New Farm Laws meant to bolster the Nutraceutical Sector

India has had a rich heritage of herbal medicines and supplements, which have found resonance in our mythology and folklore. The nutraceuticals market is in fact indigenous to India as most of its ingredients are grown mostly in the country.

December 3, 2020

India’s nutraceutical sector is set to grow from US$ 4 billion in 2017 to US$ 18 billion in 2025.

India’s share in the global nutraceutical market is expected to grow from 2% in 2017 to 3.5% in 2023.

Foreign Direct Investment has increased from US$ 131.4 million in 2012 to US$ 584.7 million in 2019.

India is an important supplier of turmeric, ginger, chillies or piperine from black pepper and paprika.

The new farm laws are aimed at strengthening Farmer Produce Organisations (FPOs) in order to make the sector more organised and available. These farm laws will significantly boost the country’s nutraceutical sector, leveraging technology and encouraging biodiversity conservation which will help the nutraceutical industry grow at a rate of 17% annually at the global level. The nutraceuticals market in India is expected to grow from $ 4 billion in 2017 to $ 18 billion in 2025 in the backdrop of rising demand for dietary supplements from the upper and middle class.

The nutraceutical industry has 3 categories- raw materials, ingredients, and formulations. Traditionally, India was a producer of just the raw materials, but today the ingredients and formulations segments are also growing, thus creating a potential for strong growth in the domestic market and exports. India is an important supplier of curcumin from turmeric, ginger, chillies or piperine from black pepper and paprika. Given the country’s natural advantages such as climatic conditions, soil quality and agriculture focus, it also has a huge potential to become the global hub for raw materials and ingredients supply.

Expanding these market options will help establish the FPOs, thereby benefiting the farmers and enabling the sector in becoming more organised. The new farm laws allow farmers to collude with nutraceutical product manufacturers for contract farming. They will also enable complete traceability of the products, paving the way to an increase in India’s global share. 

Industry overview: Global v/s Indian Nutraceutical Market

Currently, The US, Japan, and Europe hold more than 90% of the total global nutraceutical market. The global market should see a growth from US$ 247 billion in 2019 to US$ 336 billion by 2023 at a CAGR of 8%. With these markets attaining maturity, the focus of nutraceutical players is now shifting towards developing economies like India. In 2017, the Indian market held only 2% market share of the global nutraceutical market and in 2019 its value stood at around US$ 5 billion. By 2023, its share in the global nutraceutical market is expected to grow to 3.5% and touch a value of US$ 11 billion. 

Currently, the Indian market imports US$ 2.7 billion worth of nutraceuticals and is open to 100% FDI in this sector, through which such entities can sell their products through wholesale, retail, or e-commerce platforms. The Foreign Direct Investment (FDI) has increased from US$ 131.4 million in 2012 to US$584.7 million in 2019.

Owing to the rise in demand for dietary supplements, the nutraceuticals market in India is expected to grow from $ 4 billion in 2017 to $ 18 billion in 2025.

Key challenges

Despite being a major producer of the ingredients used by the nutraceutical sector, India’s share in the global market is low, mainly because of the lack of standard guidelines. The key challenges include high tax rates. Nutraceuticals and other health supplements are subject to 18% tax which makes these products more expensive than before. Without a regularised system, new stakeholders face difficulties in entering the system and in availing subsidies. Regulations related to quality and safety will indeed benefit the industry and will keep a check on unregulated practices.

Demand Shift and Trends

Increased public understanding and health responsiveness have contributed to a paradigm shift in consumerism in the nutraceutical market. As per recent estimates, the nutraceutical market in India is significantly condensed in the South, followed by the East and is gaining serious traction in rural areas. The market is poised to witness significant growth owing to the increase in demand for preventive healthcare and rise in medical treatment, which stimulates the demand for nutraceuticals containing products. Industry players are also undertaking a plethora of initiatives on their own, including a renewed focus on improved quality standards of the product, enhanced transparency, and competitive pricing for innovations.

The Way Ahead

The Food Safety and Standards Authority of India (FSSAI) will ensure that regulations for the nutraceutical market in India are at par with other global standards. This would encourage foreign investments, increasing the market’s value in a very short span of time. Transformation in food habits, less physical work, more desk jobs have made people more vulnerable to lifestyle ailments and in turn have grown health conscious, thus providing an opportunity to the Nutraceuticals Industry in India. Increase in consumer awareness on health problems and their urge to take preventive steps, has been driving the nutraceuticals industry. People now live by the aphorism, ‘prevention is better than cure’ and as a result, nutraceuticals are now looked upon as important supplements, and a part of one’s monthly expenses. 

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