CARE Ratings expect the restaurant and food service industry to register a growth of about 10.4% CAGR for the next five years
The Indian Restaurants and Food Services Industry has continued to expand at a healthy pace, aided by y-o-y (year-on-year) growth in the incomes and largely unaffected by the prevalent economic scenario that has slowed growth in sectors like manufacturing and infrastructure. The market size of the Indian restaurants and food services industry stands at Rs3.7 trillion as of 2018 registering a y-o-y growth of about 10% and a CAGR (compound annual growth rate) growth of 8.4% between 2013 and 2018.
Going forward, CARE Ratings expects the restaurant and food service industry to register a growth of about 10.4% CAGR for the next 5 years between 2018 and 2022 to reach Rs5.5 trillion by 2022. The growth will be supported by long term healthy demand outlook backed by higher disposable income, favourable demographics and rising aspirations of the burgeoning middle class, increasing internet penetration, increasing number of women joining the workforce, increasing focus on health and wellness, technological advancements and growing urbanisation.
With the surge in investments in the online food ordering business, the industry is expected to witness substantial growth and operations of large segment of the unorganized market are expected to get streamlined into organized market. Also, in the years to come, premium dining and QSRs (Quick service restaurants) are expected to expand their presence in multiple non-metro towns across country.
The level in the 91 reservoirs with FRL (full reservoir level) of 162 bn cubic metres stood at 122.5 bn cm which is 75.6% of full capacity. This is higher than the level of 69.2% last year at the end of monsoon season. This level of 75.6% is also satisfactory when compared with the 10-years average of 72%. This is a positive for both farming as well as households at the aggregate level, though the regions with deficit monsoon would continue to be under pressure.
Normally, higher production should result in lower increase in prices based on laws in Economics. However, this may not be so this time as there has been an aggressive increase in the MSPs of various crops.
Therefore, the inflationary pressures cannot be ruled out on account of both the higher MSPs as well as specific crop shortfalls.
As per the first advance estimates of the ministry of agriculture, a decline of about 6.9% in the cotton crop has been estimated for cotton season 2018-19. If production remains lower than the target estimate by ICAC and the ministry of agriculture, we expect the prices to marginally pick up from the current levels and remain firm with the new cotton arrivals in the market on back of strong exports and increased MSP by the government. The government increased cotton MSP of medium staple fibre by 28.1% to Rs5,150 per quintal and long staple fibre by 26.1% to Rs5,450 per quintal for cotton season 2018-19.
An estimated increase in soyabean oil production during 2018-19 is expected to keep the imports of soyabean oil lower on a y-o-y basis and they are likely to decline by 2.6% y-o-y to 2.9 million tonnes during the year.
While the production of soyabean oil is expected to see growth in 2018-19, the output of groundnut oil (kharif crop) is likely to witness a fall. Its production is estimated to decline by 16% y-o-y to 1.46 million tonnes during oil year 2018-19 due to an anticipated 16.1% fall in groundnut oilseed output to 6.3 million tonnes during the year.