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Agriculture Sector in India

August, 2014


India is primarily an agrarian country with 60 per cent of its population being dependent directly or indirectly on agriculture. The Indian agriculture sector has made considerable progress in the last few decades with its large resources of land, water and sunshine. India produces all major crops to meet the requirement of food, fodder, fibre, fuel and inputs for its agricultural industry.

India is presently the world's largest producer of pulses and the second largest producer of rice and wheat in the world. The country is also the second largest producer of sugar, after Brazil..

The Department of Agriculture and Cooperation under the Ministry of Agriculture is the nodal organisation responsible for the 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

Agriculture is expected to grow at 4.6 per cent in 2014. Agriculture production of food grains this year is expected to break the 2011-12 record of 259 million tonnes (MT). More importantly, agricultural profitability has increased over the last decade with record increases in MSPs (minimum support prices for agricultural produce) for all covered crops. MSP increase in the past 10 years, between 2004-05 to 2014-15, vary from about 125 per cent for foodgrains such as wheat and paddy to over 200 per cent for pulses like moong dal.

India is also set to record the highest ever food grain production. The Government of India revised its estimate, stating that the country would collectively produce 264.28 MT of food grain as compared to 257.13 MT last year.

Spice exports from India are expected to reach US$ 3 billion by 2016-17, on the back of creative marketing strategies, innovative packaging, strength in quality and a strong distribution network. The Indian spices market is pegged at Rs 40,000 crore (US$ 6.61 billion) annually, of which the branded segment accounts for 15 per cent.

Indian basmati rice processing and marketing companies such as KRBL Ltd and LT Foods Ltd have seen their profits grow. Basmati exports to countries such as South Africa, Egypt, Azerbaijan, Tanzania, Poland and Ukraine, among others, have more than tripled in the past three years.


The foreign direct investment (FDI) inflows in agricultural services and machinery sector during April 2000 - April 2014 stood at US$ 1,699.96 million and US$ 359.68 million respectively, as per data released by Department of Industrial Policy and Promotion (DIPP). The major investments in the recent past are as follows:

Tractor manufacturer Escorts Ltd has launched its Farmtrac Heritage range at South Africa's biggest agriculture show, Nampo 2014. South Africa is poised to be a trend setter for other African countries and it is a key market area for India, said Mr Rajesh Kumar, Chief International Business, Escorts Agri Machinery.

Hindustan Coca-Cola Beverages and Jain Irrigation plan to invest Rs 50 crore (US$ 8.26 million) over 10 years in the second phase of their Unnati project, which assists farmers to grow more mango trees.

PepsiCo will source cashew fruit from farmers in Maharashtra for its Indian juice business, under a strategic partnership with the Clinton Foundation. The partnership will stimulate social and economic development in emerging markets through a social enterprise model, as per the company.

In a bid to promote dairy business in Kenya, Kenya Dairy Farmer Foundation (KDFF) and East Africa Dairy Development Project of Heifer International have sought assistance from the National Dairy Development Board (NDDB) on forming co-operatives for milk procurement, processing and marketing.

Monsanto will start selling cotton hybrid seeds in India under its global brand 'Deltapine' from the current kharif season. Monsanto presently has a four per cent market share of the estimated 45 million-packets-a-year Indian cotton hybrids seeds market and is currently marketing cotton seeds under the 'Paras Brahma' brand.

Government Initiatives

The Government of India realises the importance of agriculture to the development of this nation and hence has adopted several initiatives and programmes for this sector's continuous growth. 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. Some of the recent major government initiatives in the sector are as follows:

In a meeting between Mr Alphonsus Stoelinga, the Dutch Ambassador to India, and Mr Radha Mohan Singh, Union Minister for Agriculture, Government of India, both countries have decided to strengthen the cooperation in the field of agriculture.

The General Council for National Food Security Mission (NSFM) has approved Rs 2,100 crore (US$ 347.21 million) for the scheme in 2014-15 which will focus on improving the production of oilseeds and pulses.

The Coffee Board has taken steps to include growers associations, eminent growers, and experts in the field of agriculture to strengthen coffee research at the Central Coffee Research Institute.

The Ministry of Development of North Eastern Region (DoNER) has sanctioned seven new projects worth Rs 87.88 crore (US$ 14.53 million) during FY 15, which include projects for road construction, irrigation scheme and renewal of electric installations. The irrigation schemes are slated to help the agriculture sector in the rural areas of the Northeast.

Road Ahead

The Indian agriculture sector is expected to grow with better momentum in the next few years owing to increase in investment in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Factors such as reduced transaction costs, time, better port gate management and fiscal incentives will also contribute to this upward trend. Furthermore, the increased use of genetically modified crops is also expected to better the yield of the Indian farmers.

The 12th Five Year Plan's estimates of expanding the storage capacity to 35 MT and the target of achieving an overall growth of 4 per cent will also go a long way in modifying the overall face of the Indian agriculture sector in the next few years.

Exchange rate used: INR 1= US$ 0.0165 as on August 26, 2014

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