India's Food Services Sector Expected to Reach Rs 7.76 Lakh Crore by FY28, Reveals NRAI

The food services sector in India is projected to grow by 8.1% annually, reaching Rs 7.76 lakh crore by FY28 from Rs 5.69 lakh crore in FY24, according to the National Restaurant Association of India (NRAI). The NRAI's India Food Services Report 2024 highlights this growth trajectory.

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Despite the setbacks during the COVID-19 pandemic, the food services industry in India is experiencing rapid growth. The sector shrank to Rs 2 lakh crore in FY21 from Rs 4.24 lakh crore in FY20 but recovered to Rs 4.72 lakh crore in FY22, Rs 5.3 lakh crore in FY23, and Rs 5.69 lakh crore in FY24.

Growth of Organised Segment

The organised segment of the food services sector is expected to grow at a compound annual growth rate (CAGR) of 13.2% by FY28. This segment's share is estimated to reach 52.9% of the overall market by FY28, up from 43.8% in FY24, while the unorganised segment's share is projected to decline from 56.2% to 47.1% during the same period.

NRAI President Kabir Suri emphasised the resilience of the industry post-COVID-19 and urged the government to recognise its socio-economic impact and take steps to unlock its full potential. "The post-COVID recovery highlights the resilience of the industry," he said.

Employment and Tax Contributions

The food services sector is also a significant employer, with employment figures expected to rise from 85.5 lakh in FY24 to 1.03 crore by FY28. Additionally, the sector's tax contribution is anticipated to increase from Rs 33,809 crore in FY24 to Rs 55,594 crore by FY28.

NRAI Report Steering Committee Chairman Nitin Saluja called for a separate ministry for food services to better address the sector's challenges and promote faster growth. He also reiterated the long-standing demand for industry status for the sector, which would encourage enterprise and entrepreneurship.

Policy Recommendations

Saluja also advocated for two GST slab options: one at 12% with input tax credit (ITC) and another at the current 5% without ITC. He argued that making ITC available would enable restaurants to pass on benefits to customers. "The availability of ITC will enable restaurants to pass on benefits to customers," he said.

He further highlighted the need for a simplified and standardised license and permit policy across India, stating that the sector is highly regulated. Saluja also suggested allowing restaurants to operate longer hours, even round-the-clock in cities with vibrant nightlife, to boost business and create more employment opportunities.

Future Market Position

India is set to become the third-largest food services market globally by 2028, surpassing Japan, while the US remains the largest market worldwide. The report estimates that by FY25, the sector size will touch Rs 6.13 lakh crore.

The NRAI's report underscores the significant potential for growth within India's food services sector, driven by both organised and unorganised segments adapting to changing market dynamics and consumer preferences.