Why packaged foods continue to make a killing

Ruhi Shelke, a working professional in her early 20s, likes the banana chips from her favourite local chain, Hot Chips. “They make it hot and fresh right in front of my eyes,” she says. The outlet claims to be using sunflower oil, but the clear plastic packaging does not specify the amount of salt or sugar used, nor is there any supervision over the number of times the oil is reused for frying.

Weak regulation, lax government oversight, and low consumer awareness of the contents of packaged food means that the Indian ready-to-eat snacks market, worth Rs 50,000 crore, is putting the health of millions at risk, our reporting shows.

“Rising consumption of ultra-processed foods increases the risk of health issues like diabetes, obesity and heart disease across all economic groups,” says Arun Gupta, convenor of Nutrition Advocacy in Public Interest–India (NAPi), a Delhi-based think-tank.

The problem is compounded by the fact that the ready-to-eat snacks market is populated by numerous unorganised and small producers, hard to track and check. These producers cater to specific regional markets and preferences, and often operate within specific states or cities, according to a regulatory filing by Pratap Snacks, the company that makes ‘Yellow Diamond Chips’.

In addition, the aggressive marketing of unhealthy ultra-processed foods – coupled with the rising costs of nutritious food, as IndiaSpend reported in August – has enhanced the need for stronger regulatory enforcement of packaged food, as current efforts fall short in safeguarding public health, experts say.

Rising expenditure on packaged food

The term ‘processed food’ is broad, and also includes food items such as frozen vegetables, oil and curds, paneer etc. But for this analysis, we are looking at ultra-processed foods (such as soft drinks, packaged potato chips, etc.), also known as ‘high in fat, sugar and salt’ foods. These can be any food item or drink, packaged or unpackaged, that contains low amounts of protein, vitamins, phytochemicals, minerals and dietary fibre, but are rich in fat (saturated fatty acids), salt and sugar and high in calories, and are known to have a negative impact on health, if consumed regularly or in high amounts, according to the Ministry of Women and Child Development.

The latest survey from the National Sample Survey Office showed a shift in dietary patterns of Indians. Both urban and rural households spent the largest proportion of their monthly per capita consumption expenditure (MPCE) on beverages, refreshments and processed food, at Rs 363 (9.6 percent of MPCE) for rural households, and Rs 687 (10.6 percent of MPCE) for urban households.

The increase in this spending over time highlights a growing preference for these food groups.

This increase was seen across all income classes but was more pronounced among the top 20 percent of households, especially in urban areas. For the bottom 20 percent of rural households, the share of spending on processed food rose from 3.2 percent in 2011-12 to 5.5 percent in 2022-23, and from 3.7 percent to 6.4 percent for their urban counterparts. Among the top 20 percent of households, it increased from 4.7 percent to 6.9 percent in rural areas and from 6.1 percent to 8.2 percent in urban areas, according to a 2024 paper by the Indian Statistical Institute, New Delhi.

This trend coincides with an overall decline in the share of household expenditure on food – from 59.4 percent in 1999-2000 to 46.4 percent in 2022-23 in rural areas, and from 48.1 percent to 39.2 percent in urban areas.

“There are multiple factors contributing to the rise in packaged food consumption, with convenience being a key driver,” says Srilasya Nookala, an agriculture and food expert who has worked with the Foundation for Development of Rural Value Chains, a joint initiative of the rural development ministry and Tata Trusts. She explains that packaged foods, such as ready-to-eat noodles or parathas, offer quick and easy meal solutions, and their accessibility has significantly improved due to the growth of e-commerce. Additionally, Nookala says, affordability has increased, making products like chips – once considered a luxury – a common daily item.

Small players make monitoring weaker

Unorganised producers of processed foods account for 80 percent of the market share, as per a 2023 study by the World Health Organization. Over 70 percent of sales of processed food is through independent small grocers (kirana stores) or the unorganised sector, the analysis found.

“The main challenge lies with smaller companies selling products like namkeen (savouries), where transparent packaging often lacks clear expiry dates and guidelines,” says Dipanshi Sood, manager for health and nutrition at Microsave Consulting, a Delhi-based consulting firm working on financial and social inclusion. “Obtaining a Food Safety and Standards Authority of India (FSSAI) licence is inexpensive and easily done online, but informal sectors like homemade pickles and street food, often using reused oil, face minimal regulation. The government has briefly discussed street-food policies, but addressing these issues, especially in the informal sector, remains difficult.”

These discussions had led to the ‘Clean Street Food’ project in 2016, which aimed to train 20,000 street vendors initially, and provide them with FSSAI registration and hygiene kits. As of May 2023, government initiatives involve training of food handlers, and independent third-party audits and certification.

Experts also point to the fact that big conglomerates use small manufacturing companies for production. “The responsibility for compliance lies with small or big manufacturers but more for conglomerates when small manufacturers work for them. For instance, large brands may handle the marketing, while third-party manufacturers are responsible for production. These smaller players may not be aware of regulations and may not be focused on quality,” says Rohini Saran, a Delhi-based nutrition expert, who has also worked with FSSAI’s Food Fortification Resource Centre. “Self-compliance needs to be regulated and state-level checks must be strengthened.”

Many small ultra-processed food producers are unaware of FSSAI’s rules and regulations, according to an Indian Council for Research on International Economic Relations (ICRIER) paper, looking at India's food regulations ecosystem. The large unorganised sector often has limited access to the internet or media, making it difficult to stay updated on new regulations. Even those with access must frequently visit FSSAI’s website, as relevant information is not easily accessible. Except for the Food Licensing and Registration System, many firms are unaware of FSSAI’s initiatives to simplify compliance procedures, the paper found.

Weak enforcement of FSSAI regulations

The FSSAI is responsible for regulating food safety across the country, setting science-based standards for food manufacture, storage and distribution under the Food Safety and Standards Act, 2006. However, significant gaps exist in enforcing these regulations, particularly at the state level. While the FSSAI operates through regional offices and state food safety authorities, experts say and reports show that weak monitoring, resource constraints and ineffective infrastructure hinder its ability to ensure compliance.

A 2017 audit by the Comptroller and Auditor General of India (CAG), the latest report available, revealed several shortcomings. Only seven of 72 state laboratories used by the FSSAI were accredited by the National Accreditation Board for Testing and Calibration Laboratories, as of September 2016. Additionally, in five state laboratories and the Central Food Laboratory Kolkata, 18 vital food testing equipment, valued at Rs 8.83 crore, were non-functional.

Enforcement delays were also widespread, with 26 percent of cases registered between 2011 and 2016 pending for over 90 days, particularly in states like Maharashtra and Uttar Pradesh. Of Rs 12.92 crore in penalties imposed, nearly half remained unrecovered, with no further action taken to ensure collection or suspend licence.

Some experts attribute these enforcement issues to human resource limitations. Large states with many small producers, such as Uttar Pradesh, face challenges in maintaining oversight, as the FSSAI's monitoring workforce is insufficient to cover all producers, especially in rural and semi-urban areas, said Saran. “Around 300 people cannot adequately monitor the entire country.”

The CAG audit also highlighted inefficiencies in FSSAI staffing, with 261 of the 356 positions filled by contractual employees. Many of these employees lacked clearly defined work requirements or time frames, further weakening the agency’s ability to enforce regulations effectively.

Experts also say that vague language in FSSAI regulations allows large food companies to exploit loopholes and make misleading claims. A 2023 study, by researchers at the Guru Nanak Dev University and Khalsa College in Amritsar, tested 230 products and found that 124 unhealthy products featured nutrition marketing, despite being high in saturated fats, total fats, sugars or sodium.

Companies hire highly educated professionals, including those from large consulting firms, to handle advertising and packaging, often capitalising on regulatory loopholes. For instance, while the label "organic" requires FSSAI certification, terms like "natural" do not, allowing companies to create favourable perceptions without the same level of oversight or testing, said Nookala. “This vague regulation allows food conglomerates to bypass strict scrutiny and continue making misleading claims,” she said.

Lack of consumer awareness

Coupled with easy access, weak regulation and lax enforcement of laws, consumer ignorance is pushing up sales of processed food.

A 2022 study of 2,024 respondents across 14 states found that over half (55.4 percent) of the respondents considered packaged foods as healthy. A smaller 2018 study, with 153 participants, found that only 76 percent checked for food labels every time during purchase and only 7.2 percent reported that understanding the food label was easy.

Gupta says that people are drawn in by advertisements but lack knowledge about the high sugar, salt or fat content in these foods. Even government-led campaigns do not focus on educating consumers about these critical nutritional details, he adds.

“Whenever I used to eat junk food I never bothered with back-of-the-pack information as I did not expect junk food to be healthy anyway,” says Shelke. “Friends and family have educated me against my junk food choices. While I still don’t read all the back-of-pack information for my usual brands, I do actively read nutritional information when buying new brands.”

Health impacts

India faces a growing public health challenge with the double burden of the rise of non-communicable diseases alongside malnutrition. Ultra-processed food is associated with weight gain, obesity, type-2 diabetes and hypertension, with research showing a higher diabetes risk from increased intake of sweets and snacks in India.

The National Family and Health Survey (2019-21) shows obesity among children under five has increased in 20 of 22 states since 2015-16. Among adults, overweight and obesity rates have risen to 21 percent of women and 19 percent of men in 2015-16, up from 13 percent and 9.3 percent, respectively, in 2005-06, according to a 2022 study by researchers based in the UK.

“The most vulnerable to the negative impacts of these foods are those who rely on them due to affordability, often influenced by advertising,” says Gupta. “This is especially true for people with limited access to a balanced diet, such as those living in poverty.”

This report is republished with permission from IndiaSpend.org, a data-driven, public-interest journalism non-profit. It has been lightly edited for style and clarity.

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