“India processes approximately 200 million tons of various grains and the industry employs roughly 400,000 persons. Indian grain milling industry is a quaint amalgam of the traditional and the modern. Traditional milling equipments coexist with modern mills. If the milling industry has to be described in one word, it would be ‘fragmentation’. There are a very large number of small mills and medium-sized milling units dotting the country’s skyline. Foreign direct investment in milling industry is permitted 100 percent under the automatic route. Many investors are exploring opportunities in India given its large size of the domestic market and opportunities of export to Asian and African neighbours.”
Guruswamy Chandrashekhar*
India is currently the world’s fastest growing significant economy with annual growth rate in excess of 7 percent and GDP value of $ 2.5 Trillion. With a population of 1.3 billion growing at about 1.5 percent per annum, it is the world’s second most populous country and the world’s largest democracy.
The country’s macro-economic fundamentals are strong. The foreign exchange reserves are about $ 400 billion. The value of foreign trade (export and import) is over $ 700 billion. The age profile of the population is fascinating. 31 percent of the population is below the age of 15 and as much as 53 percent of the population is below the age of 25. In other words, India is an ancient nation with a young population.
Rising incomes, huge population, appetite for consumption, urbanization and changing lifestyles have combined to create ravenous appetite for consumption of a wide variety of goods and services. Food, of course, tops the list.
Yet, India is essentially an agrarian economy given the fact that nearly half of its workforce earns livelihood from agriculture and related activities. The share of agriculture in GDP is about 15 percent.
Indeed, India is the world’s second largest producer of fine cereals rice and wheat and by far the largest producer of pulses. Because India produces humungous quantities of three major grains – rice (paddy), wheat and pulses - that need to be milled in any case for making them fit for human consumption, the country’s milling industry is absolutely vibrant.
India processes approximately 200 million tons of various grains and the industry employs roughly 400,000 persons. Indian grain milling industry is a quaint amalgam of the traditional and the modern. Traditional milling equipments coexist with modern mills. If the milling industry has to be described in one word, it would be ‘fragmentation’. There are a very large number of small mills and medium-sized milling units dotting the country’s skyline.
For wheat milling, traditional equipments (small stone mills called chakki) with limited capacity are used and their number is anybody’s guess. In addition, there are roughly 800 large stone mills that account for about 15 percent of flour production. Then you have approximately 1500 modern roller flour mills with capacities in excess of say 100 tons a day catering to growing flour demand. These account for roughly 30 percent of flour production. These mills produce wheat flour (atta), finely milled white flour (maida) and kind of semolina (sooji or rawa).
Rice milling is one of the commonest businesses in the country, triggered growing production, expanding domestic consumption and increasing export. Indeed, India is the world’s largest rice exporter with annual shipments of about 10 million tons consisting of Basmati and non-Basmati rice varieties.
There are over 100,000 mills each of the huller type and the sheller type. These mills convert paddy into rice and the yield is approximately 63-68 percent depending on various parameters.
The next big milling activity is pulse milling. The units are called dal mills. Dal means milled or split pulse which is fit for human consumption. There are approximately 15,000 dal mills in India, most of which have rather small capacities of 10-25 tons a day. However, a large number (over a quarter) have become old and inactive.
At the same time, modern dal mills with capacities of 200-500 tons have come up in India recently to take advantage of growing demand for the grain, especially packaged and branded pulses. In addition to pulse splitting, many of the mills produce chickpea flour (known as besan) for which there is tremendous demand across the country as it is used in many traditional food products including snacks.
Although the country has strict food safety and standards law, in many of the traditionally run milling units, the hygiene standards leave much to be desired. There is however a renewed consciousness about food safety and hygiene standards among mills because of rising consumer expectations. There is scope for capacity scale-up and modernization of many milling units in the country. There is a government of India scheme for financial assistance for modernization of grains and pulses milling with modern technology.
One can witness rapidly expanding number of packaged and branded milled products available on store shelves. Basmati rice, wheat flour, semolina, dal, dal flour and other related products are now available in packaged and branded form which provides some kind of an assurance about quality.
Foreign direct investment (FDI) in milling industry is permitted 100 percent under the automatic route. Many investors are exploring opportunities in India given its large size of the domestic market and opportunities of export to Asian and African neighbours.
*G. Chandrashekhar, Economist, Senior Editor and Policy Commentator, is a global agribusiness and commodities market specialist. Views are personal. He can be reached at gchandrashekhar@gmail.com