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Agriculture Sector in India

June, 2014


At 179.9 million hectares, India holds the second largest agricultural land in the world. A majority of the Indian population relies on agriculture for employment and livelihood. Steady investments in technology development, irrigation infrastructure, emphasis on modern agricultural practices and provision of agricultural credit and subsidies are the major factors contributing to agriculture growth.

The country has today emerged as a major player in the global agriculture market. Agriculture accounts for 14 per cent of gross domestic product (GDP) and about 11 per cent of India’s total exports; it is also an essential link in the supply chain of the manufacturing sector and at the same time constitutes a big market for industrial products. Currently, India is the world's largest rice exporter and second in terms of wheat exports. Horticulture exports have also seen good growth. India's agro exports during 2013–14 touched US$ 45 billion as against US$ 25 billion in 2011–12.

The Department of Agriculture and Cooperation under the Ministry of Agriculture is the nodal organisation responsible for development of the agriculture sector in India. The organisation is responsible for formulation and implementation of national policies and programmes aimed at achieving rapid agricultural growth through optimum utilisation of land, water, soil and plant resources of the country.

Market Size

Given the good monsoon, the agriculture sector in India is likely to grow in the range of 5.2–5.7 per cent in the 2013–14 agriculture year (July-June), nearly three times as compared to the previous year. In FY 12, total food grains production in India reached an all-time high of 259.3 million tonnes (MT). Rice and wheat production stood at 105.3 MT and 94.9 MT respectively.

Total exports of Indian agri and processed food products in the period April–February 2013–14 stood at US$ 20,331.05 million as compared to US$ 19,144.45 million during the corresponding period of the previous year, according to the Agricultural and Processed Food Products Export Development Authority (APEDA).

In 2012–13, the share of exports of ‘agricultural and processed food products’ in total exports rose to 13.53 per cent from 10.5 per cent share in 2010–11. Guar gum has emerged as India’s largest item of farm exports with a share of 9.58 per cent during the period, followed by basmati rice and marine products.

On account of higher output in Assam and West Bengal, tea production in India in April–February, 2013–14 rose by 7 per cent to 1,152.91 million kg. The production was 1,073.93 million kg during the corresponding period of the previous year, according to data from the Tea Board.


The foreign direct investment (FDI) inflows in agricultural services and machinery sector during April 2000–February 2014 stood at US$ 1,696.98 million and US$ 338.65 million respectively, as per data released by Department of Industrial Policy and Promotion (DIPP). The following are some of the major investments and developments in the sector:

  • The agriculture division of Mahindra and Mahindra (M&M) has entered into a joint venture (JV) with the Netherlands-based seed company HZPC for sourcing high quality potato seeds for Indian farmers.
  • Private equity fund India Agribusiness Fund plans to invest Rs 75 crore (US$ 12.44 million) in Bengaluru-based Beloorbayir Biotech which supplies key ingredients to global nutraceutical, food, beverage and pharmaceutical makers.
  • The National Bank for Agriculture and Rural Development (NABARD) has sanctioned Rs 1,112 crore (US$ 184.31 million) for creation of 1,336 warehouses in various states and state government corporations in the country, which will create 0.75 MT of additional storage space.
  • Tractors and Farm Equipment Ltd (TAFE) plans to invest Rs 250 crore (US$ 41.44 million) by the end of FY 15 on expansion and development of new products. The company, with four factories, has a capacity of around 200,000 units a year. It plans to increase the total capacity to around 300,000 units a year over the next two years, according to Ms Mallika Srinivasan, Chairman and CEO, TAFE.
  • Indian Council of Agricultural Research (ICAR) has sought Rs 5,700 crore (US$ 945.55 million) to strengthen Krishi Vigyan Kendras (KVK) in the 12th Five Year Plan. The allocation for KVK was Rs 2,000 crore (US$ 331.77 million) during the 11th Plan. In addition, a sum of Rs 500 crore (US$ 82.94 million) has been allocated to the states of Punjab, Haryana and western Uttar Pradesh for diversification of crops.

Government Initiatives

The Government of India is implementing many programmes for raising investments in agriculture. Notable among them are Rashtriya Krishi Vikas Yojana (RKVY); National Food Security Mission (NFSM); National Horticulture Mission (NHM); Gramin Bhandaran Yojana; Integrated Scheme of Oilseeds, Pulses, Oil palm, and Maize (ISOPOM), etc. The following are some of the major initiatives taken by the Government of India:

  • The government has allowed 100 per cent FDI under automatic route in storage and warehousing, including cold storages. Hundred per cent FDI is also permitted for development of seeds under the automatic route.
  • The government is promoting production of various organic inputs in the country, including bio-fertilisers under the National Project on Organic Farming (NPOF). The project provides financial assistance up to 25 per cent of total financial outlay up to a ceiling of Rs 40 lakhs as credit linked back-ended subsidy for setting up bio-fertilisers production units.
  • In the Union Budget 2014–15, a target of Rs 8 trillion (US$ 132.71 billion) for agriculture credit has been set for 2014–15. The credit target for 2013–14 was Rs 7 trillion (US$ 116.06 billion). Further, the government on January 31, 2014 released Rs 180.22 crore (US$ 29.89 million) as grant-in-aid to states under the scheme to develop infrastructure facilities for production and distribution of quality seeds.
  • The Cabinet Committee on Economic Affairs (CCEA) has approved the implementation of the National Mission on Agricultural Extension and Technology (NMAET) during the 12th Five Year Plan with a total outlay of Rs 13,073.08 crore (US$ 2.17 billion). The mission aims to restructure and strengthen agricultural extension to enable delivery of appropriate technology and improved agronomic practices to farmers.
  • Further, in 2013–14, a pilot scheme on Nutri Farms was launched with an outlay of Rs 200 crore (US$ 33.18 million) to promote cultivation of bio-fortified food crops enriched with critical micro nutrients such as iron-rich bajra, protein-rich maize and zinc-rich wheat, etc., to improve the nutrition status of the most vulnerable sections of the country’s population.

Road Ahead

With a population of about 1.2 billion, India requires a robust, modernised agriculture sector to ensure food security. The 12th Five Year Plan estimated a potential storage capacity expansion of 35 MT. Cold storage capacity also needs to grow rapidly from the current level of 24 MT. The government has targeted an overall growth rate of 4 per cent for the farm sector under the 12th Plan.

“The growth momentum in India’s agricultural exports is expected to continue in the next few years, with an increased share of processed food, including mango pulp, dried and preserved vegetables, meat and poultry items. Factors such as reduced transaction costs, time, better port gate management and fiscal incentives contributed to this upward trend. With continued focus on issues such as food safety and compliance with international standards, we can surely reach new heights,” as per Mr Piruz Khambatta, Chairman and Managing Director, Rasna, and Chairman, Confederation of Indian Industry’s (CII) National Committee on Food Processing.

Exchange rate used: INR 1= US$ 0.0166 as on May 1, 2014

References: The Economic Survey, Agricultural and Processed Food Products Export Development Authority (APEDA), The Union Budget 2014-15, Press Releases, Media Reports