A Study on the effects of

PLI Scheme on
the FMCG (Food Processing)
Sector of India

Pranveer Singh Institute of Technology MBA Mini Project II

 DESCRIPTION OF INDUSTRY

The fast-moving consumer goods (FMCG) sector is India's fourth-largest sector with

household and personal care accounting for 50% of FMCG sales in India.

Growing awareness, easier access, and changing lifestyles have been the key growth drivers for

the sector. The urban segment (which accounts for a revenue share of around 55%) is the largest

contributor to the overall revenue generated by the FMCG sector in India. However, in the last

few years, the FMCG market has grown at a faster pace in rural India compared to urban India.

Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50%

of the total rural spending.

Market Size

The Indian FMCG industry grew by 16% in CY21 a 9-year high, despite nationwide lockdowns,

supported by consumption-led growth and value expansion from higher product prices,

particularly for staples.

The rural market registered an increase of 14.6% in the same quarter and metro markets recorded

positive growth after two quarters.

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Final consumption expenditure increased at a CAGR of 5.2% during 2015-20. According to Fitch

Solutions, real household spending is projected to increase 9.1% YoY in 2021, after contracting

>9.3% in 2020 due to the economic impact of the pandemic.

The FMCG sector's revenue growth will double from 5-6% in FY21 to 10-12% in FY22,

according to CRISIL Ratings.

Price increases across product categories will offset the impact of rising raw material prices, along

with volume growth and resurgence in demand for discretionary which ms, which are driving

growth.

The FMCG sector grew by 36.9% in the April-June quarter of 2021 despite lockdowns in various

parts of the country.

The FMCG market in India is expected to increase at a CAGR of 14.9% to reach US$ 220 billion

by 2025, from US$ 110 billion in 2020.

In September 2021, rural consumption of FMCG increased 58.2% YoY; this is 2x more the urban

consumption (27.7%).

In the third quarter of FY20 in rural India, FMCG witnessed a double-digit growth recovery of

10.6% due to various government initiatives (such as packaged staples and hygiene categories);

high agricultural produce, reverse migration and lower unemployment.

Rise in rural consumption will drive the FMCG market. The Indian processed food market is

projected to expand to US$ 470 billion by 2025, up from US$ 263 billion in 2019-20.

Pranveer Singh Institute of Technology MBA Mini Project II

Pranveer Singh Institute of Technology MBA Mini Project II
 EMERGING TRENDS AND TECHNOLOGIES IN THE

INDUSTRY

Production Linked Incentive Scheme

PLI Scheme, as the Production Linked Incentive Scheme is commonly abbreviated as, is an

initiative started by the Government of India to not only encourage foreign companies to find

workforce in the country and thereby generate employment, but also encourage domestic and local

production to create micro jobs

The Production Linked Incentive Scheme (PLIS) proposes financial incentives to modernize and

enhance the competitiveness of the food processing industry by manufacturing specific categories

of food products having high potential for growth in output and value addition.

Hon'ble Finance Minister, Smt Nirmala Sitharaman has announced an outlay of INR 1.97 Lakh

Crores for the Production Linked Incentive (PLI) Schemes across 14 key sectors, to create

national manufacturing champions and to create 60 lakh new jobs, and an additional production of

30 lakh crore during next 5 years.

Background:

 The food processing sector in India encompasses manufacturing enterprises in all the

segments from micro to large industries.

Pranveer Singh Institute of Technology MBA Mini Project II

  India is having competitive advantage in terms of resource endowment, large domestic

market and scope for promoting value added products.

 Achieving full potential of this sector would require Indian companies to improve their

competitive strength vis-à-vis their global counterpart in term of scale of output,

productivity, value addition and their linkages with the global value chain.

 The Production Linked Incentive Scheme for Food Processing Industry has been

formulated based on the Production Linked incentive scheme of NITI Aayog under

“AatmaNirbhar Bharat Abhiyaan for Enhancing India's Manufacturing Capabilities and

Enhancing Exports”

Scheme Objectives:

 Support Food manufacturing entities with stipulated minimum Sales and willing to make

minimum stipulated investment for expansion of processing capacity and Branding abroad

to incentivise emergence of strong Indian brands.:

 Support creation of global food manufacturing champions;

 Strengthen select Indian brand of food products for global visibility and wider acceptance

in the international markets;

 Increase employment opportunities of off-farm jobs,

 Ensuring remunerative prices of farm produce and higher income to farmers.

Salient features:

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  Central Sector Scheme with an outlay of Rs. 10900 crore

 The first component relates to incentivising manufacturing of four major food product

segments viz. Ready to Cook/ Ready to Eat (RTC/ RTE) foods including Millets based

products, Processed Fruits & Vegetables, Marine Products, Mozzarella Cheese.

 Innovative/ Organic products of SMEs including Free Range - Eggs, Poultry Meat, Egg

Products in these segments are also covered under above component.

 The selected applicant will be required to undertake investment, as quoted in their

Application (Subject to the prescribed minimum) in Plant & Machinery in the first two

years i.e. in 2021-22 & 2022-23.

 Investment made in 2020-21 also to be counted for meeting the mandated investment.

 The conditions of stipulated Minimum Sales and mandated investment will not be

applicable for entities selected for making innovative/ organic products.

 The second component relates to support for branding and marketing abroad to

incentivise emergence of strong Indian brands.

For promotion of Indian Brand abroad, the scheme envisages grant to the applicant

entities for - in store Branding, shelf space renting and marketing.

Scheme will be implemented over a six year period from 2021-22 to 2026-27.

Major impact, including employment generation potential:

 The implementation of the scheme would facilitate expansion of processing capacity to

generate processed food output of Rs 33,494 crore and;

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 Create employment for nearly 2.5 lakh persons by the year 2026-27.

Pranveer Singh Institute of Technology MBA Mini Project II