The food services sector will grow at 8.1% CAGR between 2024 and 2028.

New Delhi: The Indian food service sector is expected to reach ₹7.76 trillion by 2028 compared to today ₹5.69 trillion, growing at a CAGR of 8.1% on the back of expanding market opportunities and improving economic conditions. Rising income levels have led to a shift in consumer behavior, with increased consumption driven by millennials and Gen Z buyers being a major contributor to this expected growth. This segment includes food and delivery services, but not the hospitality industry. This sector has already recovered from the post-COVID-19 slump, when the industry fell to ₹2 trillion. Before the COVID-19 pandemic in 2019, this sector was at the level ₹$4.23 trillion, according to the India Food Services Report 2024 released today by the National Restaurant Association of India in association with market research agency Kantar.

In 2024, the sector was the third largest industry in India after retail and insurance, at ₹5.7 trillion. The retail sector, of course, has achieved a much larger amount ₹62.9 trillion, and insurance at the level of approximately ₹7.9 trillion. The organized sector is growing faster than the unorganized sector. In 2024, the organized segment was valued at ₹3.66 trillion, while the unorganized segment reached the level of ₹3.2 trillion. By 2028, these numbers are expected to increase significantly, with the organized segment expected to reach ₹7.76 trillion, while the unorganized segment is expected to grow to ₹5.69 trillion.

Moreover, in 2024, the organised segment held 52.9% of the market share, as compared to 47.1% for the unorganised segment. By 2028, the organised segment’s share is expected to grow to 57.7%, while the unorganised segment’s share is expected to decline to 42.3%. This indicates a clear shift towards the organised sector in the next few years.

“The industry is currently very large and accounts for 1.9% of the total GDP and contributes around 1.4% to the total collected GDP,” said Nitin Saluja, co-founder of the Chaayos coffee chain and secretary of the association. The employment dynamics in this significant industry indicates significant growth and its role as a major employer. In 2024, the industry employed 85.5 lakh people and this number is expected to increase to 103.21 lakh by 2028. This growth underlines the growing importance of the sector in providing employment opportunities in various roles and skill levels. It also said that it is the second largest industry in terms of employment in the country and will grow from 85.5 lakh currently to 103.21 lakh workers in four years.

Saluja said the financial year will see a similar 8% growth for the sector, with the nine largest cities contributing 60% of the revenue generated by the food and services sector. “The food delivery market is also growing solidly, at around 22%,” he said.

The sector is advocating for a dedicated ministry focused on its needs to promote a faster growth agenda and better appreciate the challenges it faces, and is asking for an “industry status” for the food service sector to further strengthen it and encourage entrepreneurship. The sector is also proposing two options for GST bands, one with a GST rate of 12% with input tax deduction and the current GST rate of 5% without input tax deduction. With this deduction available, restaurants will be able to pass on the benefit to customers.