India - Agricultural SectorIndia - Agricultural Commodities

Overview
India is primarily an agrarian economy.   While agriculture is estimated to account for just over 17 percent of the US$2.6 trillion economy, the sector employees over 60 percent of the population.  India has largely achieved self-sufficiency in production of food grains, delivering strong and fast economic growth for the past several years, and this trend is projected to continue in the future.  The country has unique competitive advantages with the largest arable land area (60.44 percent) of an estimated 179.8 million hectares and diverse agro-climatic conditions supporting the cultivation of various crops.  The agricultural sector indeed plays a vital role in Indian economics, politics, and society.

India is among the highest-ranking countries in production volume for various commodities like rice, cotton, dairy, fruits, vegetables, meat and seafood, but the nation has access to only 60 percent of the produce due to lack of storage infrastructure, which leads to an estimated loss of up to 40 percent of the produce.  In fact, these losses are estimated at $13 billion annually. 

Over the past decade, agriculture and horticulture outputs have seen record growth year-after-year.  Yet, crop yields are still generally lower compared to the world average.  This low productivity is due to many factors such as erratic monsoons (over 50 percent of cultivated land is monsoon dependent), shrinking groundwater resources, decline in soil fertility, inefficiency in the food distribution system, lack of storage, transportation, lack of awareness in the use of modern agricultural practices and technologies among the farming community, unpredictable weather, small average farm sizes of 1.08 hectares, and agricultural subsidies that distort market signals and hamper productivity-enhancing investment.

The agricultural sector in India is witnessing a shift from traditional farming to organic farming, horticulture, aquaculture, poultry, and dairy production.  The demand for fresh and processed products of all types is increasing due to rapid urbanization, the rise in incomes, and changing consumption habits of the population.  The growth of an efficient cold chain network from “farm to fork” will help curb the current spoilage rate of agricultural output while helping producers capture value as products retain quality and give extra benefit to consumers. 

The federal government and several state governments are working on many farmer friendly initiatives to alleviate challenges faced by the agrarian community.  With policy interventions, faster mechanization, adapting of innovative technologies and smarter farming solutions, the agriculture sector is expected to witness its next wave of growth, thus helping the Indian economy to achieve the recent World Bank’s Global Economic Prospects report of projected growth of 7.5 percent in the next two fiscal years. 

India’s food and grocery (F&G) retail business is estimated at $380 billion.  The F&G retail sector is dominated by traditional trade formats like neighborhood shops or mom and pop stores, which hold about 98 percent of the total market share.  The market share held by modern trade formats such as supermarkets and hypermarkets is expected to double from two to four percent by 2020 as stores fulfill the evolving needs of consumers.

The Indian fiscal year (IFY) 2017-2018 has seen significant changes in the retail and e-retail space in India through the acquisition and takeover of several smaller formats of retail chains by larger domestic and international players in the food retail segment.  The acquisition of Bengaluru headquartered e-retailer Flipkart by Walmart for $16 billion stood out as the biggest acquisition by a foreign retailer in India.

The emergence of larger chains and stores began around 2005 and the sector has since grown to over 4,900 supermarkets and 500 hypermarkets across India. 
Also, on the rise is India’s casual dining and quick service restaurant sector that has nearly 60 foreign restaurant brands across India. 

Over the years, India has developed export competitiveness in certain specialized products, making it the world’s 14th largest agricultural, fishery, and forestry product exporter.  In 2018, India accrued a $14.6 billion trade surplus of agricultural, fishery, and forestry goods. Leading exports consisted of Basmati rice, carabeef/meat of bovine animals, frozen shrimp and prawns, cotton, and refined sugar.  

Units: $ billions
Table 1. India: Market Size of Indian Agricultural Products 

Source: Directorate General of Foreign Trade, Ministry of Agriculture & Farmers Welfare, Global Trade Atlas

Leading Sub-Sectors

Agricultural Machinery
India is the largest tractor market in the world and is estimated to grow at 10 percent annually for the foreseeable future.  It is estimated that tractor production in India accounts for about 35 percent of global volumes.  The major market share is garnered by the 31-50 hp segment which accounts for 82 percent of sales volumes of 711,478 units in 2018.  However, the utilization of tractors is low compared to other leading economies of the world.  Although tractors are the core of farm mechanization, farm production has gone way beyond simply utilizing tractors.  A stronger emphasis now is on increasing productivity by moving away from traditional farming methods to adopting other powered equipment and implements, thus becoming a prime driver of growth in this sector.  In addition, the government is working to provide easier access to credit for farmers, developing farmer-friendly policies, tying into the new and growing trend of collaborative farming in India. 

Various state governments, with support from the federal government, have embarked on a public-private partnership model to start custom for-hire centers to provide agricultural machinery/implements on a rental basis to farmers, thus easing the use of mechanization and opening opportunities for used equipment exporters.  This is a key change, as purchasing the equipment is beyond the reach of many farmers due to high acquisition and maintenance costs, and the average size of farms in India is less than two hectares.

The key growth drivers will be farmers replacing old tractors with new energy efficient ones, the growth of tractors in low-density regions across the country, and non-farm usage such as haulage in the construction and road building sector.  Hence, there is growth potential given the size and importance of agriculture in the Indian economy. 

Irrigation: 
The Indian government has laid out an ambitious goal of doubling farmers’ incomes by 2022.  To achieve this ambitious goal, the Indian government is aggressively promoting rural development with an impetus on agricultural mechanization and irrigation penetration.  The government is allocating funds to these initiatives, which are critical components in improving the state of agriculture in the country.  Agriculture in India is vulnerable to the vagaries of weather because an estimated 52 percent of farm land is unirrigated and still dependent on rainfall.  India receives sporadic rainfall across the region, and farmers are flooding their fields, which results in wastage of precious water.  Efficient usage of water is critical to Indian agriculture as the demand for water for irrigation will steadily rise due to the enormous population.  The key drivers of growth for irrigation equipment/machines will primarily be population growth, food scarcity and shortage of water.  American companies providing energy efficient affordable irrigation products may have business opportunities to explore in the India market.

Farming-as-a-Service (FaaS)
Farming-as-a-Service is a concept which was spawned a few years ago in India by offering farming services, machinery, and implement rentals on a pay-per-use basis.  The concept is still in its nascent stage but is becoming popular, and a handful of local startups have begun operations in the market.  Farming services such as land preparation, soil-health data, sowing, harvesting, crop management, post-harvest management, and machinery rental will be relevant to most of the farmers as they own small farmlands (average size 1.15 hectares) which are affordable and reduce the need for capital expenditure. 

Food Processing Sector
The food processing sector in India is one of the largest sectors, accounting for 32 percent of the country’s total food market.  The sector is the sixth largest and ranks fifth in terms of production, consumption, exports and growth.  The sector contributes 9 percent and 11 percent of GDP in manufacturing and agriculture, respectively, and makes up for 13 percent of India’s exports and 6 percent of total industrial investment.  As per the latest Annual Survey of Industries, there are 39,319 registered food processing units in the country that employ approximately 1.7 million people in food and beverage manufacturing. 

India has established itself as a net food exporter with a consistent balance of trade surplus in food and agricultural products.  Though the country remains susceptible to production and price shocks for various commodities, the food processing sector is growing at an average rate of 8 percent per annum.  It is expected to further grow due to increase in domestic consumption, changing trends in markets, consumer preferences for value-added products and growing capabilities.

India ranks second in terms of global food production and is the world’s largest producer of many commodities.  However, compared to global trends, a negligible amount of produce is processed in India due to key challenges such as a lack of advanced processing technologies, market disconnects and a lacking supply chain infrastructure.  Food wastage remains a critical challenge, and an estimated 40 percent of perishable produce goes to waste.  

The Government of India has plans to reduce wastage of agricultural produce by 50 percent in the next two years.  To address some rising concerns of food wastage and positioning the country as the food processing hub, the government is facilitating policy reforms, capital subsidies, tax rebates, reduced custom duties and access to credit for entrepreneurs establishing food processing units.  The Ministry of Food Processing Industries (MoFPI) has implemented and sanctioned the establishment of 42 mega food parks in the country, with nine operationalized under the scheme as of 2018.  Though food policy reforms suggest progress, import of non-standardized foods and ingredients remains a challenge owing to regulatory and tariff barriers. While opportunities for imported food in the Hotel, Restaurant & Institutional (HRI) and food processing sectors are improving, the India market remains relatively small due to high tariffs, ongoing import restrictions, and strong competition from the domestic industry.   

Cold Chain Sector
Traditionally, Indian consumers prefer fresh meat, vegetables, dairy products and produce.  With the evolving middle class, an increase in demand for fresh produce, meat and perishable packaged foods is on the rise, thus leading to potential opportunities for sustainable cold chain networks.

India is one of the largest producers of agricultural products and has an abundant supply of produce.  Yet, it is known for its underdeveloped cold chain infrastructure, which results in supply chain losses of food and other resources.  The losses in the agricultural sector alone are estimated at $14 billion annually due to inadequate infrastructure.

The key challenges are the lack of cold warehousing infrastructure, lack of standards in construction and operation of facilities and low awareness of handling temperature-sensitive products.  In addition, the cold-chain is energy intensive because temperatures need to be maintained at a desired level and energy expenses alone make up about 30 percent of the total expenses for the cold storage industry in India, compared to 10 percent in western countries.  Thus, the high energy costs and unreliability of power in many areas of the country are impediments to growth of the sector.

The government is focusing on integrated cold chain and supply chain related infrastructure and to encourage investments, it has initiated vital decisions such as tax exemptions to the cold chain operators, and concessions such as reduction in excise and basic custom duties on imports of cold room and cold storage infrastructure related projects. Components such as ripening chambers, pre-cooling units, pack house, sorting and grading lines and machinery are in demand.  MoFPI has implemented and sanctioned Integrated Cold Chain projects to reduce post-harvest losses and to develop the storage and transportation of temperature-sensitive goods.  Under the scheme, around 83 cold chain projects are operationalized as of 2018, creating additional capacities for storage, individual quick freezing and reefer vehicles.  Plans are also in progress to develop a national food processing policy to build a food grid and national cold chain grid.      

Competitors/Market Entry/Barriers/Intellectual Property
The agriculture and farm equipment market in India is currently estimated at US$9 billion and is expected to reach over US$11 billion in the next five years.  U.S. companies face competition from agricultural machinery and equipment manufacturers such as Mahindra & Mahindra, Escort Agri Machinery, Tractors and Farm Equipment Ltd., and New Holland and in the irrigation segment from Netafim India, Jain Irrigation, Finolex Plasson, Green India and Kissan Irrigation.

In July 2017, India implemented the GST (Goods and Service Tax) which is continuously evolving and is likely to benefit the agriculture sector in the supply chain segments and the creation of uniform markets across the country.  Agricultural machinery/equipment tariffs range from over 10 percent to 30 percent. 

U.S. companies, particularly small and medium-sized enterprises, should consider approaching India’s markets on a regional level.  Good localized information is a key to success in such a large and diverse country.  The U.S. Commercial Service offices in New Delhi, Mumbai, Chennai, Ahmedabad, Bengaluru, Hyderabad, and Kolkata (www.export.gov/india) provide valuable local information and advice and are well connected with local business and economic leaders.

India remains one of the world’s most challenging major economies with respect to protection and enforcement of intellectual property.  India was listed on the Priority Watch List in USTR’s Special 301 report for 2018.  

Commodity Trade (In Alphabetical Order)
Condiments and Sauces
Indian imports of condiments and sauces in 2018 exceeded $32 million of which nearly $5.8 million were from the United States. Other large suppliers included China, Thailand, Malaysia, and several European countries. Retail and restaurant sector offerings are growing and demand for imported condiments and sauces is on the rise as consumers experiment with how to use these imported ingredients.

Cotton
India is one of the world’s largest producers and exporters of cotton. However, India will continue to import extra-long staple (ELS) and quality long staple cotton (28-34 mm), with occasional imports of medium staple cotton when international prices are favorable. The United States has been one of the leading suppliers of cotton to India over the past few years. U.S. cotton exports to India in calendar year CY 2018 were valued at about $329 million. Imports from the United States have maintained approximately 40 percent market share of total ELS cotton imports into India since 2011. Other major cotton suppliers include Australia, Egypt, Commonwealth of Independent States, and West Africa.  Indian mills that import U.S. Pima (a brand name for ELS cotton) and upland cotton are appreciative of its superior quality, consistency, and higher ginning yield.

Craft Beer and Beer Ingredients
The India craft beer market is poised for tremendous growth though still considered niche. There are more than 100 operating microbreweries and brew pubs across India – up from around 45 in 2016 and expected to reach 200 by 2020. Supplying ingredients like malt, hops, yeast for these businesses and supplementing these breweries/pubs with imported beers is an emerging market opportunity as evidenced by growing trade and industry demand. Preferences for and acceptance of craft beers is expanding as the sector sees growth and market penetration across India in states that allow alcohol consumption. The microbrewery sector accounts for one percent of the total beer sector. A handful are expanding production lines and adding bottled or canned craft beers. The craft beer sector has captured seven percent market share of the bottled beer business.

Fresh Fruits
India provides market access for most fresh fruits. With a growing segment of consumers insisting on high standards and year-round availability, there is increasing demand for imported fresh fruits. Imports of U.S. fresh fruits (mostly apples and table grapes) into India in 2018 were valued at $163 million with apples having the highest market share at $155 million. With a continuing ban on apples and pears from China, market sources expect imports to continue to show growth over the coming years, with new products expected to enter the Indian market.

Hides and Skins
India’s hides and skins imports declined for the fourth year in a row to $37 million during CY 2018, a steep 28 percent drop below last year.  The United States is the third largest supplier of hides and skin after Saudi Arabia and Italy.  Last year, U.S. hides and skin exports stood at $2.7 million, which was 42 percent below the previous year.  Raw hide imports have a zero tariff in India, while tanned leather imports have a tariff of 10 percent (basic duty).  Imported raw material is primarily used by the local leather industry, and some of it is re-exported. 

Pulses
India is the world’s largest producer, consumer and importer of pulses (peas, lentils, and beans), with annual imports ranging from 2.5-6.6 million tons (in the recent past). In Calendar Year 2017 Indian Fiscal Year (IFY) 2016/17 (April-March), imports reached a record 6.99 million tons ($3.9 billion USD), mostly from Canada, Myanmar, Australia, Russia, China and the United States. Two consecutive record domestic harvests of pulses in 2016/17 and 2017/18 resulted in local pulse prices crashing in early 2017 causing farmer unrest in major pulse growing states. Consequently, since March 2017, the GOI has taken a series of measures to restrict imports of pulses - raising the import duties on various pulses from zero to 30-60 percent; and imposing quantitative restrictions (QRs) on imports of major pulses.  Consequently, India’s pulse imports in CY 2018 IFY 2017/18 declined to 2.4 million tons, adversely affecting the global market since late 2017.

Historically, the United States has been the supplier of higher priced green and yellow peas, lentils and garbanzo beans (chickpeas), with imports reaching record 369,000 metric tons in 2014. However, due to the recent trade restrictions, imports of pulses from the U.S. declined sharply to 30,700 tons in CY 2018 compared to 138,400 tons in CY 2017 and 322,000 tons in CY 2016. Market sources report that imports of most pulses have declined to very low levels since the end of 2018, due to the high import duties and the QRs.

Snack Foods
Evolving consumer lifestyles and increasing disposable income levels are leading to increased demand for imported snack foods, even with increased competition from local players. The 2018 imports of snack foods into India (including cookies, chocolates, chewing gum, sugar confections, etc.) exceeded $100 million with nearly $3.6 million from the United States.

Tree Nuts
Tree nuts (primarily almonds) have been one of the leading U.S. agricultural exports to India.  In 2018, imports of tree nuts from the United States exceeded $662 million. The United States is the largest supplier of almonds (mostly in-shell) to India, with a market share of about 87 percent. Other suppliers include Australia, Syria, China, Iran, and Afghanistan.

Almonds are a preferred nut in India and are gaining popularity among the growing middle-income population due to their nutritional and health benefits. India also imports small quantities of walnuts, pistachios and hazelnuts, mainly from the United States, Iran, Afghanistan, Pakistan, and the Middle East.  However, with recent increases on tariffs for in-shell walnuts and shelled almonds, and the possible implementation of WTO retaliatory tariffs by India, trade numbers may decrease in the coming year.

Opportunities
Popular Trade Events
India International Hospitality Expo, Aug 7-10, 2019, India Exposition Mart, Greater Noida, U.P.
With over 400 exhibitors and 10,000 decision makers, India International Hospitality Expo is a comprehensive show and a sourcing hub for hospitality, retail and F&B industry in India.  

Foodpro, August 23-25, 2019, Chennai Trade Centre, Chennai, Tamil Nadu
The Confederation of Indian Industry (CII) is a leading organizer of events in different major industry sectors. Foodpro is a biennial event and is billed as the largest food processing show in South India with 200 exhibitors, 5,000 business visitors and more than 25,000 general visitors. The show focuses on processing technology, equipment and machinery, refrigeration and cold chain systems, processed and packaged foods, dairy equipment and technology, packaging materials, retailing and vending systems, hotel and kitchen equipment, and bakery machinery and technology. For more information visit:  http://ciifoodpro.in/fp/index.php

Agri Tech India, Aug. 31 – September 1, 2019, Bengaluru International Exhibition Centre, Bengaluru
Agri Tech India, currently in its eleventh edition, is a leading trade show in India, with concurrent events in the dairy tech, grain tech and poultry livestock expo.  The show attracts 400 plus exhibitors from over 30 countries and is organized by the Media Today Group.  The show primarily focuses on agriculture, farm machinery, dairy technology, agricultural processing technologies, and poultry and livestock. For more information visit:  https://www.agritechindia.com/

Agritex India, September 5-7, 2019, Hitex Exhibition Center, Hyderabad
Agritex India is in its seventh edition of the trade show and includes agriculture, dairy farming, food processing, aquaculture and horticulture technologies.  The show seems to provide networking opportunities to academics, technical developers and stakeholders associated with the farming sector. For more information visit: http://agritex.co.in/   

India Cold Chain Show, December 4-7, 2019, Bombay Exhibition Centre, Mumbai
The India Cold Chain show is a leading trade show, with 150 plus exhibitors and 7,000 plus business visitors and is organized by Reed Manch Exhibitions.  The show is focused on cold storage infrastructure, IT solutions for cold storage/warehouses, and material handling solutions. For more information visit:  https://indiacoldchainshow.com/

Agricultural Trade Shows
There are numerous food and agricultural-themed trade shows in any given year. Currently there are no USDA endorsed trade shows in India. However, USDA India offices and Cooperator groups participate in additional food and agricultural product shows throughout the year. In recent years, USDA India has had booth space at AAHAR in New Delhi, Food India by SIAL and the India Food Forum in Mumbai. For a list of additional annual or biennial trade shows see the linked Trade Show Report found at https://gain.fas.usda.gov

For more information on export opportunities in agricultural machinery, equipment, or cold chain sector in India please contact Commercial Assistant Lakshmi Davey at Lakshmi.Davey@trade.gov.

For more information on commodities and agricultural items, please contact USDA’s Foreign Agricultural Service in New Delhi and Mumbai.
AgNewDelhi@fas.usda.gov
AgMumbai@fas.usda.gov

Please also review the USDA FAS Exporter Guide  and the Food and Agricultural Import Regulations and Standards – Narrative report.

Web Resources
Agricultural Food Products Export Development Authority  http://apeda.gov.in/apedawebsite/
Department of Scientific and Industrial Research     http://www.dsir.gov.in/
Federation of Cold Storage Associations of India   http://www.fcaoi.org/
Food and Agricultural Organization of the United States in India  http://www.fao.org/india/en/
Food Safety and Standards Authority of India   http://www.fssai.gov.in
Global Cold Chain Alliance     http://www.gcca.org/
Indian Council of Agricultural Research    http://www.icar.org.in/
Investment & Technology Promotion Division   http://www.indianbusiness.nic.in/
Ministry of Food Processing Industries    http://mofpi.nic.in/
Mission for Integrated Development of Horticulture  http://midh.gov.in/
National Center for Cold Chain Development   http://www.nccd.gov.in/
Forbes India          http://www.forbesindia.com/blog/economy-policy/cold-chain-indias-ticket-to-a-new-era-of-abundance-and-economic-growth/

USDA Cooperators and State and Regional Trade Groups Active in India
Almond Board of California    http://www.almonds.com/
American Pistachio Growers     http://www.americanpistachios.org/
American Hardwood Export Council    http://www.americanhardwood.org/
California Table Grape Commission   http://www.tablegrape.com/
California Walnut Commission    http://www.walnuts.org/
California Olive Committee    http://www.calolive.org/
Cotton Council International    http://www.cottonusa.org/
Cranberry Marketing Committee    http://www.uscranberries.com/
Distilled Spirits Council of the United States  http://www.discus.org/
Food Export Association of the Midwest USA   http://www.foodexport.org/
Food Export USA-Northeast    http://www.foodexport.org
Pear Bureau Northwest     http://www.usapears.org/
Softwood Export Council     http://www.softwood.org/
Southern United States Association   http://www.susta.org/
United States Soybean Export Council   http://www.ussec.org/
U.S. Grains Council     https://www.grains.org/
U.S. Apple Export Council    http://www.usaapples.com/
U.S. Dry Pea and Lentil Council    http://www.pea-lentil.com/
U.S. Dry Bean Council     http://www.usdrybeans.com/
U.S. Pecan Council     http://www.uspecans.org/
U.S. Highbush Blueberry Council    http://www.blueberry.us/
Washington State Apple Commission   http://www.bestapples.com/