Expressnews
December 2025: With the Union Budget on the horizon, the food services industry in India is tentatively optimistic about the policy backing the sector may receive as it gains importance in terms of its contribution in employment, consumption and the formal economy. The market is worth about INR 5.7 lakh crore today, but it will grow to about INR 7.76 lakh crore in FY28 with an ensuing steady CAGR of between 8-9%. The industry contributes almost two percent to the GDP of India and offers livelihood to over 8.5 million individuals, which makes the industry one of the largest non-agricultural employers in India.
Among the main pain points that need remedial action, one can single out:
GST Rationalizations: GST rationalization is much needed in the industry especially the reinstatement of input tax credit (ITC) on organized food service operators. Although the GST compliance has enhanced formalization, the non-existence of ITC has tightened profitability margins, particularly to those organized players who are taking almost 45-50 percent of the market today.
The fact that there is no input tax credit in GST has led to a lot of challenges in this particular food service industry. Indeed, if there is no ITC, it is difficult for businesses to estimate costs. As such, banks or even institutional investors are not in a position to provide loans to this particular industry.
The restoration of ITC would trigger positive chain reactions. This would pave the way for agri-business expansion, clarity in costs, and facilitate formal sector credits to flow into the food service industry. Credits would result in increased compliance and a clear system as well.
Technology and Skill Development: The industry is seeking specific assistance to advance skill development, improve food safety and promote technology adoption in the entire value chain. As the operating staff in the Indian food services is expected to reach 1 crore in 2028, organized skilling will be essential in enhancing the productivity, quality of service delivery, and adherence to the emerging food safety standards. Increased adoption of technologies, such as automation of procurement processes, use of artificial intelligence to predict demand, etc., can be used to decrease inefficiencies, reduce food waste, and enhance the overall operation efficiency.
Promoting Sustainable Practices: Sustainability is another aspect in which policy incentives might have a high economic and environmental bite. Commercial kitchens are very energy consuming as the energy expenses constitute the estimated 8-10 percent of the operating cost. India can also cut down the expenses by budgetary allotment of energy-efficient kitchen appliances, implementation of renewable energy and waste management systems to enable the Indian government meet its overall sustainability and climate objectives.
Mr. Sanjay Kumar, CEO & MD, Rassense Pvt Ltd, stated, “Indian food services sector being one of the largest employers of the semi-skilled workforce of the country,requires a mega-boost of policy reforms to support growth and development. Having said that, there is very little room that is available for flexibility given the rigid norms right from ITC barriers to multi-level approval processes.
We look forward to this upcoming union budget and hope the FinMin to announce measures that addresses the pain-points the food services sector is going through. This will be in best interest of driving the country to the goal of self-reliant much in lines with the goal of the honourable PM.”
