to increase demand and consumption,
  • skill development initiatives, and
  • simplify regulations and norms of Goods and Services Tax (GST) to support the F&B industry growth.


Budget 2023-24: Supportive Measures Mentioned for F&B Industry

On February 01, 2023, the India finance minister presented India Budget for the financial year 2023-24. The following measures are expected to aid the growth of tourism and hospitality sector, in which the F&B industry plays a key role:

  • “A total of Rs. 1.97 lakh crore is allotted to the food and allied sector.
  • An estimated budget outlay of Rs. 1,530 crore, as compared to the revised estimates of Rs. 801 crore during the previous year, for the Production-Linked Incentive (PLI) Scheme for food processing Industry.
  • For last and first mile connectivity for the ports, coal, steel, fertilizer, and food grains industries, 100 important transport infrastructure projects have been identified. With a total investment of Rs. 75,000 crore, including Rs. 15,000 crore from private sources, they would be given priority.
  • Promotion of tourism will be taken up on “mission mode”, with active participation of states, convergence of government programmes and public-private partnerships.
  • 50 destinations will be selected through challenge mode and would be developed as a complete package.
  • 50 additional airports, heliports, water aerodromes and advance landing grounds will be revived for improving regional air connectivity.
  • Revamped Credit Guarantee Scheme for MSMEs will take effect from 1st April 2023 through infusion of Rs. 9,000 crore in the corpus.
  • The cost of the credit will be reduced by about 1% under the revamped scheme.
  • Physical connectivity, virtual connectivity, tourist guides, high standards for food streets and tourists’ security, all the relevant aspects would be made available on an App to enhance tourist experience.
  • The focus of development of tourism would be on domestic as well as foreign tourists.
  • Sector-specific skilling and entrepreneurship development will be dovetailed to achieve the objectives of the ‘Dekho Apna Desh’ initiative.
  • Under the Vibrant Villages Programme, tourism infrastructure and amenities will also be facilitated in border villages.
  • Swadesh Darshan Scheme’ shall promote integrated development of theme-based tourist circuits.
  • States will be encouraged to set up a Unity Mall in their state capital or most prominent tourism centre or the financial capital for promotion and sale of their own ODOPs (one district, one product), GI products and other handicraft products.”


F&B Industry Experts’ Opinions – Expectations Vs. Reality

Most of experts in the India F&B industry opined that the Budget announcements for the tourism sector would enhance the hospitality sector, even though there was no mention about the direct support to the concerned industry. The F&B industry can gain from the tourism development initiatives, as it is a crucial part of travel and tourism. The CEO of a global QSR chain in India felt that the government’s increasing focus on promoting tourism on mission mode could boost the growth of F&B industry as well. The reduction in the income tax rate and an increase in the income tax limit to Rs. 7 lakhs per annum would enable people to spend more of their disposable income on food and leisure. Hence, it will augur well for the F&B industry and the restaurants segment.

The Federation of Hotel & Restaurant Associations of India (FHRAI) opined, “the focus on tourism promotion through the development of 50 tourism destinations as a whole package will help in the growth of domestic as well as international tourism. …The Hospitality industry’s long pending requests for Infrastructure status, uniform GST, and placing Tourism on the concurrent list of the constitution have not been met but the new announcements are positive signs of the Government’s intent about working on them in the near future”.

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