AGRICULTURE. November 2010

Transcription

1 AGRICULTURE November 2010

2 AGRICULTURE November 2010 Contents Advantage India Market overview Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations 2

3 ADVANTAGE INDIA Advantage India India s agricultural policy focuses on food selfsufficiency, remunerative prices for farmers, and maintenance of stable prices for consumers. These goals are met by a number of measures such as minimum support prices, food subsidies for consumers, regulated markets, input subsidies for producers, and international trade policy. Since independence, the government has focused on the sector through five-year plans, and the public sector outlay in the sector as per the Eleventh Five Year Plan is US$ 29.6 billion (INR 1,363.8 billion). Advantage India India has diverse geographic features such as climate, soil, availability of water, and biodiversity due to its vast area. In 2008, arable land in India was 159 million hectares, second only to the US. In 2008, India was the second-largest producer of wheat and rice in the world, and the largest producer of pulses in the world. In 2008, India was ranked second in terms of people involved in agriculture and allied activities, with approximately 583 million people involved in agriculture. Although, the share of agriculture and allied activities in GDP is estimated at 14.6 per cent, the sector is the source of livelihood for more than 50 per cent of the Indian population. Sources: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 3 December 2010; Agriculture and Food Management, Economic Survey , Government of India: Union Budget and Economic Survey website, accessed 08 March 2010; India s Macroeconomic Indicators, Third Advance Estimates of Crop Production Released, PIB press release website, accessed 14 July

4 AGRICULTURE November 2010 Contents Advantage India Market overview Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations 4

5 MARKET OVERVIEW Market overview (1/12) Green Revolution: The introduction of inputs, such as fertilisers, high-yielding varieties (HYV) of crops, pesticides, surface irrigation, and mechanised farming increased agricultural productivity. In a span of two decades, the food grain production had more than doubled to reach MT in The yield stood at 872 kg/ha in Timeline of Indian agriculture National Agricultural Policy (NAP): The NAP aims to achieve an annual growth rate of 4 per cent in the agricultural sector over the next two decades. India requires a robust agriculture sector to achieve GDP growth of 8 10 per cent. 1950s 1960s and 70s 1980s and 90s 2000s Post-independence: This era was characterised by low agricultural productivity and starvation across the country. In , food grain production was 50.8 MT, and the yield of food grains was 522 kg/ha. Economic reforms: The country's import and export policies are aimed at enhancing export capabilities of the sector by focusing on productivity, promoting modernisation, and competitiveness. Since , India s exports have increased approximately 12.9 times to reach US$ 18.7 billion in

6 Food grain production (MT) MARKET OVERVIEW Market overview (2/12) Growth of food grain production in India % % 46.0% % % % 15.7% 14.6% E 60% 50% 40% 30% 20% 10% 0% Share of agriculture and allied services in GDP Food grain production (Million Tonnes) Percentage share of agriculture and allied services in GDP The share of agriculture and allied services in GDP has been estimated at 14.6 per cent in , as the dependence of the economy has shifted to the service sector and industry. Sources: Handbook of Statistics on the Indian Economy , Reserve Bank of India website, accessed 18 January 2010; Second Advance Estimates of Production of Foodgrains for , accessed 08 March 2010; Dr R. Albert Christopher Dhas, Agricultural Crisis in India: The Root Cause and Consequences, The American College, Madurai; Third Advance Estimates of Crop Production Released, PIB Press Release, accessed 14 July 2010; India s Macroeconomic Indicators, EXIM Bank website, accessed 14 July E Third advance estimates 6

7 MARKET OVERVIEW Market overview (3/12) Over the 50-year period, i.e., from to , food grain production in India has increased at a compound annual growth rate (CAGR) of approximately 2.7 per cent, to reach million tonnes (MT) in The increase in food grain production is largely attributed to the Green Revolution, which took place in the 1960s and 1970s. Agri-inputs, such as fertilisers, high-yielding varieties (HYV) of crops, pesticides, surface irrigation, and mechanised farming were primarily responsible for the increase in agricultural productivity. Sources: Handbook of Statistics on the Indian Economy , Reserve Bank of India website, accessed 18 January 2010; Second Advance Estimates of Production of Foodgrains for , accessed 08 March 2010; Dr R. Albert Christopher Dhas, Agricultural Crisis in India: The Root Cause and Consequences, The American College, Madurai; Third Advance Estimates of Crop Production Released, PIB Press Release, accessed 14 July 2010; India s Macroeconomic Indicators, EXIM Bank website, accessed 14 July E Third advance estimates 7

8 MARKET OVERVIEW Market overview (4/12) Kharif and Rabi seasons India has two crop seasons, Kharif and Rabi, based on the dependence of crop productivity on the monsoons. The Kharif season is during the summer and monsoon months, lasting from April to September, and rice is the main crop grown during the season. The Rabi season is during the winter months of October to March, and wheat is the main crop of this sesason. India Kharif and Rabi (production in million tonnes) 100%= % 47.3% 50.1% 45.1% 47.9% 47.3% 49.1% 47.6% 49.6% 54.0% 51.9% 52.7% 49.9% 54.9% 52.1% 52.7% 50.9% 52.4% 50.4% 46.0% * Kharif Rabi Sources: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November 2010; Second Advance Estimates of Production of Foodgrains for , accessed 08 March *Fourth Advance Estimates as released on 19 July

9 MARKET OVERVIEW Market overview (5/12) According to estimates by the Department of Agriculture and Cooperation, production of food grains in is estimated to be million tonnes, with the Rabi crops accounting for million tonnes and Kharif crops accounting for million tonnes. According to first advance estimates by the Department of Agriculture and Cooperation, production of food grains in is estimated to be million tonnes. Sources: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November 2010; Second Advance Estimates of Production of Foodgrains for , accessed 08 March *Fourth Advance Estimates as released on 19 July

10 MARKET OVERVIEW Market overview (6/12) Key crop varieties in India Production (million tonnes) Sugarcane Rice Wheat Nine-Oilseeds Cotton Maize Soyabean * Over the 59-year period, i.e., from to *, the production of rice and wheat has increased at a CAGR of approximately 2.6 per cent and 4.5 per cent, respectively. The production of maize and cotton has increased at a CAGR of 4 per cent and 3.6 per cent, respectively over the same period. Sources: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November 2010; Second Advance Estimates of Production of Foodgrains for , accessed 08 March 2010; Handbook of Statistics on the Indian Economy , Reserve Bank of India website, accessed 18 January *Fourth Advance Estimates as released on 19 July 2010; Note: For cotton production is in million bales of 170 kg each 10

11 MARKET OVERVIEW Market overview (7/12) Key crop varieties in India The yield of crops has witnessed an increase since the Green Revolution. Between and *, the yield of rice and wheat has increased by 3.3 and 4.4 times, to reach 2,130 kg/ha and 2,830 kg/ha, respectively. The yield of sugarcane has doubled since to reach around 66,922 kg/ha in **. Sources: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November 2010; Second Advance Estimates of Production of Foodgrains for , accessed 08 March 2010; Handbook of Statistics on the Indian Economy , Reserve Bank of India website, accessed 18 January *Fourth Advance Estimates as released on 19 July 2010; ** First Advance Estimates as released on Note: For cotton production is in million bales of 170 kg each 11

12 Wheat production Rice production MARKET OVERVIEW Market overview (8/12) Key crop varieties in India Wheat production and yield 2,708 2,281 2,830 3,000 2, Rice production and yield 1,901 1,740 2,177 2,500 2, ,630 1, * 2,000 1,500 1, Yield ,336 1,013 1, ** 1,500 1, Yield Production (Million Tonnes) Yeild (Kg/hectare) Production (Million Tonnes) Yeild (Kg/hectare) The principal crops of the Indian agriculture sector include rice, wheat, jowar, bajra, maize, pulses, nine oilseeds, soya bean, sunflower, cotton, jute, mesta, and sugarcane. Sources: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November 2010; Agriculture and Food Management, Economic Survey , Government of India: Union Budget and Economic Survey website, accessed 08 March *Fourth Advance estimates; **First Advance Estimates as released on 23 September

13 MARKET OVERVIEW Market overview (9/12) Key crop varieties in India The increase in production has primarily been due to the introduction of HYV of crops. The yield of wheat has increased by approximately four times, while the yield of rice has grown more than three times Area under cultivation (million hectares) * Rice Wheat Sources: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November 2010; Agriculture and Food Management, Economic Survey , Government of India: Union Budget and Economic Survey website, accessed 08 March *Fourth Advance estimates 13

14 Sugarcane production Nine-Oilseeds MARKET OVERVIEW Market overview (10/12) Key crop varieties in India Sugarcane production and yield Nine oilseeds production and yield ,395 68,577 66,922 57,844 45,549 48, ** 80,000 60,000 40,000 Yield , * 1,200 1, Yield Production (Million Tonnes) Yeild (Kg/hectare) Production (Million Tonnes) Yeild (Kg/hectare) Sources: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November 2010; Agriculture and Food Management, Economic Survey , Government of India: Union Budget and Economic Survey website, accessed 08 March *Fourth Advance estimates; **First Advance Estimates as released on 23 September

15 Maize production Cotton production MARKET OVERVIEW Market overview (11/12) Key crop varieties in India Maize production and yield Cotton production and yield ,959 1,822 1,518 1, , ** 2,500 2,000 1,500 1, Yield ** Yield Production (Million Tonnes) Yeild (Kg/hectare) Production (Million Tonnes) Yeild (Kg/hectare) Sources: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November 2010; Agriculture and Food Management, Economic Survey , Government of India: Union Budget and Economic Survey website, accessed 08 March *Fourth Advance estimates; **First Advance Estimates as released on 23 September 2010; Note: For cotton, production is in million bales of 170 kg each 15

16 MARKET OVERVIEW Market overview (12/12) Leading food grain-producing states in India Other Bihar Madhya Pradesh Karnataka Maharashtra Haryana West Bengal Rajasthan Andhra Pradesh Punjab Uttar Pradesh Share of states in food grain production MT MT 16.3% 19.3% 6.1% 4.7% 5.2% 5.2% 5.6% 5.3% 5.2% 6.6% 6.8% 6.6% 7.0% 7.0% 5.1% 7.0% 8.2% 8.4% 12.9% 21.7% 11.6% 18.3% In India, 10 states account for approximately 80 per cent of the total food grain production. In , West Bengal was the leading producer of rice in India, accounting for approximately 15.2 per cent of the total production, followed by Andhra Pradesh and Uttar Pradesh, accounting for 14.4 per cent and 13.2 per cent, respectively. Uttar Pradesh was the leading producer of wheat in India in It accounted for 35.4 per cent of the total wheat production, followed by Punjab and Haryana, accounting for 19.5 per cent and 13.4 per cent, respectively. In , Andhra Pradesh was the leading producer of maize in India. The state accounted for 21 per cent of the total production followed by Karnataka and Rajasthan at 15.4 per cent and 9.3 per cent, respectively. Source: Handbook of Statistics on the Indian Economy , Reserve Bank of India website, accessed 18 January 2010; Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 3 December Note: Total production does not include Union Territories 16

17 MARKET OVERVIEW EXIM scenario (1/4) Between and P, the value of agricultural exports and imports has grown at a CAGR of 16.2 per cent and 28.7 per cent India s agri imports and exports (US$ billion) P Agriculture Exports Agriculture Imports Source: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November P Provisional 17

18 MARKET OVERVIEW EXIM scenario (2/4) India is a net exporter of agricultural products. However, it faces challenges related to tradedistorting subsidies, tariffs and trade barriers Agri imports and exports as a percentage of total national exports and imports P 3.1 Percentage of agri exports to total national exports Percentage of agri imports to total national imports Source: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November P Provisional 18

19 MARKET OVERVIEW EXIM scenario (3/4) In , India s export of cereals amounted to US$ 3.29 million, with Saudi Arabia, the UAE and Malaysia being the leading export destinations. Rice (basmati and non-basmati) and other cereals were the leading cereals exported from the country. 100%= US$ 19.5 billion 47.8% Key agri products exported by India, * (US$ billion) 7.0% 8.8% 6.3% 12.1% 6.9% 11.0% Oil Meals Rice Basmati Marine Products Spices Paper/Wood products Meat & Preparations Sugar Other 0.1% Source: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November *Provisional 19

20 MARKET OVERVIEW EXIM scenario (4/4) Vegetable oil is a leading agricultural product imported by India from developing countries such as Malaysia and Indonesia. 100%= US$ 12.9 billion Key agri products imported by India, * (US$ billion) 0.4% 26.1% 16.3% 44.6% Vegetable Oils Fixed (Edible) Wood & Wood Products Pulses Wheat 12.6% Other Source: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November *Provisional 20

21 MARKET OVERVIEW Growth drivers (1/2) Growth in population and wealth With a population of more than a billion, India has a huge domestic demand for agri products. Although food deficit declined from 290 kcal/person/day in to 260 kcal/person/day in , there is a challenge with respect to meeting the total demand for food. India s economic growth has, however, put into motion factors such as increasing private final consumption expenditure and disposable incomes, which have driven the agricultural sector. Land and irrigation India s land under cultivation has continued to rise since the 1950s, and more than 50 per cent of India s workforce is involved in agriculture and allied activities. In (P), the country s gross irrigated area stood at 87.3 million hectares, in comparison to 28 million hectares in Fertilisers Fertilisers comprise a key agri input, which has resulted in higher production of crops and yield. Fertiliser consumption per hectare has grown significantly from 0.55 Kg in 1950 to more than 125 Kg by

22 MARKET OVERVIEW Growth drivers (2/2) Mechanisation Seeds Institutional credit The Indian farmer has adapted modern agricultural techniques, such as the use of tractors and tillers. The farm power used in India has increased by five times to kw/ha in from kw/ha in , decreasing the contribution of human power from 15 per cent in to 5.8 per cent in High yielding varieties (HYVs) of seeds and an organised seed sector have been instrumental in driving agricultural productivity across the country. The area under certified seeds in India has increased from around 500 hectares in to more than 0.5 million hectares in , improving the yield of crops. Institutional credit has reduced the role of traditional money lenders in the Indian agricultural sector, thereby, creating an organised credit market. The share of institutional credit, which stood at approximately 7 per cent in 1951, has increased to more than 60 per cent in 2002; whereas the share of non-institutional credit, which primarily comprises money lenders, has declined to approximately 40 per cent in 2002, from 92.7 per cent in

23 MARKET OVERVIEW Growth drivers population and wealth (1/2) India has the second-largest population in the world, accounting for more than one-sixth of the world s population. The country s inherent need to feed more than a billion people, is a driving force for domestic agriculture. 1,400 1,200 1, India population (million) 1, , Population (Million) Sources: Handbook of Statistics on the Indian Economy , Reserve Bank of India website, accessed 18 January 2010; India Agricultural Policy Review, Agriculture and Agri-Food Canada website, accessed 18 January

24 MARKET OVERVIEW Growth drivers population and wealth (2/2) India s PFCE has been boosted by the economic reforms, which began in the 1990s. The growth in PFCE has resulted in the growth of the agriculture sector. Growth in the country's population and wealth has accelerated domestic demand, thereby transforming the country from a net importer to a net exporter of agricultural products (food crops). India private final consumption expenditure (PFCE) 35,100 Values indexed to 100 as of ,100 25,100 20,100 15,100 10,100 5, Sources: Handbook of Statistics on the Indian Economy , Reserve Bank of India website, accessed 18 January 2010; India Agricultural Policy Review, Agriculture and Agri-Food Canada website, accessed 18 January

25 MARKET OVERVIEW Growth drivers agricultural land in India India ranks seventh in the world in terms of total geographic area. In 2008, arable land as a percentage of total land in India stood at 53.5 per cent, in comparison to the world average of 10.9 per cent. The area under irrigation in the country has grown at a steady pace since the Green Revolution, with net irrigated area accounting for 18.9 per cent of total land area in India in P. Sources: Agricultural Statistics At a Glance 2010," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 17 November 2010 P Provisional Land use (million hectares) P Total cropped area Net area sown 25

26 MARKET OVERVIEW Growth drivers improved irrigation facilities in India The government has taken several initiatives through five-year plans to improve irrigation facilities in India. The Working Group on Water Resources for the Eleventh Five Year Plan ( ) has proposed creation of irrigation potential of 16 million hectare during the Eleventh Five Year Plan period. The total irrigation potential in the country has increased from 81.1 million ha in to million ha by March Irrigated area (million hectares) P Gross Irrigated Area Net Irrigated Area Sources: "Agricultural Statistics At a Glance 2008, Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 18 January 2010; "Agricultural Statistics At a Glance 2009," Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 14 July 2010; P Kataria and AS Joshi, Energy Use in Indian Agriculture, Department of Economics, Punjab Agricultural University, Ludhiana, India; Agriculture and Food Management, Economic Survey , Government of India: Union Budget and Economic Survey website, accessed 08 March P Provisional 26

27 MARKET OVERVIEW Growth drivers increasing role of fertilisers Fertilisers production and consumption Fertiliser consumption per hectare Production (Million Tonnes) Consumption (Million Tonnes) Consumption (Kg/ha) In 1950, per hectare use of fertilisers in India was 0.55 Kg. However, backed by government policies and initiatives, the consumption increased to more than 125 Kg per hectare by The government has taken various policy initiatives for the fertiliser sector, such as pricing policy for indigenous urea, new investments in the urea sector, nutrient-based pricing, production and availability of fortified and coated fertilisers, uniform freight subsidy on all fertilisers under the fertiliser subsidy regime, concession scheme for decontrolled phosphatic and potassic fertilisers, etc. Source: Agriculture and Food Management, Economic Survey , Government of India: Union Budget and Economic Survey website, accessed 08 March

28 MARKET OVERVIEW Growth drivers mechanisation of Indian agriculture (1/2) The country has witnessed a surge in the sale of tractors and power tillers. In 2005, India was ranked second in the world, after the US, in terms of tractor usage Farm power in India (kw/ha) CAGR ( ) 4.8% Sources: Annual Report , Department of Agriculture & Cooperation, Ministry of Agriculture, Government of India website, accessed 14 July 2010; P Kataria and AS Joshi, Energy Use in Indian Agriculture, Department of Economics, Punjab Agricultural University, Ludhiana, India. 28

29 MARKET OVERVIEW Growth drivers mechanisation of Indian agriculture (2/2) 500, , , ,531 Sale of tractors CAGR( ): 8.5 per cent 296, , , ,836 35,000 30,000 25,000 20,000 17,481 Sale of power tillers CAGR( ): 19.2 per cent 22,303 24,791 26,135 35, , ,000 15,000 10,000 5, Following the Green Revolution, Indian agriculture has moved towards mechanisation. The farm power used in India has increased by five times to kw/ha in from kw/ha in , decreasing the contribution of human power from 15 per cent in to 5.8 per cent in Sources: Annual Report , Department of Agriculture & Cooperation, Ministry of Agriculture, Government of India website, accessed 14 July 2010; P Kataria and AS Joshi, Energy Use in Indian Agriculture, Department of Economics, Punjab Agricultural University, Ludhiana, India. 29

30 MARKET OVERVIEW Growth drivers role of seeds in Indian agriculture Seed production (billion tonnes) A Foundation seed production Breeder seed production Certified/quality seed distribution (billion tonnes) HYV seeds have played a prominent role in the success of the Indian agriculture sector, resulting in higher production of food grains. During the Green Revolution, the Indian Council for Agricultural Research developed new strains of HYV seeds, and focused mainly on wheat and rice. 2,500 2,000 1,500 1, CAGR(FY06 10): 18.8 per cent 1, , , , , A Certified/Quality seed distribution The Seeds Act, 1966 and the New Policy on Seeds Development, 1988, form the basis of promotion and regulation of the Indian seed industry. The objectives of the National Seeds Policy, is to create an appropriate climate for the seed industry, safeguard the interests of Indian farmers, and the conservation of agro biodiversity. Source: Annual Report , Department of Agriculture & Cooperation, Ministry of Agriculture, Government of India website, accessed 14 July A Anticipated 30

31 MARKET OVERVIEW Growth drivers improved agricultural credit Flow of institutional credit to agriculture and allied activities (US$ billion) 8.7% 8.7% 9.9% 8.4% 8.9% 9.9% 9.8% 34.1% 31.0% 25.1% 22.0% 18.5% 19.0% 13.5% 57.2% 60.3% 65.0% 69.5% 72.6% 71.1% 76.7% P Commercial banks Cooperative banks RRBs 100%= US$ billion Institutional credit, which comprises loans from commercial banks, cooperatives societies and banks as well as regional rural banks (RRBs), has grown at a CAGR of about 25 per cent between and In , the amount disbursed by all banks (including cooperative banks and RRBs) to agriculture and allied activities stood at US$ 57.5 billion (INR 2,644.6 billion), with commercial banks accounting for more than three-fourth of the amount disbursed. Sources: Annual Report , Department of Agriculture & Cooperation, Ministry of Agriculture, Government of India website, accessed 14 July 2010; Flow of institutional credit to agriculture and allied activities, Economic Survey ; Ramesh Golait, Current Issues in Agriculture Credit in India: An Assessment, Summer 2007, Reserve Bank of India Occasional Papers, RBI website, accessed 18 January P Provisional 31

32 AGRICULTURE November 2010 Contents Advantage India Market overview Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations 32

33 INDUSTRY INFRASTRUCTURE Industry infrastructure Agriculture Export Zones (AEZs) (1/2) State AEZ Focus Products State AEZ Focus Products Andhra Pradesh Assam Bihar Mango pulp, fresh vegetables, grapes, mangoes, gherkins, chillies Fresh and processed ginger Litchis Punjab Rajasthan Sikkim Vegetables, potatoes, basmati rice Coriander, cumin Ginger, flowers (orchids) and cherry pepper Gujarat Himachal Pradesh Jammu & Kashmir Mangoes, vegetables, dehydrated onions, sesame seeds Apples Apples and walnuts Tamil Nadu Tripura Uttar Pradesh Flowers, mangoes, cashew nuts Pineapples Potatoes, mangoes, vegetables, basmati rice Jharkhand Karnataka Kerala Madhya Pradesh Vegetables Gherkins, rose onions, flowers, vanilla Horticulture products, medicinal plants Potatoes, onions, garlic, seed spices, wheat, lentils, grams, oranges Uttaranchal West Bengal Basmati rice, litchis, flowers, medicinal and aromatic plants Pineapples, litchis, potatoes, mangoes, vegetables, Darjeeling tea Maharashtra Grapes and grape wine, mangoes including Kesar mango, flowers, onions, pomegranate, banana, oranges Orissa Ginger and turmeric 33

34 INDUSTRY INFRASTRUCTURE Industry infrastructure Agriculture Export Zones (AEZs) (2/2) Total number of AEZs in India is 60 Distribution of AEZs among states 8 Maharashtra West Bengal Andhra Pradesh Madhya Pradesh Distribution of AEZs among states Karnataka Uttaranchal Uttar Pradesh Tamil Nadu Others Source: Agri Export Zones of India, Agricultural and Processed Food Products Export Development Authority website, accessed 29 December

35 AGRICULTURE November 2010 Contents Advantage India Market overview Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations 35

36 INVESTMENTS Investments (1/4) The sector has transformed from agriculture to agribusiness, providing value to each stakeholder in the farm to fork value chain. In the recent past, the sector has witnessed investments from the corporate sector in the form of organic farming, contract farming, and setting up hubs for the procurement of farm produce. M&A scenario Key domestic deal in 2010: The largest deal in the sector was the acquisition of Agro Dutch Industries Ltd by Penta Homes Pvt Ltd, Vishwa Calibre Builders Pvt Ltd, and a private investor for US$ 85.4 million (INR 3.9 billion). Deal type Period: January 2009 to July 2010 No of deals Deal value (US$ million) 2009 Inbound 4 N/A Domestic Inbound Outbound 2 N/A Domestic Sources: Transactions, Bloomberg, accessed 12 January 2010 (for deals pertaining to 2009); M&A Transactions, Thomson One Banker, accessed 5 August 2010 (for deals pertaining to 2010); Consolidated FDI Policy, Department of Industrial policy and promotion website, accessed 9 August

37 INVESTMENTS Investments (2/4) Examples of investment by private players In March 2010, Bharti Walmart Private Limited, the joint venture between Bharti Enterprises and Walmart Stores Inc, launched the sustainable agricultural programme in Punjab. The programme provides sanitation and energy-efficient solutions through community toilets and bio-gas plants that impact the yield and quality of the farm produce. In March 2010, the Mauritius-based private equity fund, India Agri Business Fund, agreed to invest US$ 10 million (INR 460 million) in The Global Green Company Limited, the foods division of the Avantha Group. In July 2007, Cadbury India Ltd and the Tamil Nadu Horticulture Department entered an agreement to promote cocoa farming. The five-year agreement aims to bring 50,000 acres under cocoa farming, which would provide coconut farmers an additional income of US$ 17.4 million (INR 80 million) a year. In August 2006, Reliance Retail entered an agreement with the Punjab government for agricultural and retail projects entailing an initial investment of US$ million (INR 5.0 billion). The company plans to set up rural hubs for procurement of vegetables, fruits, pulses and other farm produces. In 2003, Mahindra Shubhlabh Services Ltd, a subsidiary of Mahindra & Mahindra Ltd, and Punjab Agro Food grains Corporation, entered an agreement to divert about 100,000 acres of land from paddy (rice) to maize under contract farming. Sources: Transactions, Bloomberg, accessed 12 January 2010 (for deals pertaining to 2009); M&A Transactions, Thomson One Banker, accessed 5 August 2010 (for deals pertaining to 2010); Consolidated FDI Policy, Department of Industrial policy and promotion website, accessed 9 August 2010; Bharti Walmart launches Sustainable Agri Program in Punjab, UNI (United News of India), 30 March 2010, via Dow Jones Factiva, (c) 2010 HT Media Limited; Global Green to get $10-m funding, Business Line (The Hindu), 13 March 2010, via Dow Jones Factiva, (c) 2010 The Hindu Business Line; Cadbury India in pact with TN Horticulture Dept, Business Line (The Hindu), 2 July 2007, via Dow Jones Factiva, (c) 2007 The Hindu Business Line; Punjab, Mahindras sign farm pact, Business Line (The Hindu), 14 March 2003, via Dow Jones Factiva, (c) 2003 The Hindu Business Line; Reliance Retail inks MoU with Punjab govt for agri project, The Press Trust of India Limited, 1 August 2006, via Dow Jones Factiva, (c) 2006 Asia Pulse Pty Limited. 37

38 INVESTMENTS Investments (3/4) Key state-wise contract farming initiatives by private sector State Crop Company/Corporate Area (Hectares) Maharashtra Soyabean Tinna Oils and Chemicals 134,800 Madhya Pradesh Wheat Hindustan Lever Ltd (HLL) 15,000 Punjab Rice (Basmati) Satnam Overseas, DD Intenational Inc, Amira Foods India Ltd (Escorts Ltd & Grain Tech) 14,700 Punjab Rice (Basmati), Groundnut & Potato, tomato, chilli PepsiCo India Ltd ~6,000 Karnataka Marigold & Caprica Chili AVT Natural Products Ltd 4,000 Punjab Rice (Basmati), Maize Satnam Overseas 4,000 Punjab Barley United Breweries Ltd 2,270 Sources: Agriculture and Food Management, Economic Survey , Government of India: Union Budget and Economic Survey website, 08 March

39 INVESTMENTS Investments (4/4) Total investment in the agriculture and allied sectors in amounted to US$ billion (INR 1,386 billion), of which the private sector accounted for 82 per cent (US$ billion). Sources: Socio Economic Survey, Cumulative FDI inflows Period: April 2000 to September 2010 Sector Amount (US$ million) Agricultural services 1,540.5 Food-processing industries 1,102.0 Fermentation industries Vegetable oils and vanaspati Agricultural machinery Fertilisers Tea and coffee Sugar 41.7 Total 4,023.8 Sources: Fact Sheet on Foreign Direct Investment (FDI), Department of Industrial Policy and Promotion website, accessed 26 November

40 AGRICULTURE November 2010 Contents Advantage India Market overview Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations 40

41 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (1/8) The various ministries within the Government of India and other agencies responsible for the development of the agricultural sector include Ministry of Food Processing Industries Department of Agriculture & Cooperation (National Horticulture Board) Department of Animal Husbandry, Dairying and Fisheries Ministry of Commerce and Industry (commodity boards for rubber, coffee, tea and spices) National Dairy Development Board (NDDB) 41

42 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (2/8) The major acts and rules pertaining to the agro industry: Agriculture Produce (Grading & Marking) Act, 1937 Fruit Products Order, 1955 Coconut Development Board Act, 1979 National Cooperative Development Corporation (NCDC Act), 1962 Seed Act, 1966 Seeds Control Order,

43 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (3/8) FDI policy 100 per cent FDI is allowed under the automatic route in floriculture, horticulture, development of seeds, cultivation of vegetables and mushrooms under uncontrolled conditions and services related to the agriculture and allied sectors. 100 per cent FDI is allowed in the tea sector, including tea plantations, under the government route, subject to the following conditions: Compulsory divestment of 26 per cent equity of the company in favour of an Indian partner/the public within a period of five years. Prior approval of the state government, in the event of any future land use change. 43

44 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (4/8) Government initiatives 1. Vishesh Krishi Gram UdyogYojana (VKGUY) special agriculture and village industry scheme The objective of this scheme is to promote exports in the following areas Agricultural produce and its value-added products Minor forest produce and its value-added variants Gram udyog products Forest-based products Other products 44

45 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (5/8) Government initiatives 2. Rashtriya KrishiVikasYojana (RKVY) RKVY was launched in 2007 to achieve the objective of attaining 4 per cent growth in the agricultural sector during the Eleventh Plan Period. The key objectives of the scheme are: To incentivise states to increase public investment in agriculture and allied sectors To ensure the preparation of agriculture plans in the districts and states, based on agro-climatic conditions, and the availability of technology and natural resources To maximise returns to farmers engaged in the agriculture and allied sectors To bring about quantifiable changes in the production and productivity of various components of agriculture and allied sectors by addressing them in a holistic manner Sources: Department of Agriculture and Cooperation, Department of Industrial Policy and Promotion 45

46 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (6/8) Public sector outlays and expenditure under agriculture and allied activities (US$ billion) 4.9% 9.2 Ninth Plan ( ) Plan Outlays 3.9% 12.8 Tenth Plan ( ) % Eleventh Plan ( ) Percentage share of agriculture and allied activities to total outlay 6% 5% 4% 3% 2% 1% 0% India has pursued a policy to attain food self-sufficiency, with a focus on expanding cultivated and irrigated areas, implementing land reforms, adopting HYV crops, promoting increased use of chemical fertilisers and pesticides, and restructuring rural credit institutions, and community development. In 2000, the government announced its first comprehensive agricultural policy statement the National Agricultural Policy (NAP). The NAP aims to achieve an annual growth rate of 4 per cent in the agricultural sector by Sources: Share of Public Sector Outlays and Expenditure under Agriculture and Allied Activities during Ninth Plan, Tenth Plan, and Eleventh Plan, Department of Agriculture & Cooperation, Ministry of Agriculture, Government of India, accessed 18 January 2010; Source: "Agricultural Statistics At a Glance 2008, Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 18 January

47 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (7/8) Currently, India s agricultural policy focuses on food self-sufficiency, remunerative prices for farmers, and maintaining stable prices for consumers. These goals are met by a number of instruments such as minimum support prices (MSP), food subsidies for consumers, regulated markets, input subsidies for producers, and international trade policy. Since independence, the country has focused on the agricultural sector, through five year plans. The government s Eleventh Five Year Plan ( ), focuses on inclusive growth, and rests upon substantial increase in public sector outlay. In the Eleventh Plan, the public sector outlay towards agriculture and allied activities stands at US$ 29.6 billion (INR 1,363.8 billion). Sources: Share of Public Sector Outlays and Expenditure under Agriculture and Allied Activities during Ninth Plan, Tenth Plan, and Eleventh Plan, Department of Agriculture & Cooperation, Ministry of Agriculture, Government of India, accessed 18 January 2010; Source: "Agricultural Statistics At a Glance 2008, Economics And Statistics, Ministry of Agriculture, Government of India website, accessed 18 January

48 POLICY AND REGULATORY FRAMEWORK Policy and regulatory framework (8/8) The Union Budget focused on the following: Provision of US$ 86.9 million (INR 4 billion) to extend the Green Revolution to the eastern region of the country, comprising Bihar, Chhattisgarh, Jharkhand, Eastern Uttar Pradesh, West Bengal and Orissa. Provision of US$ 65.2 million (INR 3 billion) to organise 60,000 pulses and oil-seed villages in rain-fed areas in and to provide an integrated intervention for water harvesting, watershed management and soil health to improve productivity of the dry land farming areas. Provision of US$ 43.4 million (INR 2 billion) to sustain the gains already made in the green revolution areas through conservation farming, which involves concurrent attention to soil health, water conservation and preservation of biodiversity. Banks have been consistently meeting the targets set for agricultural credit flow in the past few years. For the year , the agricultural credit flow target has been set at US$ 81.5 billion (INR 3.7 billion). In addition to the 10 mega food park projects already being set up, the government has decided to establish five more similar parks. External commercial borrowings are to be available for cold storage or cold room facility, including those for farm level pre-cooling, for preservation or storage of agricultural and allied products, marine products and meat. Source: India Agricultural Policy Review, Agriculture and Agri-Food Canada website, www4.agr.gc.ca/aafc-aac/displayafficher.do?id= &lang=eng, accessed 18 January

49 AGRICULTURE November 2010 Contents Advantage India Market overview Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations 49

50 OPPORTUNITIES Opportunities (1/3) 350 Demand supply gap of cereals in India (MT) P 2021P 2026P Demand Supply The demand-supply gap for food in India shows that in the short to medium term, supply will meet demand requirements; from 2021 demand will outstrip supply for cereals, pulses, edible oil and sugar. Food commodity prices are likely to be high and volatile for the next years. India needs a pulses revolution in order to meet the increasing demand. Sources: Surabhi Mittal, Working Paper No 209: Demand-Supply Trends and Projections of Food in India, Indian Council For Research On International Economic Relations (ICRIER) website, accessed 22 January 2010; India needs a pulses revolution, The Economic Times website, accessed 21 September

51 OPPORTUNITIES Opportunities (2/3) Demand-side growth along with government initiatives expected to help India become a leading agro country India ranks among the fastest-growing global economies and is the world s converging point of focus amidst narrowing boundaries and well-connected international regions. The massive agrarian employment base in India s rural population is directly responsible for driving such unsurpassed growth dynamics. The Indian population is projected to reach approximately 1.6 billion in 2050, thereby creating a huge domestic demand for agricultural products. The various policies and growth initiatives of the Government of India are expected to further boost growth in this sector. According to the Organisation for Economic Co-operation and Development - Food and Agriculture Organization, India is estimated to account for 12.1 per cent and 21.8 per cent of the world s wheat and rice production, respectively by Sources: Surabhi Mittal, Working Paper No 209: Demand-Supply Trends and Projections of Food in India, Indian Council For Research On International Economic Relations (ICRIER) website, accessed 22 January 2010; India Agricultural Policy Review, Agriculture and Agri-Food Canada website, www4.agr.gc.ca/aafc-aac/display-afficher.do?id= &lang=eng, accessed 18 January

52 OPPORTUNITIES Opportunities (3/3) Agricultural inputs expected to grow due to increased production levels With the production levels expected to grow, agricultural input such as fertilisers, farm equipment and machinery, irrigation facilities, institutional credit, and research and development are expected to be driven towards a higher target. These inputs are an essential part of the agribusiness, and provide opportunities across different levels in the agriculture value chain. Private sector involvement expected to boost Indian agriculture further Agriculture is expected to be a point of focus for the private sector in India, as a number of private players are expected to venture into organic farming, contract farming, and setting up hubs for the procurement of farm produce. Increased corporate investment in this sector is expected to offer a new frontier of growth across many areas such as economies of scale through advanced models of farming, effective distribution systems and food security. Increased private equity (PE) investment in the food processing and agri-based companies is also expected to boost further employment in this sector. PE players have invested US$ 300 million in these companies during January June Sources: Surabhi Mittal, Working Paper No 209: Demand-Supply Trends and Projections of Food in India, Indian Council For Research On International Economic Relations (ICRIER) website, accessed 22 January 2010; India Inc urged to invest more in agriculture, Business Line (The Hindu), 23 September 2010, via Dow Jones Factiva, 2010 The Hindu Business Line; PE funds invest $300 mn in food processing, agri-based companies, Business Standard, 21 July 2010, via Dow Jones Factiva, 2010 Business Standard Ltd. 52

53 AGRICULTURE November 2010 Contents Advantage India Market overview Industry Infrastructure Investments Policy and regulatory framework Opportunities Industry associations 53

54 INDUSTRY ASSOCIATIONS Industry associations (1/3) Autonomous Bodies National Institute of Agricultural Extension Management (MANAGE) Rajendranagar, Hyderabad , Andhra Pradesh Phone: to 706 Fax: National Institute of Agricultural Marketing (NIAM) Bambala, Kota Road Jaipur , Rajasthan Phone: Fax: ,