Demand for Agro Processed Food Products: An Evidence from Indian Households

Abstract

There is an increased growth in the value addition sector which in turn leads to the development of agro-industries, it is important for all stakeholders involved in production, processing and marketing of agricultural products to understand the demand dynamics for processed food products and its determinants in Indian households making use of the National Sample Survey Organization data revealed that the per capita expenditure on processed foods had increased by over 52 per cent in both rural and urban areas in the year 2011-12 over 2004-05. Per capita income and product prices were identified as the major determinants of consumption of processed food products. The income elasticity estimates obtained through Quadratic Almost Ideal Demand System (QUAIDS) model were positive and high for most agro processed foods particularly for milk based products and fruit juice. This implies greater business opportunity for agro food processing sector in India as per capita income and population growth are on the increase. The processed food products were highly responsive to changes in their own prices as indicated by high own price elasticity. Cross price elasticity estimates led to the conclusion that the changes in the quantity demanded of the processed foods are independent of changes in the prices of the other processed products.