Firm should use FDI to do effective business:
In India the food processing industry is one of the sunrise industries whose capability has been identified well but not realized satisfactorily. The food processing sector in India covers a wide range of finished and intermediate raw products. The Indian Government has allowed 100% FDI (foreign direct investment) in the sector of food processing through automatic route. Thus Foreign Direct Investment not only supplements and complements domestic investment but also brings best managerial practices and state-of-art technology thereby offering better access to domestic industry and foreign technology. One of the biggest in terms of export, consumption and production prospects is the Indian food processing market. Though India is one of the biggest producers of food worldwide, with new reforms controlling the roost, it motivates commercialization. The food processing market of the country is setting up a vast number of investors across the world (Gutcho, 1991). Nevertheless foreign direct investment is critical for the economy not only because it adds to the resources of investment in some of the difficult factors but also because of the technology transfer and other skills which come along with foreign direct investment. In India the acceleration in FDI in the past two years is the identification of the developing economic strength of the Indian economy in food processing sector.
India is the 7th biggest country, with expanded independence judiciary and framework, a sound infrastructure and financial network and above whole thriving and stable democracy. Due to India’s diverse agro-climatic situations it has huge base and vast ranging of raw material base suitable for food processing industries. Currently only small number of materials are processed into value added products. India is one of the largest arousing markets, with around 250 million strong middle class and 910 million populations. Increased literacy, rising per capita income and wide urbanization has all caused wide development and alterations in patterns of demand leading to vast number of opportunities for destroying huge latent market. Around 50% of the Indian households spend most of their expenditure on food items. India’s comparatively reasonable workforce can be utilized to establish huge less cost production bases effectively for export and domestic markets. Better opportunities of investment occur in several food processing industry areas. Automatic government approval is allowed for foreign direct investment up to 100% equity of companies in India for entire beverages and food except for alcoholic items and beverages reserved for small scale sector. The food processing industry declares a priority sector and the new Exim Policy places higher thrust on Agro based Industries. Agro based 100% Export Oriented Units permitted sales up to 50% in Domestic tariff Area. India is world’s 3rd biggest food producer due to diverse agro-climatic conditions and big traits of irrigated and arable land. A vast number of big raw materials are suitable for food processing industries (Edwardson and MacCormac, 1986).
In the past decade, India moved from a scarcity era to surplus, in the food production area. Similarly the opinion of the analysts is that the Indian Food Processing Industry in India is on an ensured development of profitability and growth over the upcoming years. It is also calculated that in India the food-processing market will grab the attention of phenomenal investment in the form of financial, capital, technological factors of around United States $33 million by 2010.