CII expects processed food industry to grow 15 per cent plus in 2008-09

New Delhi: The Indian processed food industry growth outlook for the year 2008-09 will grow by more than 15 per cent, according to a snap poll on processed food industry conducted by the Confederation of Indian Industry (CII)

The positive growth outlook revealed by 78 per cent of the CEOs is backed by expected growth in domestic market size, launch of new products and expected increase in exports during the current year.

While the CEOs expected a positive growth outlook during the current year, the pressure on their profit margins was indicated to be high due to increased cost due to high interest rates (as reveald by 72 per cent of the CEOs) and increase in commodity prices leading to increase in raw material costs (as revealed by 86 per cent of the CEOs).

Despite the pressure on margins, the majority of the CEOs revealed that the processed food industry expects increase in capacities during the current year, said a CII official.

The outlook on investments during the current year strongly suggests continuation of expansion plans - as revealed by 94 per cent of the CEOs who have indicated that expansion plans are on track in their own companies.

92 per cent of the CEOs revealed that they are engaged in research and development (R&D) programmes during the current year, of which, 50 per cent of them said that their annual expenditure on R&D during the current year is expected to be up to 1 per cent of their annual turnover and another 25 per cent of the CEOs revealed that the R&D expenditure during the current year is expected to be in the range of 1 - 2 per cent of their annual turnover.

On exports, the CEOs who expected exports to increase during the current year revealed that relative global competitiveness of processed food industry is likely to affect exports in the medium term due to pressure on cost competitiveness (revealed by 61 per cent of the CEOs), inefficient supply chain (as revealed by 58 per cent of the CEOs)
and domestic regulatory burden due to multiple compliance formalities (as revealed by 39 per cent of the CEOs)

On export market potential, the CEOs indicated that difficulty to comply with international food regulations (revealed by 39 per cent of the CEOs) and other non-tariff barriers in export markets (revealed by 39 per cent of the CEOs) are the major impediments on the external factors affecting future export growth.

On impediments to growth and innovation, 61 per cent  of the CEOs revealed that rationalisation of VAT and 42 per cent of the CEOs revealed that rationalistion of excise duties were a major policy intervention urgently needed to sustain growth and investments in this sector. In addition, 70 per cent of the CEOs opined that the current food regulatory system in India is not conducive for growth.