India - Commercial Guide
Agricultural Sector

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2020-08-25

IMPORTANT NOTICE:   COVID 19 Caveat Regarding Agriculture Trade Prospects:  The following data reflects past sales. The reader should use due caution when using these figures to estimate future trends.  India’s economy and attendant trade prospects are both still heavily affected by the measures required to control the COVID 19 crisis.  USDA has no data to substantiate any claim that the trends suggested by past years will continue despite the impact of COVID 19.

Overview

India is an agrarian economy, and more than 54 percent of land area is considered arable.  India is among the world’s leading producers in production volume for various commodities such as rice, wheat, cotton, fruits & vegetables and dairy.  Agriculture and related sectors such as forestry and fisheries account for 16 percent of GDP though this has been declining since 1991.  Agricultural related occupations, including those in the textile sector, account for roughly half of India’s labor market. Consequently, the agricultural sector plays an important role in Indian economics, politics, and society.

Indian agricultural production for food staples is highly monsoon dependent.  Farm yields are generally below the world average.  This low productivity is caused by many factors: heavy government regulation, inefficiency in the food distribution system, poor infrastructure (which results in post-harvest losses of up to 40 percent for certain products), lack of availability and awareness in the use of modern agricultural practices and technologies, unpredictable weather, small average farm sizes (2.7 acres/1.08 hectares and shrinking), and domestic agriculture support programs and subsidies that distort market signals and hamper productivity-enhancing investment.

The agricultural sector is witnessing a shift from traditional farming to horticulture and to livestock (poultry, dairy and fishery) production.  The demand for fresh and processed products of all types is increasing as the population urbanizes, incomes rise, and consumption habits change.  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 benefit to consumers.

Imports of consumer-oriented foods, led by tree nuts and fresh fruits, are among the fastest growing segments of imported agricultural products and reached $4.7 billion in 2019, down from $5.3 billion in 2018.  The market for imported foods has grown steadily due to the rise of millennials, affluent professionals, brand-oriented importers, modern retail outlets, e-commerce retailers, and trend-setting restaurants.

Imported nuts and fruits feed into India’s traditional retail channels, with an estimated 90 percent of imported fresh fruit sold in roadside stands and open markets.  Imported packaged and consumer ready foods are found in a small number of gourmet grocery stores, in the imported foods sections of larger store formats, and in thousands of small neighborhood stores.  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. 

India’s food and grocery (F&G) retail business is estimated at $500 billion.  The F&G retail sector is dominated by traditional trade formats like neighborhood shops or kirana (mom and pop) stores, which hold about 90 percent of the total market share (in sales).  The market share held by modern trade formats such as supermarkets and hypermarkets along with e-commerce retailers is expected to expand rapidly over the next five years, as it fulfills the evolving needs of consumers.

The retail and e-retail sector has experienced noteworthy consolidation through new partnerships and acquisitions this year.  Reliance, the country’s largest food retailer, is expanding its presence in the e-commerce market by partnering with Facebook, while advancing negotiations towards a potential acquisition of Future Group’s (a major competitor) food retail operations, according to local media reports.  Amazon India has expanded its Amazon Pantry services to over 300 cities, which will facilitate the acquisition of food essentials and fresh products for customers at home.

The emergence of larger chains and stores began around 2005 and the sector has since grown to over 8,157 modern retail outlets across India.  While many retailers are expanding and opening new stores, profitability continues to be an issue for a variety of reasons, such as high real estate costs.

India’s casual dining and quick service restaurant sector is also on the rise with nearly 60 foreign restaurant brands across India.  Another emerging trend is the rise of local “themed” dining restaurants serving cuisines with a fusion of national and international foods.

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 2019, India accrued an $8.25 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. 

 

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

 

2016

2017

2018

2019

Total Exports

33.7

39.5

39.4

31.0

Total Imports

26.9

30.2

24.6

22.7

Imports from the US

1.4

1.9

1.9

2.1

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

Commodity Trade (In Alphabetical Order)

Condiments and Sauces

Indian imports of condiments and sauces in 2019 reached nearly $24 million, of which $5.6 million were from the United States. Other large suppliers included Thailand, China, 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. Nonetheless, 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 2019 were valued at $587 million, the highest on record. Imports from the United States have maintained approximately 49 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, higher ginning yield and yarn realization.

Craft Beer and Beer Ingredients

The India craft beer market is poised for tremendous growth though it is still considered niche. There are more than 100 operating microbreweries and brew pubs across India, which represents growth from around 45 in 2016 to around 200 in 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 quality standards and year-round availability, there is an increasing demand for imported fresh fruits. Imports of U.S. fresh fruits (mostly apples, pears, and table grapes) into India in 2019 were valued at $62 million with apples having the highest market share at $56 million, which was lower than year ago volumes by 64 percent.  This is due to India’s increase in tariffs imposed on apples from 50 percent to 70 percent in June 2019 in retaliation for U.S. steel and aluminum tariffs.  Overall market sources expect imports within the fresh fruits segment 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 fifth year in a row to $31.2 million during CY 2019, a steep 17 percent drop below last year.  The United States is now the second largest supplier of hides and skin after Saudi Arabia. Turkey, Italy, and Yemen follow the United States.  Last year, U.S. hides and skin exports stood at $2.8 million, which was 7 percent above the previous year.  Raw hide imports have a zero tariff in India, while tanned leather imports have a tariff of 15 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 3.8 - 6.99 million tons during CY 2012 to 2017.  In Calendar Year 2017 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, which caused farmer unrest in major pulse growing states. Consequently, since March 2017, the GOI has taken a series of measures to restrict imports of pulses: they have raised the import duties on various pulses from zero to 30-60 percent and imposed quantitative restrictions (QRs) on imports of major pulses.  Consequently, India’s pulse imports in CY 2018 declined to 2.39 million tons and recovered slightly to 3.22 million tons in 2019, significantly lower than the pre-import restrictions period 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 recent trade restrictions, imports of pulses from the U.S. declined sharply to 28,140 tons in CY 2018 compared to 138,400 tons in CY 2017.  US pulse imports in CY 2019 improved to slightly over 77,000 tons as importers found ways to circumvent the QR on peas and higher lentil imports.  Market sources report that imports of most pulses have declined to very low levels since the end of 2019, due to government imposing restrictions that blocked out-of-quota imports.

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 2019 imports of snack foods into India (including cookies, chocolates, chewing gum, sugar confections, etc.) exceeded $127 million with over $2.6 million from the United States.

Tree Nuts

Tree nuts (primarily almonds) have been one of the leading U.S. agricultural exports to India.  In 2019, imports of tree nuts from the United States exceeded $823 million. The United States is the largest supplier of almonds (mostly in-shell) to India; 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 health benefits. India also imports small quantities of walnuts, pistachios, and hazelnuts, mainly from the United States, Iran, Afghanistan, Pakistan, and the Middle East. 

Leading Sub-Sectors 

Agricultural Machinery 

India is the largest tractor market in the world.  It is estimated that tractor production in India accounts for about 35 percent of global production volume.  The 31-50 hp category is the largest market segment.  Total tractor sales grew by 10.24 percent to 878,476 units in 2019.  However, the utilization of tractors is low compared to other leading economies of the world since the average size of farms in India is less than three acres.  Though tractors are the core of farm mechanization, farm production has gone way beyond simply utilizing tractorsThe key growth drivers for tractors will be farmers replacing old tractors with new energy efficient ones, the growth of tractors in low  tractor density regions such as Jharkhand, Rajasthan, Madhya Pradesh and other  regions in the country where the usage of tractors have been low due to factors such as low land holding, farm power/diesel, finance , and non-farm usage such as haulage in the construction and road building sector.   A stronger emphasis is now 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 Indian government is working to provide easier access to credit for farmers by developing farmer-friendly policies aligned with the new and growing trend of collaborative farming in India.

Various state governments, with support from the federal government, have started rental centers for agricultural machinery and tools, making mechanization more accessible and opening the market for used equipment exporters.  This is a crucial change, as purchasing the equipment is beyond the reach of many farmers due to high acquisition and maintenance costs.

Irrigation:   

The Indian government has laid out an ambitious goal of doubling farmers’ incomes by 2022.  It is aggressively promoting and funding rural development with an impetus on agricultural mechanization and irrigation penetration.  Agriculture in India is vulnerable to the vagaries of weather because an estimated 52 percent of farmland is unirrigated and dependent on rainfall.  Efficient usage of water is critical to Indian agriculture as the demand for water for irrigation will steadily rise due to the growing population.  The key drivers of growth for irrigation equipment will primarily be population growth, food scarcity and water shortage.  American companies providing energy efficient affordable irrigation products should explore business opportunities in India. 

Farming-as-a-Service (FaaS)  

Farming-as-a-Service is a concept which was spawned a few years ago in India 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 with a handful of local startups having 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 beneficial to most farmers as they own small farmlands (average size three acres) with low capital reserves. 

Agri-Tech

Technology driven platforms for supply chain management, and digital farming technologies using AI for agricultural management has started transforming the agri-sector in India and adoption among the farming community is gradually growing.  The Agri-Tech sector in India is witnessing a rise in the number of emerging agri-tech start-ups.   Some of the key Indian start-ups in this space include – Ninjacart, Agrostar, Stellops, Cropin, and Jumbotail.  According to a report by NASSCOM, start-ups in the agri-tech sector has raised investments of $248 million as of June 2019, bringing in opportunities for private-public partnerships.

Food Processing Sector  

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. 

The food processing sector accounts for 32 percent of India’s total food market.  The sector 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, representing 10.7 percent of India’s exports and 6 percent of total industrial investment.  According to the Annual Survey of Industries, there are 39,748 registered food processing units in the country that employ approximately 1.85 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 according to the USDA FAS GAIN Report.  This growth is driven by increasing domestic consumption, changing market trends, consumer preferences for value-added products and growing capabilities.

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 rising concerns of food wastage and to position the country as a food processing hub, the government is facilitating policy reforms, capital subsidies, tax rebates, reduced custom duties and access to credit for entrepreneurs investing in 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 17 operationalized as of 2019.  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 Indian market remains relatively small due to high tariffs, ongoing import restrictions, and strong competition from the domestic industry.     

Cold Chain Sector 

With an evolving middle class, the demand for fresh produce, meat and perishable packaged foods is on the rise, 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, 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. To encourage investments, it has initiated tax exemptions for 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 this scheme, around 298 cold chain projects are approved as of 2019, 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 $9 billion and is expected to reach over $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. In the irrigation segment main competitors include 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 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     ( export.gov/India/ ) provide valuable local information and advice and are well connected with local business and economic leaders.  

Opportunities

Popular Trade Events 

Agritechindia, January 29-31, 2021, Bengaluru International Exhibition Center, Bengaluru, State of Karnataka, India. 

Agri Tech India currently in its twelfth edition is a leading trade show, with concurrent events in dairy tech, grain tech, poultry livestock and agri-technology processing 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 & Livestock.

India Cold Chain Show, December 3-5, 2020, (Dates to be confirmed) 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.

CII FoodPro , 2021, Dates to be announced, Chennai, India

FoodPro is a biennial event organized by the Confederation of Indian Industry is the 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, bakery machinery and technology.   

EIMA Agrimach, 2021, Dates to be announced, IARI, PUSA, New Delhi, India

Organized by the Federation of Indian Chambers of Commerce and Industry, in partnership with Ministry of Agriculture & Farmers Welfare and Indian Council of Agricultural Research, EIMA Agrimach is International exhibition and conference on Farm mechanization, and showcases Agri-Machinery and Equipment, farm technologies, agri services, agro processing industries, and Agri inputs and provides opportunity to Global companies through B2Bs and country pavilions. 

World Food India, Dates are yet to be announced by MoFPI, New Delhi, India

Organized by the Confederation of Indian Industry, in partnership with Ministry of Food Processing, World Food India is a flagship and international exhibition and conference on Agriculture and Food, and showcases, farm to folk technologies, food processing equipment, packaging, post-harvest technologies, cold chain infrastructure and refrigerated transport, processed foods, and retail. 

For more information on export opportunities in the leading sub sectors such as Agricultural machinery, irrigation, Farming-as-a-Service, Agri-Tech, Cold Chain, and Food Processing Equipment in India please contact Commercial Assistant Lakshmi Davey.

For more information on commodities and agricultural items, please contact USDA’s Foreign Agricultural Service in New Delhi and Mumbai.

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

Resources

Agricultural Food Products Export Development Authority

Department of Agricultural Research and Education, Government of India

Department of Scientific and Industrial Research, Government of India     

Department of Agriculture, Cooperation and Farmers Welfare, Government of India

Department of Fertilizers, Government of India

Federation of Cold Storage Associations of India   

Food and Agricultural Organization of the United States in India  

Food Safety and Standards Authority of India   

Global Cold Chain Alliance     

Indian Council of Agricultural Research    

Mission for Integrated Development of Horticulture  

National Center for Cold Chain Development   

The Ministry of Agriculture and Farmers' Welfare, Government of India

USDA Cooperators and State and Regional Trade Groups Active in India

Almond Board of California                              

American Pistachio Growers  

American Hardwood Export Council                        

California Table Grape Commission                

California Walnut Commission                                  

California Olive Committee                              

Cotton Council International                            

Cranberry Marketing Committee                   

Distilled Spirits Council of the United States              

Food Export Association of the Midwest USA                  

Food Export USA-Northeast                            

Pear Bureau Northwest                                             

Softwood Export Council                                           

Southern United States Association                           

United States Soybean Export Council                        

U.S. Grains Council                                          

U.S. Apple Export Council                                

U.S. Dry Pea and Lentil Council                                 

U.S. Dry Bean Council                                             

U.S. Pecan Council                                

U.S. Highbush Blueberry Council                                 

Washington State Apple Commission