A Spotlight on India's Agriculture
02 October 2017

India’s ambitious growth plan over the next three decades centers on agriculture. India is the world’s largest cotton and the second-largest wheat and rice producer. In 2016, India became the second largest fruit producer in the world. The country also exported $1.24 billion in raw sugar, $1.1 billion in crustaceans, and $742 million in tea in 2016. Rice exports totaled $6.5 billion.

India Is a Leading Agriculture Producer

 

The agricultural sector accounts for 15% of India’s GDP and contributes just under 5% of value added growth to the economy. Even with agriculture already contributing so much to India’s economy, many experts believe the country has yet to fully capitalize on its potential. With lofty goals and expectations—including the doubling of its economy between 2010 and 2020, the doubling of its middle class between 2015 and 2020, and the world’s youngest population in 10 years—India’s next moves will warrant careful scrutiny.

Agriculture Contributes Greatly to India’s GDP

 

India’s Green Revolution in the 1960s turned the country from a large net grain importer to a mostly self-sufficient grain producer. After reaching a peak of 7.64 million tonnes in 1965, wheat imports declined significantly over the next decade. Indian wheat imports routinely experience multi-year lulls when good monsoons lead to totals hovering in the tens or hundreds of thousands. The 6.1 million tonnes imported in 2016 was the highest total in 10 years and followed two years of lower production. In an effort to replenish depleted stock and take advantage of the availability of cheap Ukrainian wheat, India is expected to import up to 4 million tonnes of wheat in 2017/18 despite a record harvest.

India’s Wheat Imports Are Currently Under Control

 

Many observers see India as having unlimited potential over the next 50 years. However, the country continues to face economic and structural challenges that could limit growth. Further, the majority of the country’s agriculture is dependent on the monsoon, adding a level of correlated uncertainty to annual yields.

Domestically, the country has done well to be better prepared for droughts and lessen the impact of potential famines. That success could be attributed to the high yield crops introduced during the Green Revolution, but the practices and varieties introduced during that time have had some important long-term consequences. Increased pesticide and fertilizer usage have had their own impact on the environment. The production of high yield wheat also requires a lot of water.

Prime Minister Narendra Modi continues to support progressive agricultural reforms, but other policies he has introduced have directly and negatively impacted the agricultural industry. The notorious 2016 cash ban devastated farmers who primarily use currency for business transactions.

Given the progress that India’s farmers have made, it seems mysterious that 59,000 of them have committed suicide over the past 30 years. In an effort to fight this phenomenon, bankers have made an effort to forgive predatory loans made in the past. Some studies have blamed climate change for despair on the farms. The high propensity for suicide among Indian farmers still baffles observers and may indicate invisible, serious problems at the heart of the country’s agricultural sector.

Even with these concerns, companies are looking at India as the next big market. The diverse tastes of the huge consumer base makes any initial entry a challenging one, but the potential rewards of gaining a foothold far outweigh research and development costs. Over the next four weeks we will be focusing on different aspects of Indian agriculture ranging from the impact of policy on major crops to consumer demand across the country.

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