Agriculture 060710

AGRICULTURE
April 2010
AGRICULTURE April 2010
Contents
 Advantage India
 Market overview
 Industry Infrastructure
 Investments
 Policy and regulatory framework
 Opportunities
 Industry associations
2
ADVANTAGE INDIA
Agriculture April 2010
Advantage India
• India has favourable geographic features
including diverse climates and soils suitable for
growing a range of crops, availability of a large
network of rivers and biodiversity.
• India’s agricultural policy focusses
on food self- • It is the largest producer of several fruits such
sufficiency, remunerative prices for as bananas, mangoes and papaya, and the
farmers and maintenance of stable second-largest producer of vegetables such as
prices for consumers. The brinjal, cabbage and onion.
government is trying to achieve
these goals by measures such as
minimum support prices, food
subsidies for consumers, regulated
markets and input subsidies for
• The share of agriculture and allied
producers.
activities in India’s GDP is 15.7 per
• The public sector outlay in the cent (2008–09).
sector, according to the Eleventh
• The agriculture sector is the source
Five Year Plan (2007–2012), is US$
of livelihood for more than 52 per
29.6 billion (INR 1,363.8 billion).
cent of the Indian population.
Sources: "Agricultural Statistics At a Glance 2008," Department of Agriculture & Cooperation, Ministry of Agriculture, Government of
India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January 2010; “Agriculture and Food Management,” Economic Survey 2009-
10, Government of India: Union Budget and Economic Survey, http://indiabudget.nic.in/es2009-10/esmain.htm accessed 08 March 2010
3
Contents
 Advantage India
 Market overview
 Investments
 Opportunities
4
MARKET OVERVIEW
Market overview … (1/11)

Growth of food grain production in India
250 234.5 60%
Share of agriculture and allied services

56.7%
52.5%
196.8 50%
200 46.0% 176.4
39.9% 40%
150 129.6 34.0%
in GDP
108.4 30%
26.2%
100 82.0
20%
50.8 15.7%
50 10%
0 0%
1950–51 1960–61 1970–71 1980–81 1990–91 2000–01 2008–09
Food grain production (million tonnes) Percentage share of agriculture and allied services in GDP
• The increase in food grain production from 50.8 million tonnes in 1950–51 to 234.5 million tonnes in
2008–09, can be largely attributed to the Green Revolution, which took place in the 1960s. Agri
input, including fertilisers, high yielding varieties (HYVs) of crops, pesticides, surface irrigation and
mechanised farming, has been primarily responsible for the growth in agricultural productivity.
Sources: “Handbook of Statistics on the Indian Economy 2008-09,” Reserve Bank of India website, http://www.rbi.org.in/home.aspx accessed 18
January 2010; “Second Advance Estimates of Production of Foodgrains for 2009–10,”
http://dacnet.nic.in/eands/Advance_Estimate/2ndAdvance_Estimates_2009-10(English).pdf accessed 08 March 2010; Dr R Albert Christopher
Dhas, “Agricultural Crisis in India: The Root Cause and Consequences,” The American College, Madurai; Economic Survey 2009–2010
5
MARKET OVERVIEW
• The shift from agriculture to a services and industry-driven economy has resulted in a decline in the
share of agriculture and allied services in India’s GDP from more than 50 per cent in 1950–51 to 15.7
per cent in 2008–09.
Sources: “Handbook of Statistics on the Indian Economy 2008-09,” Reserve Bank of India website, http://www.rbi.org.in/home.aspx accessed 18
January 2010; “Second Advance Estimates of Production of Foodgrains for 2009–10,”
http://dacnet.nic.in/eands/Advance_Estimate/2ndAdvance_Estimates_2009-10(English).pdf accessed 08 March 2010; Dr R Albert Christopher
Dhas, “Agricultural Crisis in India: The Root Cause and Consequences,” The American College, Madurai; Economic Survey 2009–2010
6
MARKET OVERVIEW

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 months and monsoons, lasting from April to September, and the main
crop grown during this season is rice. The Rabi season is during the winter months of October to March, and
the main crop grown is wheat.
India — Kharif and Rabi (production in million tonnes)
196.8 212.9 174.8 213.2 198.4 208.6 217.3 230.8 234.5

100%
80% 47.3% 45.1% 47.3%

48.1% 50.1% 47.9% 49.1% 47.6% 49.6%
60%
40%
51.9% 52.7% 49.9% 54.9% 52.1% 52.7% 50.9% 52.4% 50.4%
20%
0%
2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09*
Kharif Rabi
Sources: “First Advance Estimates of Production of Food grains for 2009–10,” Department of Agriculture & Cooperation, Ministry of
Agriculture, Government of India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January 2010; “Second Advance Estimates of Production of
Foodgrains for 2009–2010,” http://dacnet.nic.in/eands/Advance_Estimate/2ndAdvance_Estimates_2009-10(English).pdf accessed 08 March 2010
*Final estimate
7
MARKET OVERVIEW
• According to the final estimates of the Agricultural Statistics Division, Government of India, production of
food grains in 2008–09 was estimated to be 234.47 million tonnes, with the Kharif crops accounting for
118.14 million tonnes and the Rabi crops for 116.33 million tonnes. According to the second advanced
estimates of the Agricultural Statistics division, production of food grains in 2009–2010 is estimated to be
216.85 million tonnes.
Sources: “First Advance Estimates of Production of Food grains for 2009–10,” Department of Agriculture & Cooperation, Ministry of
Agriculture, Government of India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January 2010; “Second Advance Estimates of Production of
Foodgrains for 2009–2010,” http://dacnet.nic.in/eands/Advance_Estimate/2ndAdvance_Estimates_2009-10(English).pdf accessed 08 March 2010
*Final estimate
8
MARKET OVERVIEW

Key crop varieties in India
Production (million tonnes)
300 285.0
241.1
250
200
154.3
150
99.2
100 74.3 80.7
53.6 55.1
50 36.3
18.6 27.7 9.8
22.3 19.7
9.9
9.4 7.0 7.0 9.0 0.4 2.6
0
Sugarcane Rice Wheat Nine-oilseeds Cotton Maize Soyabean
1980–81 1990–91 2008–09*
• Over the 50-year period, i.e. , from 1950–51 to 2008–09, India’s production of rice and wheat has grown at
a CAGR of approximately 2.7 per cent and 4.4 per cent, respectively. The country’s production of maize
and cotton has grown at a CAGR of 4.3 per cent and 3.5 per cent, respectively, over the same period.
Sources: “Area, Production and Yield of Principal Crops,” Department of Agriculture & Cooperation, Ministry of Agriculture, Government of
India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January 2010; “Second Advance Estimates of Production of Foodgrains for 2009-10,”
http://dacnet.nic.in/eands/Advance_Estimate/2ndAdvance_Estimates_2009-10(English).pdf accessed 08 March 2010; “Handbook of Statistics on the Indian
Economy 2008-09,” Reserve Bank of India website, www.rbi.org.in
*Final Estimates FY09 as released on 12 February 2010; Note: For cotton production is in million bales of 170 kg each
9
MARKET OVERVIEW

• The yield of crops has witnessed significant growth since the Green Revolution. From 1950–51 to
2008–09, the country’s yield of rice and wheat has grown by 3.3 and 4.4 times, to reach 2,186 kg/ha and
2,891 kg/ha, respectively. The yield of sugarcane has doubled since 1950–51 to reach about 62,000 kg/ha
in 2008–09.
Sources: “Area, Production and Yield of Principal Crops,” Department of Agriculture & Cooperation, Ministry of Agriculture, Government of
India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January 2010; “Second Advance Estimates of Production of Foodgrains for 2009-10,”
http://dacnet.nic.in/eands/Advance_Estimate/2ndAdvance_Estimates_2009-10(English).pdf accessed 08 March 2010; “Handbook of Statistics on
the Indian Economy 2008-09,” Reserve Bank of India website, www.rbi.org.in
*Final Estimates FY09 as released on 12 February 2010; Note: For cotton production is in million bales of 170 kg each
10
MARKET OVERVIEW

Wheat production and yield Rice production and yield
100 4,000 120 2,186 2,500

2,708 2,891 1,740 1,901
Wheat production
80 100 2,000
Rice production
3,000 1,336
2,281 80
60
Yield
1,500
Yield
1,307 1,630 2,000 1,013 1,123
40 60
851 69.7 80.6 1,000
55.1 1,000 40 74.3 85.0 99.2
20 36.3 42.2 53.6
11.0 23.8 20 34.6 500
0 0
0 0
Production (million tonnes) Yield (kg/hectare)

• The principal crops in India are rice, wheat, jowar, bajra, maize, pulses, nine oilseeds, soya
bean, sunflower, cotton, jute, mesta and sugarcane.
Sources: “Agricultural Statistics At a Glance 2008," Department of Agriculture & Cooperation, Ministry of Agriculture, Government of
India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January 2010; “Agriculture and Food Management,” Economic Survey 2009-10, Government
of India: Union Budget and Economic Survey, http://indiabudget.nic.in/es2009-10/esmain.htm accessed 08 March 2010
* Fourth Advance estimates
11
MARKET OVERVIEW

Area under cultivation (million hectares)
50 44.7 45.4
• The growth in production has been primarily 37.6 40.2 42.7
40 34.1
due to the introduction of high yielding 27.9
25.7
varieties (HYVs) of crops. 30 22.3 24.2
18.2
20 12.9
10
0
1960–61 1970–71 1980–81 1990–91 2000–01 2008–09*
Rice Wheat
Sources: “Agricultural Statistics At a Glance 2008," Department of Agriculture & Cooperation, Ministry of Agriculture, Government of
India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January 2010; “Agriculture and Food Management,” Economic Survey 2009-10, Government
of India: Union Budget and Economic Survey, http://indiabudget.nic.in/es2009-10/esmain.htm accessed 08 March 2010
12
MARKET OVERVIEW

Sugarcane production and yield Nine oilseeds production and yield

Sugarcane production
400 80,000
65,395 68,577 62,000 30 1,016 1,200
57,844
25 1,000
Nine-Oilseeds
300 48,322 60,000 771 810
45,549 20 800
507 579 532
Yield
Yield
200 40,000 15 600
10 400
100 20,000
110.0 296.0 273.9 5 18.4 200
126.4 154.3 241.1 7.0 9.6 9.4 18.6 28.2
0 0 0 0
1960–61 1980–81 2000–01
Source: “Agricultural Statistics At a Glance 2008," Department of Agriculture & Cooperation, Ministry of Agriculture, Government of
India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January 2010; Agriculture and Food Management,” Economic Survey 2009-10, Government of
India: Union Budget and Economic Survey, http://indiabudget.nic.in/es2009-10/esmain.htm accessed 08 March 2010
Note: For cotton, production is in million bales of 170 kg each
13
MARKET OVERVIEW

Maize production and yield Cotton production and yield
25 2355 2,500 25 419 500
Cotton production
20 1,822 2,000 20 400
Maize production
15 1,518 1,500 15 300

225 190
Yield
Yield
1,279 1,159
10 926 1,000 152
10 125 106 200
5 500 23.2
7.5 7.0 9.0 12.0 19.3 5 100
4.1 9.8
0 0 5.6 7.0 9.5
4.8
0 0
Source: “Agricultural Statistics At a Glance 2008," Department of Agriculture & Cooperation, Ministry of Agriculture, Government of India,
http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January 2010; Agriculture and Food Management,” Economic Survey 2009-10, Government of India:
Union Budget and Economic Survey, http://indiabudget.nic.in/es2009-10/esmain.htm accessed 08 March 2010
Note: For cotton, production is in million bales of 170 kg each
14
MARKET OVERVIEW

Leading food grain-producing states in India
Share of states in food grain production • In India, 10 states account for approximately 80
per cent of the country’s total food grain
196.6 MT 230.5 MT
production.
Other 16.3%
• In 2007–08, West Bengal was the leading producer
19.3%
of rice in India, accounting for about 15.2 per cent
Bihar 6.1% of the total production, followed by Andhra
4.7%
Madhya Pradesh 5.2%
Karnataka
5.2% Pradesh, Uttar Pradesh, Punjab and Orissa.
5.6% 5.3%
Maharashtra 5.2% In 2007-08, Uttar Pradesh was the leading
6.6% •
Haryana 6.8%
6.6% producer of wheat, accounting for 32.7 per cent
West Bengal 7.0%
7.0% of the total wheat production, followed by
Rajasthan 5.1%
8.2%
7.0% Punjab, Haryana, Rajasthan, Madhya Pradesh and
Andhra Pradesh
8.4% Bihar.
Punjab 12.9%
11.6% • In 2007–08, Uttar Pradesh was the leading
producer of sugarcane in the country, accounting
21.7% 18.3% for 35.8 per cent of the total production, followed
Uttar Pradesh
by Maharashtra, Tamil Nadu, Karnataka, Andhra
2001–01 2007–08 Pradesh and Gujarat.
Source: “Handbook of Statistics on the Indian Economy 2008-09,” Reserve Bank of India website, http://www.rbi.org.in/home.aspx accessed 18 January 2010
Note: Total production does not include production in Union Territories
15
MARKET OVERVIEW
EXIM scenario … (1/4)
• Over the period 1990–91to 2007–08, the value India’s agri imports and exports (US$ billion)
of India’s agricultural imports and exports has
16.9
grown at a CAGR of 20.8 per cent and 16.3 per 18
cent, to reach US$ 6.2 billion (INR 297.8 billion) 16
13.6
14
and US$ 16.2 billion (INR 777.7 12 10.7
billion), respectively. 10 8.1
9.0
7.5
8 6.4 6.5
6 4.8 5.0 4.7
3.8
4
2
0
2002–03 2003–04 2004–05 2005–06 2006–07 2007–08P
Exports Imports
Source: “Agricultural Statistics At a Glance 2008," Department of

Agriculture & Cooperation, Ministry of Agriculture, Government
of India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18
January 2010
P – Provisional
16
MARKET OVERVIEW
• India is a net exporter of agricultural products. Agri imports and exports as a percentage of
However, it faces challenges related to trade- total national exports and imports
distorting subsidies, tariffs and trade barriers. 16
13.6
14 12.7 12.2
12 11.1 10.8 10.9
10
8
6
5.9 6.1
4
4.6
2 3.3 3.5 3.1
0
2002–03 2003–04 2004–05 2005–06 2006–07 2007–08
P
Percentage of agri exports to total national imports

Percentage of agri imports to total national imports

January 2010
P – Provisional
17
MARKET OVERVIEW
• In 2008–09, India’s export of cereals Key agri products exported by India, 2007–08*
amounted to US$ 3.29 million, with Saudi (US$ billion)
100%= US$16.9 billion
Arabia, the UAE, and Malaysia being its
leading export destinations. Rice (basmati Cotton raw including waste 10.3%
and non-basmati) and other cereals were Oil meals 10.2%
the leading cereals exported from the
country. Rice (other than basmati) 9.5%
Marine products 8.8%
Sugar 6.9%
Paper/wood products 6.3%
Rice basmati 5.6%
Spices 5.4%
Other 36.9%

Agriculture & Cooperation, Ministry of Agriculture, Government of
India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January
2010
18
MARKET OVERVIEW
• Vegetable oil is a leading agricultural product Key agri products imported by India, 2007–08*
imported by India from developing countries (US$ billion)
such as Malaysia and Indonesia. 100%= US$6.5 billion
Vegetable oils fixed

34.6%
(edible)
Wood and wood 18.3%

products
Pulses 17.7%
Wheat 8.9%
Other
20.4%

January 2010
19
MARKET OVERVIEW
Growth drivers … (1/2)
With a population of more than a billion, India has a huge domestic demand for agri products. Although
Growth in population food deficit declined from 290 kcal/person/day in 1990–92 to 260 kcal/person/day in 2004-06, there is a
challenge with respect to meeting the total demand for food. India’s economic growth has, however, put
and wealth
into motion factors such as increasing private final consumption expenditure and disposable
incomes, which have driven the agricultural sector.
Land under cultivation in India has continued to rise since the 1950s, and more than 50 per cent of the
Land and irrigation country’s workforce is engaged in agriculture and allied activities. In 2005–06, its gross irrigated area
stood at 82.6 million hectares, as compared to 28.0 million hectares in 1960–61.
Fertilisers comprise a key agri input, which has resulted in higher production of crops and yield. Fertiliser
Fertilisers consumption per hectare has grown by leaps and bounds, with consumption increasing from 0.55 kg/ha
in 1950 to more than 125 kg/ha in 2009.
20
MARKET OVERVIEW
Growth drivers … (2/2)
The Indian farmer has adopted modern agricultural techniques, such as the use of tractors and tillers.
The farm power used in India has grown by five times to 1.502 kW/ha in 2005–06 from 0.0295 kW/ha in
Mechanisation
1971–72, decreasing the contribution of human power from 15 per cent in 1971–72 to 5.8 per cent in
2005–06.
HYV seeds and an organised seed sector have been instrumental in driving agricultural productivity
across the country. The area under certified seed cultivation in India has grown from less than 500
Seeds
hectares in 1962–63 to more than 0.5 million hectares in 1999–2000, boosting the productivity of agri
products.
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
Institutional credit approximately 7 per cent in 1951, grew to more than 60 per cent in 2002, while that of non-institutional
credit, which primarily comprises money lenders, declined to approximately 40 per cent in 2002 from
92.7 per cent in 1951.
21
MARKET OVERVIEW
Growth drivers — population and wealth … (1/2)
• India has the second-highest population in the India — population (million)

world, accounting for more than one-sixth of
the world’s population.The need to feed more 1,400
than a billion people is a driving force for 1,154.0
domestic agriculture. 1,200
1,019.0
1,000
839.0
800
679.0
600 541.0
434.0
400 359.0
200
0
1950–51 1960–61 1970–71 1980–81 1990–91 2000–01 2008–09
Source: “Handbook of Statistics on the Indian Economy 2008-09,”

Reserve Bank of India
website, http://www.rbi.org.in/home.aspx, accessed 18 January
2010
22
MARKET OVERVIEW
Growth drivers — population and wealth … (2/2)
• India’s PFCE has been boosted by economic India — private final consumption expenditure (PFCE)
reforms, which began in the 1990s.The growth in 35,100.0 32,407.0
its PFCE has resulted in the growth of its
agriculture sector. 30,100.0
25,100.0
20,100.0
14,897.4
15,100.0
10,100.0
4,192.9
5,100.0
100.0 169.2 409.6 1,245.4
100.0
1950–511960–611970-71 1980-81 1990-91 2000-01 2008-09
Values indexed to 100 as of 1950–51
Source: “Handbook of Statistics on the Indian Economy 2008-09,”

Reserve Bank of India
website, http://www.rbi.org.in/home.aspx, accessed 18 January 2010
23
MARKET OVERVIEW
Growth drivers — agricultural land in India

Land use (million hectares)
225
200 192.8
185.7 185.4
172.6
175 165.8
152.8
150 140.3 140.0 143.0 141.4 141.9
133.2
125
100
75
50
25
0
1960–61 1970–71 1980–81 1990–91 2000–01 2005–06P
Total cropped area Net area sown
• India ranks seventh in the world in terms of its total geographic area. In 2005, agricultural land as a
percentage of total land in the country stood at 57.1 per cent, in comparison to the world average of
11.9 per cent. India’s irrigated area has grown at a steady pace since the Green Revolution, with ground
water irrigating approximately 64 per cent of the net irrigated area in 2003–04.
India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January 2010; P.Kataria and A.S.Joshi, “Energy Use in Indian Agriculture,” Department
of Economics, Punjab Agricultural University, Ludhiana, India
P – Provisional
24
MARKET OVERVIEW
Growth drivers — improved irrigation facilities in India

Irrigated area (million hectares)
90
82.6
80 76.6
70
63.2
60.2
60 55.1
49.8 48.0
50
38.2 38.7
40
31.1
28.0
30 24.7
20
10
0
1960–61 1970–71 1980–81 1990–91 2000–01 2005–06P
Gross irrigated area Net irrigated area
• The government has taken several initiatives through its Five Year Plans to improve irrigation facilities in
India. The Working Group on Water Resources for the Eleventh Plan has proposed the creation of irrigation
potential for16 million hectares during the Eleventh Plan period. The total arable land in the country grew
from 81.1 million hectares in 1991–92 to 102.77 million hectares in March 2007.
India, http://dacnet.nic.in/eands/latest_2006.htm accessed 18 January 2010; P.Kataria and A.S.Joshi, “Energy Use in Indian Agriculture,” Department of
Economics, Punjab Agricultural University, Ludhiana, India; “Agriculture and Food Management,” Economic Survey 2009-10
P – Provisional
25
MARKET OVERVIEW
Growth drivers — increasing role of fertilisers

Fertilisers — production and consumption Fertiliser consumption per hectare
30 140 128.6
24.9 116.8
25 120 111.8
105.5
19.7 100 88.9
20
14.8 14.3 80
15 12.5
60
9.0
10
40
5.5
5 2.2 3.0 20
0.2 0.3 1.1
0 0
1960–61 1970–71 1980–81 1990–91 2000–01 2008–09 2000–01 2005–06 2006–07 2007–08 2008–09
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 the government‘s policies
and initiatives, consumption grew to more than 125 kg/ha by 2009.
• The government has taken various policy initiatives for the fertiliser sector, such as a pricing policy for
indigenous urea, new investments in the urea sector, nutrient-based pricing, production and availability of
fortified and coated fertilisers, a uniform freight subsidy on all fertilisers under the fertiliser subsidy
regime, a concession scheme for decontrolled phosphatic and potassic fertilisers, etc.
Sources: “Agriculture and Food Management,” Economic Survey 2009-10, Government of India: Union Budget and Economic
Survey, http://indiabudget.nic.in/es2009-10/esmain.htm accessed 08 March 2010; Industry Analysis Service(IAS), CMIE
26
MARKET OVERVIEW
Growth drivers — mechanisation of Indian agriculture … (1/2)
Farm power in India (kW/ha)

• The country has witnessed a surge in the sale 2.0
of tractors and power tillers. In 2005, India CAGR(2004–08) 1.50
1.5
was ranked second in the world, and was next 4.8% 1.23
to the US in terms of tractor usage. 1.0 0.76
0.47
0.5 0.30
0.0
1971–72 1981–82 1991–92 2001–02 2005–06
Sources: “Annual Report 2008–09,” Department of Agriculture &

Cooperation, Ministry of Agriculture, Government of
India, http://agricoop.nic.in/AnnualReport08-
09/Agriculture%20English%20book.pdf accessed 18 January 2010;
P.Kataria and A.S.Joshi, “Energy Use in Indian Agriculture,” Department
of Economics, Punjab Agricultural University, Ludhiana, India
27
MARKET OVERVIEW
Growth drivers — mechanisation of Indian agriculture … (2/2)

Sale of tractors Sale of power tillers
500,000 CAGR(2004–08)
35,000 CAGR(2004–08)
16.2%
400,000 352,781 346,501 30,000 13.7% 26135
No of units
296,080 24791
No of units
25,000 22303
300,000 247,531
20,000 17481
190,336 15665
200,000 15,000
100,000 10,000
5,000
0
0
2003–04 2004–05 2005–06 2006–07 2007–08
2003–04 2004–05 2005–06 2006–07 2007–08
• Indian agriculture has moved towards mechanisation after the success of the Green
Revolution.
• Farm power used in India increased by five times to 1.502 kW/ha in 2005–06 from 0.0295
kW/ha in 1971–72, decreasing the contribution of human power from 15 per cent in
1971–72 to 5.8 per cent in 2005–06.
Sources: “Annual Report 2008–09,” Department of Agriculture & Cooperation, Ministry of Agriculture, Government of
India, http://agricoop.nic.in/AnnualReport08-09/Agriculture%20English%20book.pdf accessed 18 January 2010; P.Kataria and A.S.Joshi, “Energy Use in
Indian Agriculture,” Department of Economics, Punjab Agricultural University, Ludhiana, India
28
MARKET OVERVIEW
Growth drivers — role of seeds in Indian agriculture

Seed production (billion tonnes) Certified/quality seed distribution (billion tonnes)
120 2,500
96.9
100
85.3 2,000 1,900.0
79.7 1,790.5
80 74.0
69.0 1,550.1
60 1,500
40
1,000
20 6.6 6.9 7.4 9.2 10.0
500
0
2004–05 2005–06 2006–07 2007–08 2008–09*
0
Foundation seed production Breeder seed production 2006–07 2007–08 2008–09*
• HYV seeds have played a prominent role in the growth of the Indian agriculture sector, resulting in higher
production of foodgrains. During the Green Revolution , the Indian Council for Agricultural Research
(ICAR)developed new strains of HYV seeds and focussed mainly on wheat and rice.
• The Seeds Act, 1966, and the New Policy on Seeds Development, 1988, form the basis for the promotion
and regulation of the Indian seed industry. The objective of the National Seeds Policy is to create a
favourable climate for the seed industry, safeguard the interests of Indian farmers and conserve agro-
biodiversity.
Source: “Annual Report 2008–09,” Department of Agriculture & Cooperation, Ministry of Agriculture, Government of
India, http://agricoop.nic.in/AnnualReport08-09/Agriculture%20English%20book.pdf accessed 18 January 2010; National Seeds Policy
*Anticipated
29
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%

22.0% 18.5% 19.0% 13.5%
34.1% 31.0% 25.1%
69.5% 72.6% 71.1% 76.7%

57.2% 60.3% 65.0%
2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09P

Commercial banks Cooperative banks RRBs
100%=
15.1 18.9 27.2 39.2 49.9 55.4 57.5
US$ billion
• Institutional credit from commercial banks, cooperative societies and banks, as well as regional rural
banks, has grown at a CAGR of about 25 per cent between 2002–03 and 2008–09.
• In 2008–09, the amount disbursed by all banks (including cooperative and regional rural banks) for
agriculture and allied activities stood at US$ 55.09 billion (INR 2,644.6 billion), with commercial banks
accounting for approximately three-fourth of the amount disbursed.
Sources: “Flow of institutional credit to agriculture and allied activities,” Economic Survey 2008–09; Ramesh Golait, Current Issues in Agriculture
Credit in India: An Assessment,” Summer 2007, Reserve Bank of India Occasional Papers, RBI
website, http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/82933.pdf, accessed 18 January 2010
P – Provisional
30
Contents
 Advantage India
 Market overview
 Investments
 Opportunities
31
INDUSTRY INFRASTRUCTURE
Industry infrastructure — Agriculture Export Zones (AEZs)

… (1/2)
State AEZ Focus Products State AEZ Focus Products
Mango pulp, fresh vegetables, grapes, Punjab Vegetables, potatoes, basmati rice
Andhra Pradesh
mangoes, gherkins, chillies
Rajasthan Coriander, cumin
Assam Fresh and processed ginger
Ginger, flowers (orchids) and
Sikkim
Bihar Litchis cherry pepper
Mangoes, vegetables, dehydrated onions, Tamil Nadu Flowers, mangoes, cashew nuts
Gujarat
sesame seeds
Tripura Pineapples
Himachal Pradesh Apples
Potatoes, mangoes, vegetables,
Uttar Pradesh
Jammu & Kashmir Apples and walnuts basmati rice
Jharkhand Vegetables Basmati rice, litchis, flowers,
Uttaranchal
medicinal and aromatic plants
Karnataka Gherkins, rose onions, flowers, vanilla
Pineapples, litchis, potatoes,
Kerala Horticulture products, medicinal plants West Bengal
mangoes, vegetables, Darjeeling tea
Potatoes, onions, garlic, seed spices, wheat,
Madhya Pradesh
lentils, grams, oranges
Grapes and grape wine, mangoes including
Maharashtra Kesar mango, flowers, onions,
pomegranate, banana, oranges
Orissa Ginger and turmeric
32
INDUSTRY INFRASTRUCTURE
Industry infrastructure — Agriculture Export Zones (AEZs)

… (2/2)
Distribution of AEZs among states
Maharashtra 8
West Bengal 6
Andhra Pradesh 5
Madhya Pradesh 5
Karnataka
4
Distribution
Uttaranchal of AEZs among states
4
Uttar Pradesh 4
Tamil Nadu 4
Others 20
Total number of
AEZs in India is
60
Source: “Agri Export Zones of India,” APEDA website, www.apeda.com, accessed 29 December 2009
33
Contents
 Advantage India
 Market overview
 Investments
 Opportunities
34
INVESTMENTS
Investments … (1/3)
• The sector has transformed from pure 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 and contract farming, and set up of
hubs for procurement of farm produce.
Investment by private players

• 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 will provide coconut farmers an additional
income of US$ 1.66 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$ 104.16 million (INR 5.0 billion). The company plans to set up rural hubs for procurement of
vegetables, fruits, pulses and other farm produces.
35
INVESTMENTS
Key state-wise contract farming initiatives by private sector

State Crop Company/Corporate Area (Hectares)
Maharashtra Soyabean Tinna Oils and Chemicals Ltd 134,800
Madhya Pradesh Wheat Hindustan Lever Ltd 15,000
Satnam Overseas Ltd, DD Intenational Inc,
Punjab Rice (basmati) Amira Foods India Ltd (Escorts Ltd & 14,700
Grain Tech)
Rice (basmati), groundnut and potato,
Punjab PepsiCo India Ltd 6,000
tomato, chilli)
Karnataka Marigold and Caprica chili AVT Natural Products Ltd 4,000
Punjab Rice (basmati), maize Satnam Overseas 4,000
Punjab Barley United Breweries Ltd 2,270
Source: Ministry of Food Processing Industries; “Flow of institutional credit to agriculture and allied activities,” Economic Survey 2008–09; “Cadbury
India in pact with TN Horticulture Dept,” 2 July 2007, Business Line (The Hindu); “Reliance Retail inks MoU with Punjab govt for agri project,” 1
August 2006, The Press Trust of India Limited; “Punjab, Mahindras sign farm pact – One lakh hectares to be brought under crop diversification,” 14
March 2003, Business Line (The Hindu); “Reliance Retail inks MoU with Punjab govt for agri projects,” 02 August 2006, The Financial Express
36
INVESTMENTS
• Total investment in the agriculture and allied Cumulative FDI inflows

sectors in 2008–09 amounted to US$ 28.87 billion
Period: April 2000 to January 2010
(INR 1,386 billion), of which the private sector
accounted for 82 per cent (US$ 23.78 billion). Amount of FDI inflows
Sector
(US$ million)
Agriculture services 1,496.76
Source: Socio Economic Survey, 2009–2010
Fermentation industries 767.72
Agricultural machinery 149.31
Vegetable oils and ‘vanaspati’ 129.82
Tea and coffee 89.14
Sugar 41.68
Source: “Fact Sheet On Foreign Direct Investment

(FDI)”, Department of Industrial Policy and
Promotion, www.dipp.nic.in,, accessed 29 April 2010
37
Contents
 Advantage India
 Market overview
 Investments
 Opportunities
38
POLICY AND REGULATORY FRAMEWORK
Policy and regulatory framework … (1/6)
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)
39
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, 1983
40
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.
41
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
42
Government initiatives
2. Rashtriya Krishi VikasYojana (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 include
• 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
43
Public sector outlays and expenditure under

agriculture and allied activities (US$ billion)
35 6%
29.6
30 4.9% 5% • India aims at achieving food self-sufficiency, with a
25 3.9% focus on expanding its cultivated and irrigated
4%
20
area, implementing land reforms, adopting HYV
3.7% 3% crops, promoting increased use of chemical
15 12.8 fertilisers and pesticides, and restructuring rural
9.2 2% credit institutions, and community development.
10
5 1%
• In 2000, the government announced its first
0 0% comprehensive agricultural policy statement — the
National Agricultural Policy (NAP). The NAP aims
Ninth Plan Tenth Plan Eleventh Plan
to achieve an annual growth rate of 4 per cent in
(1997–2002) (2002–07) (2007–2012)
the agricultural sector over the next two decades.
Plan Outlays
Percentage share of agriculture and allied activities

to total outlay
Source: “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, http://dacnet.nic.in/eands/At_Glance_2008/Agriculture_new.html accessed 18 January 2010
44
Contents
 Advantage India
 Market overview
 Investments
 Opportunities
45
OPPORTUNITIES
Opportunities
Demand–supply gap of cereals in India (MT)
Opportunities
350
• India’s population is projected to reach approximately 1.6

300
277.2 billion in 2050, creating a huge domestic demand for
242.2 260.2
agricultural products.
250
245.1 • Agriculture is expected to be a focal point for the private
209.7
sector in the country, since several private players are
200
188.5 expected to venture into organic and contract
farming, and set up hubs to procure farm produce.
150
• Significant investments are expected in supply chain
technology and cold storage facilities.
100
• Contract farming is expected to gain ground. This is an
agreement between the food processor
50
(contractor), typically a large organised player, and the
farmer, whereby the latter is contracted to plant and
0 produce the former’s crop on his land.
2011P 2021P 2026P
Demand Supply
Source: “Working Paper No 209: Demand-Supply Trends and Projections of Food in India,” Indian Council For Research on International Economic
Relations (ICRIER), http://www.icrier.org/ accessed 22 January 2010
46
Contents
 Advantage India
 Market overview
 Investments
 Opportunities
47
INDUSTRY ASSOCIATIONS
Industry associations … (1/3)
Autonomous Bodies
• National Institute of Agricultural Extension Management (MANAGE)
Rajendranagar, Hyderabad–500 030, Andhra Pradesh
Phones: 040-24016702 to 706
Fax: 040-24015388
• National Institute of Agricultural Marketing (NIAM)

Bambala, Kota Road
Jaipur–302033, Rajasthan
Phone: 0141-2770027
Fax: 0141-2771938, 2770027
48
Boards
• Central Insecticides Board and Registration Committee
Machinary Store Building,
N.H.IV Faridabad
Phone: 0129 -2413002
• Coconut Development Board

Kera Bhavan, SRVHS Road, Kochi
Kerala–682011
Phone: 0484-2376265, 2377267, 2376553
Fax: 0484-2377902
• National Dairy Development Board (NDDB)

PB No 40, Anand–388 001
Phone: 02692-260148/260149/260160
Fax: 02692-260157
49
Boards
• National Horticulture Board (NHB)

Ministry of Agriculture, Government of India
85, Institutional Area, Sector-18
Gurgaon–122015, Haryana
• National Oilseeds and Vegetable Oils Development Board (NOVOD)

86, Institutional Area, Sector-18
Gurgaon–122015, Haryana
Councils
• Indian Council of Agricultural Research (ICAR)
Krishi Bhavan, New Delhi 110 114
50
NOTE
Note
Wherever applicable, numbers in the report have been rounded off to the nearest whole number.
Conversion rate used: US$ 1= INR 48
51
DISCLAIMER
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has been prepared by Ernst & Young in consultation with belief, the content is not to be construed in any manner
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AGRICULTURE

 Policy and regulatory framework

 Policy and regulatory framework

Market overview … (1/11)

250 234.5 60%

Share of agriculture and allied services

Market overview … (2/11)

Market overview … (3/11)

196.8 212.9 174.8 213.2 198.4 208.6 217.3 230.8 234.5

80% 47.3% 45.1% 47.3%

Market overview … (4/11)

Market overview … (5/11)

1980–81 1990–91 2008–09*

Market overview … (6/11)

Market overview … (7/11)

Wheat production and yield Rice production and yield

100 4,000 120 2,186 2,500

Production (million tonnes) Yield (kg/hectare)

Market overview … (8/11)

Area under cultivation (million hectares)

Market overview … (9/11)

Sugarcane production and yield Nine oilseeds production and yield

Market overview … (10/11)

Maize production and yield Cotton production and yield

25 2355 2,500 25 419 500

15 1,518 1,500 15 300

Production (million tonnes) Yield (kg/hectare)

Production (million tonnes) Yield (kg/hectare)

Market overview … (11/11)

EXIM scenario … (1/4)

Source: “Agricultural Statistics At a Glance 2008," Department of

EXIM scenario … (2/4)

Percentage of agri exports to total national imports

Source: “Agricultural Statistics At a Glance 2008," Department of

EXIM scenario … (3/4)

Marine products 8.8%

Paper/wood products 6.3%

Rice basmati 5.6%

Source: “Agricultural Statistics At a Glance 2008," Department of

EXIM scenario … (4/4)

Vegetable oils fixed

Wood and wood 18.3%

Source: “Agricultural Statistics At a Glance 2008," Department of

Growth drivers … (1/2)

Growth drivers … (2/2)

Growth drivers — population and wealth … (1/2)

• India has the second-highest population in the India — population (million)

Source: “Handbook of Statistics on the Indian Economy 2008-09,”

Growth drivers — population and wealth … (2/2)

Values indexed to 100 as of 1950–51

Source: “Handbook of Statistics on the Indian Economy 2008-09,”

Growth drivers — agricultural land in India

Total cropped area Net area sown

Growth drivers — improved irrigation facilities in India

Gross irrigated area Net irrigated area

Growth drivers — increasing role of fertilisers

Production (million tonnes) Consumption (million tonnes) Consumption (kg/ha)

Growth drivers — mechanisation of Indian agriculture … (1/2)

Farm power in India (kW/ha)

Sources: “Annual Report 2008–09,” Department of Agriculture &

Growth drivers — mechanisation of Indian agriculture … (2/2)

Growth drivers — role of seeds in Indian agriculture

Growth drivers — improved agricultural credit