“The Production Linked Incentive Scheme for Food Processing (PLISFPI) has significantly boosted India’s food manufacturing capabilities and expanded its global presence. However, several critical gaps and structural challenges still hinder its full potential.”
To support policy evolution, the Centre for Advanced Trade Research (CATR) conducted a stakeholder survey capturing industry perspectives on PLI’s performance, priorities, and future expectations. The findings underscore support for the scheme’s objectives, especially its impact on MSME participation, export growth, and market expansion.
However, challenges such as limited regional outreach, procedural complexity, low R&D investment, and financing constraints continue to inhibit wider sectoral transformation. This research note synthesizes those insights and outlines actionable recommendations for PLI 2.0—ranging from simplified processes for MSMEs and R&D-linked incentives to enhanced export facilitation and rural integration. It highlights the strategic imperative for India to shift from production expansion to building a globally competitive, innovation-led, and inclusive food processing ecosystem.
India’s food processing sector is at the cusp of strategic transformation, backed by government-led production incentives and rising global demand for value-added agri-food products. Among the 14 key sectors identified under the Production Linked Incentive (PLI) scheme, food processing stands out for its unique role in linking farm-level production with global consumer markets.
With ₹10,900 crore allocated for implementation from FY 2021–22 to FY 2026–27, the PLI scheme seeks to expand manufacturing capacity, drive domestic and foreign investment, and foster innovation in high-potential categories such as Ready-to-Eat foods, marine products, processed fruits, and dairy. As the sector now transitions toward a more innovation-driven and inclusive policy framework under PLI 2.0, the findings support a shift from capacity-led to competitiveness-led incentives, rooted in rural integration, research support, and market readiness.
Over the past decade, the sector has demonstrated consistent growth, with its Gross Value Added (GVA) rising from ₹1.61 trillion in 2015–16 to ₹1.92 trillion in 2022–23, and an average annual growth rate (AAGR) of 5.35%. The employment base also expanded from 17.73 lakh in 2014–15 to 20.68 lakh by 2021–22, reflecting the sector’s labor-intensive nature. The export profile has similarly improved—processed food exports surged from US$ 4.4 billion in 2018-19 to US$ 7.9 billion in 2024–25, and their share in total agri-food exports rose from 13.4% in 2018-19 to 16.7% in 2024-25 (HS Codes 16-22).
The export dynamism has been supported by rising foreign investor confidence, with the food processing industry has received Rs. 85,343 crore (US$ 12.96 billion) in FDI equity inflows from April 2000-September 2024 as 100% FDI is permitted under the automatic route in food processing industries. These trends underscore the food processing sector’s growing macroeconomic relevance and its potential as a driver of rural transformation, value chain integration, and global market competitiveness.
The PLI Scheme for food products has documented investments totaling Rs. 9,032 crore (US$ 1 billion), leading to production and sales amounting to Rs. 380,350 crores (US$ 44.2 billion) and creating employment for 3,40,116 individuals. This initiative has bolstered SMEs by promoting innovation, enhancing competitiveness, broadening market access, creating job opportunities, and supporting the wider value chain within the food processing sector.
The CATR survey reveals emerging trends shaping the food processing sector:
Effectiveness of PLI Scheme: The CATR survey highlights diverse views on the PLI Scheme’s impact on India’s food processing sector. Many stakeholders rated it “very effective” (42%) for boosting production, exports, and MSME participation, but others found it only “somewhat effective” (26%) or neutral (18%), with a few labeling it “ineffective”(8%). Uncertainty among some respondents suggests awareness gaps (6%), underscoring the need for better implementation and engagement strategies.
Most Visible Impact of the PLI Scheme – Industry stakeholders emphasized MSME participation (22%), export growth (23%), and new processing facility investments (23%) as key impacts of PLI Phase 1, alongside increased production capacity (19%). However, some noted minimal impact in regions with low awareness. This reflects the scheme’s success in driving MSMEs and export growth but highlights uneven regional and sectoral outcomes.
Food industry segments benefiting the most: Ready-to-eat and processed foods with 50% were identified as the top beneficiaries of the PLI scheme, followed by organic and health-focused product by 32%, with marine, meat, and dairy products also gaining significantly. Some mentions of edible oils indicate targeted benefits. This aligns with global demand for convenience and health-oriented foods, showcasing the scheme’s market relevance.
Most lacking support in the current policy environment – Access to credit and finance emerged as the primary policy gap, noted by 28% of respondents, underscoring the financial barriers faced by MSMEs. Quality certification and global branding (20%) and export market facilitation (16%), reflecting challenges in meeting international standards. Logistics and cold chain infrastructure (16%) and R&D and technology support (14%) were also highlighted, pointing to operational and innovation bottlenecks.
Additional concerns include raw material cost volatility and weak state-level implementation, emphasizing the need for PLI 2.0 to enhance financing access, streamline certification processes, strengthen export support, and invest in infrastructure and innovation to drive global competitiveness and inclusive growth.
Below outlines are actionable strategies for PLI 2.0 recommended by industry to address gaps and enhance the food processing sector’s competitiveness, inclusivity, and innovation, would be concise, impactful, and reflective of the forward-looking vision.
Expand R&D and innovation support: To align with global trends, PLI 2.0 should prioritize robust incentives for research and development, focusing on product development, sustainable packaging, and nutritional innovation. Investments in high-value segments like nutraceuticals, plant-based proteins, and millet-based products can enhance India’s competitiveness in health-conscious markets.
Simplify MSME processes: Streamlining application, approval, and compliance processes is critical to boost MSME participation in PLI 2.0. Simplified procedures, including digital platforms for submissions and clear guidelines, can reduce bureaucratic hurdles faced by smaller enterprises. Providing dedicated support for navigating regulatory requirements will enhance accessibility, encourage broader MSME engagement, and foster innovation.
Enhance export support: Provide targeted assistance for international certifications, branding, and market access to boost global competitiveness. Facilitating trade fairs, buyer-seller meets, and export promotion councils will enhance market penetration. This strategy will help Indian exporters capitalize on growing demand for processed foods, securing a larger global market share.
Strengthen FPO and rural integration: By integrating FPOs into supply chains, the scheme can ensure consistent raw material supply while boosting farmer incomes. Support for rural processing units and training programs will empower local communities, reduce post-harvest losses, and promote decentralized industrialization.
Improve Infrastructure Linkages: Synergizing PLI 2.0 with schemes like PMKSY and PM Gati Shakti can address critical logistics and cold chain infrastructure gaps. Investments in Mega Food Parks, cold storage networks, and efficient transport systems will enhance supply chain reliability. Streamlined coordination with these initiatives will reduce operational bottlenecks, lower costs, and improve product quality for exporters.
Link Incentives to Sustainability: PLI 2.0 should tie disbursements to employment generation and environmental sustainability outcomes to align with global priorities. Incentives for adopting eco-friendly packaging, energy-efficient processing, and waste reduction will enhance the sector’s environmental footprint. Linking benefits to job creation, especially in rural areas, will drive inclusive growth.
Quality certification and Branding support: A notable stakeholders emphasized the lack of quality certification and global branding support, aligning with global trends toward clean-label products, suggesting PLI 2.0 could prioritize branding to boost India’s premium market competitiveness.
Hence, PLI 2.0 can represents a strategic recalibration of India’s food processing policy that seeks to address PLI 1st phase shortcomings while aligning with future opportunities in the global food economy. By integrating innovation, sustainability, and inclusivity into its framework, the PLI 2.0 scheme can enhance the potential to catalyze a paradigm shift in the sector.
Enhanced support for R&D, focus on high-growth product segments, MSME empowerment, and alignment with broader policy ecosystems position PLI 2.0 can play as a transformative force. If effectively implemented, it could redefine India’s competitive edge in food exports, foster rural development, and elevate the country’s standing as a trusted supplier of value-added, health-oriented food products worldwide.
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