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Contribution of food service industry will be 2.1% of GDP by 2021: Report
Saturday, 23 July, 2016, 08 : 00 AM [IST]
Ashwani Maindola, New Delhi
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Indian restaurant industry is poised to achieve a milestone by sharing more than two per cent of Indian GDP in the next five years, according to a sector report on food service industry released here by National Restaurant Association of India (NRAI).

NRAI India Food Services Report 2016 (NRAI IFSR 2016), the most comprehensive trade report on the Indian food services sector, was launched here highlighting the food service sector, estimating that the total contribution of the restaurant industry alone will be 2.1% to the GDP of India by the year 2021.

While discussing the report, Riyaaz Amlani, president, NRAI, at the launch event said, “The total food services market today stands at Rs 3, 09, 110 crore and has grown at 7.7% since our last report in 2013. This is projected to grow to Rs 4,98,130 crore at a CAGR of 10% by 2021. This year alone, the Indian restaurant sector will create direct employment for 5.8 million people and contribute a whopping Rs 22,400 crore by way of taxes to the Indian economy.”

Further, reports say that the share of the chain segment in the organised market is Rs 20,400 crore (20%); this is expected to grow at a CAGR of 20% to reach Rs 50,950 (25% of the organised market) by 2021.

The QSR and ACDR formats together make up ~60% of the total organised market with ACDR having the highest market share at 41%. In terms of number of outlets, the density is highest in metros and mini metros which are home to majority of the food services outlets. The two mega metros, Delhi & Mumbai, constitute a total of 22% of the food services market while the six mini metros constitute 19% of the food services market.

Also, as per the National Sill Development Council, restaurants contribute the maximum manpower requirement within the hospitality sector. In 2016, the total food services market is expected to generate direct employment for 5.5-6 million people and is expected to generate employment for 8.5-9 million people by 2021.

The indirect employment generated by food services has seen a growth at CAGR of 4% from 2013-2016 and expected to grow at a CAGR of 6% till 2021, according to the report.

While the food services industry has seen a steady growth over the last three years, the report reveals that the industry has its fair share of roadblocks and challenges like high real estate and manpower costs, inadequate supply chain, infrastructure, financing issues and majorly policy formulation. The main aim of the report is to aid entrepreneurs and investors take informed decisions and unite the industry under one banner.

On the sidelines, while talking to FnB News, Amlani said that customer variety and choice has been a significant aspect of restaurant industry, and based on that the number of restaurants have gone up in recent times. “In 2011, average Indian was eating out one time in a month, it doubled in next two years by 2013 and in 2016 now it’s five times on an average. The frequency of people eating out is going up and in next two years we will see a phenomenal growth,” he said.

However, the report reveals a shortcoming as well that the share of the organised market is just 33%. Expressing distress on this, he remarked, “This is largely due to over regulation of our industry, the complex maze of approvals and licences required and high tax brackets. It is about time that our industry’s socio-economic impact is recognised by the government, and it initiates immediate steps to unlock the true potential of this behemoth,” while adding that it is the highest taxed industry.

On regulations, Amlani said, “We need to move from licence to registration. We shouldn’t be depended on anybody (for the licence) to start the business. By registration I mean that we can start our operations and the authorities can see if we are complying with the regulations or not. If licences are delayed, we face rupees one lakh per day loss on cost of capital, infrastructure etc. At least 100 mandays are lost for getting 36 licences for this industry.”

Earlier, Rahul Singh, honorary secretary, NRAI, while presenting details from the report pointed out that the NRAI IFSR 2016 documents the unprecedented growth that this sector has witnessed while outlining some of the challenges our industry faces that pose a barrier to entry and optimal operational efficiency. He also noted that the report findings reveal that the food services market in India has triggered growth across a wide range of ancillary industries, thus providing a boost to the entire ecosystem. Key allied industries which support food services and have benefited from its growth are agriculture and food processing, supply chain and logistics, real estate, kitchen equipment, and commissary.

Introducing the report, Samir Kuckreja, past president and trustee, NRAI, said, “The NRAI’s 3rd research on the food services industry is a comprehensive report that includes results from in-depth interaction with a variety of companies, meetings with over 50 CEOs, consumer research that covered 2,000 people across 20 cities of India and trade research at restaurants.” The report addresses international market perspective for nine countries including USA, China, South Africa, Turkey and the UAE. The report also covers PE/VC funding in the industry and digital/social media marketing.

Earlier, Amitabh Kant, CEO, Niti Aayog (National Institution for Transforming India), GoI, after releasing the report, said, “India has been on a high growth trajectory over the last couple of years. India’s exponential growth and consumption in terms of frequency of eating out and experimentation with cuisines and concepts has given the F&B services sector such a fillip that this industry is currently estimated to be worth US$48 billion in terms of overall market size. I am happy to unveil the NRAI India Food Services Report 2016, an industry paper that documents the various developmental parameters, for the F&B sector at large. I congratulate the NRAI team for spearheading a project of this calibre and wish them success for their future endeavours.”
 
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