India's food services sector is estimated to grow by 8.1 per cent to reach a size of Rs 7.76 lakh crore by FY28 from Rs 5.69 lakh crore in FY24, National Restaurant Association of India said on Tuesday.

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In its India Food Services Report 2024, the National Restaurant Association of India (NRAI) said the organised segment of the food services sector is pegged to grow at a CAGR of 13.2 per cent by FY28.

The sector has recovered from the setback of the COVID-19 pandemic during which it shrunk to Rs 2 lakh crore in FY21, down from Rs 4.24 lakh crore in FY20. In FY22, it recovered to reach Rs 4.72 lakh crore, Rs 5.3 lakh crore in FY23 and increased to Rs 5.69 lakh crore in FY24.

According to the report, in FY25, the sector size is estimated to touch Rs 6.13 lakh crore. India will become the third-largest food services market by 2028, overtaking Japan. The US remains the largest global market.

"Despite the setbacks during the COVID-19 pandemic, the food services industry in India is experiencing rapid growth...The post-COVID recovery highlights the resilience of the industry," NRAI President Kabir Suri said.

He drew the government's attention to "recognise the socio-economic impact" of the sector and take immediate steps to unlock its full potential.

NRAI said the sector is the second largest employer, with employment of 85.5 lakh in FY24 and is set to increase to 1.03 crore in FY28.

The sector's tax contribution is slated to reach Rs 55,594 crore by 2028, up from Rs 33,809 crore in 2024.

The share of the organised segment of the food services sector is estimated to reach 52.9 per cent of the overall by FY28 from 43.8 per cent in FY24, while that of the unorganised segment is slated to drop to 47.1 per cent by FY28 from 56.2 per cent in FY24, the report said.

NRAI Report Steering Committee Chairman Nitin Saluja stressed the need to have a separate ministry for food services, which can better understand the challenges of the sector, saying it would enable to push for an agenda for faster growth of the industry.

He also reiterated the long-pending demand for 'industry status' of the sector as it would encourage enterprise and entrepreneurship.

Saluja also said the two options of GST slabs at 12 per cent with input tax credit (ITC) and the current 5 per cent without ITC must be made available to all restaurants, and added that the availability of ITC will enable the restaurants to pass on the benefits to customers.

Stating that the sector is highly regulated, he also called for a simplified and standardised license and permit policy across the country.

Besides, he also said restaurants must be allowed to function for longer hours, even round the clock in cities where nightlife is vibrant to grow business and create more employment opportunities.