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Agriculture industry in India accounts for 13.9% of India's GDP

India is one of the top agricultural country in the world. It is self sufficient to produce commodities for the population of the country.

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Definition / Scope

Agriculture has been and plays a vital role in India’s economy. Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood.

Since Independence, India has made immense progress towards food security. Indian population has tripled, and food-grain production more than quadrupled.

The initial increase in production was centred on the irrigated areas of the states of Punjab, Haryana and western Uttar Pradesh. Self-sufficiency has always been an important factor for India’s agriculture. Therefore, India adopted significant reforms focused on the goal of food grain self-sufficiency.


Market Overview

  • The Indian agriculture sector accounts for 13.9 per cent of India's gross domestic product (GDP) and employs just a little less than 54.6 per cent of the country's workforce.
  • Indian agriculture is characterized by agro-ecological diversities in soil, rainfall, temperature, and cropping system. Besides favourable solar energy, the country receives about 3 trillion m3 of rainwater, 14 major, 44 medium and 55 minor rivers share about 83 per cent of the drainage basin.
  • About 210 billion m3 water is estimated to be available as ground water.
  • Irrigation water is becoming a scarce commodity. Thus proper harvesting and efficient utilization of water is of great importance.
  • Agriculture, along with fisheries and forestry, is one of the largest contributors to the Gross Domestic Product (GDP).
  • At 157.35 million hectares, India holds the second largest agricultural land in the world. With 20 agri-climatic regions, all 15 major climates in the world exist in India. India is the largest producer of spices, pulses, milk, tea, cashew and jute; and the second largest producer of wheat, rice, fruits and vegetables, sugarcane, cotton and oilseeds. Further, India is 2nd in global production of fruits and vegetables, and is the largest producer of mango and banana.
  • Total food grains production in India reached an all-time high of 251.12 million tonnes (MT) in FY15 (as per 3rd Advance Estimates).

Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet

Market Risks

  • Climate change is one of the major factor of production of agri commodities.
  • Commodities are hoarded by the traders to inflate the price of the goods.
  • Commodities that are stored in the godowns are damaged due to poor infrastructure.
  • Farmers don't get the fare prices for the goods.

Top Market Opportunities

The vast opportunities are provided by the government for the betterment of the agricultural sector and in its Budget 2015–16, planned several steps for the sustainable development of agriculture.

Some of the recent major government initiatives in the sector are as follows:

  • India and Lithuania have agreed to intensify agricultural cooperation, especially in sectors like food and dairy processing.
  • Gujarat Government has planned to connect 26 Agricultural Produce Market Committees (APMCs) via electronic market platform, under the National Agriculture Market (NAM) initiative.
  • The State Government of Telangana plans to spend Rs 81,000 crore (US$ 12.1 billion) over the next three years to complete ongoing irrigation projects and also undertake two new projects for lifting water from the Godavari and Krishna river.
  • The National Dairy Development Board (NDDB) announced 42 dairy projects with a financial outlay of Rs 221 crore (US$ 34.02 million) to boost milk output and increase per animal production of milk.
  • The government planned to invest Rs 50,000 crore (US$ 7.7 billion) to revive four fertiliser plants and set up two plants to produce farm nutrients.
  • The Ministry of Food Processing Industries took some new initiatives to develop the food-processing sector that would enhance the income of farmers and export of agro and processed foods, among others.
  • The Government of Telangana allocated Rs 4,250 crore (US$ 654 million) for the first phase of the farm loan waiver scheme. The scheme is expected to benefit 3.6 million farmers who took loans of Rs 100,000 (~US$ 1,539) or below before March 31, 2014.
  • Indian agriculture has potential and prospects in areas of agri business. Horticulture is also a very healthy and growing agri business.
  • Flowers are estimated to be grown in about 35,000 ha in India of which 10,000 ha are under modern flowers like rose, carnation, orchid, etc. In India, the land and climate are suitable to grow all types of flowers throughout the year in one part or the other.
  • India’s share in the world market has risen to 0.7%.
  • Rural women also play an important role and participate in all stages of crop production, as they constitute 50% of rural labour force and their participation can further be enhanced by educating and training.
  • Agriculture start-ups is also a booming area, and thus can bring opportunities for small agri entrepreneurs and strengthen the chain of supply in Indian agriculture.

Market Drivers

Over the years, multiple factors have been responsible and worked together to facilitate the agriculture sector.

  • Growth in household income and consumption, expansion in the food processing sector and increase in agricultural exports.
  • Rising private participation in Indian agriculture, growing organic farming and use of information technology.
  • Spice exports from India are expected to reach US$ 3 billion by 2016–17 due to some creative marketing strategies, innovative packaging, strength in quality and strong distribution networks. The spices market in India is valued at Rs. 40,000 crore (US$ 6.16 billion) annually, of which the branded segment accounts for 15 per cent, collected through secondary research and IBEF.
  • The initiative of Second Green Revolution in the Eastern states of India has further given a boost to the agriculture scene. Prior to being launched in 2010 – 2011, the government of India had allocated an additional Rs 400 crore in 2011-12 under Rashtriya Krishi Vikas Yojana for extending green revolution to the eastern region comprising Assam, Bihar, Jharkhand, Eastern UP, Chhattisgarh, Odisha and West Bengal. Rice was a priority crop under the scheme. Seeing the success of the scheme, the Budget 2012-13 has raised the allocation to Rs 1,000 crore.
  • The aim of the program is to harness the water potential for enhancing agriculture production in Eastern India which were underutilized.
Growth driver.png

Market Restraints

  • Penetration of technology in the rural places.
  • Financial assistance to the farmers is lacking.
  • Education in the farming industry is lacking.
  • Fluctuating supply of commodities in the country.

Industry Challenges

Though the sector is growing faster than ever before, there are some challenges faced by the ministry and industry.

  • It is expected that country's farm sector crisis is expected to deepen in 2016-17 if the current trend of falling global commodities prices is not reversed.
  • According to Niti Aayog member Ramesh Chand, “At present, the market is not behaving in a normal manner. As a result, the crisis (in agriculture sector) is deepening.”
  • The main reasons being drought and unseasonal rains. This has also led to an increase in the suicide rates in the country.
  • The important reforms that can be carried out are to train the farmers to get jobs outside of farming to sustain farm growth and welfare of the farms.
  • The enormous pressure to produce more food from less land with shrinking natural resources is a tough task for the farmers. Another challenge is that more and more farmers are leaving farming but not the land holdings, in order find a solution tenant farmers should be given land lease so that the land can be put into use to facilitate and take up farming. In that case credit access is very important. According to reports, 50 percent of the farmers still depend on private lenders. The inclusion of the private sector can also prove beneficiary.
  • Indian soils have been used for growing crops over thousands of years without caring much for replenishing. This has led to depletion and exhaustion of soils resulting in their low productivity.

Technology Trends

  • Improvement in the seed technology.
  • Different mechanical equipment's are introduced in the market in different stages of agriculture production.

Pricing Trends

The prices of the commodities is completely depends on the rain and the hoarding of the goods from the traders.

Regulatory Trends

  • The government is allocating easy loans to the farmers.
  • Capturing the malpractices done by the traders.

Other Key Market Trends

  • Hybrid seeds are generated which suits different soil and weather conditions.
  • Multi farming are experimented by the farmers for better output.

Market Size and Forecast

The Department of Agriculture and Cooperation under the Ministry of Agriculture is responsible for the development of the agriculture sector in India.

  • GDP from Agriculture in India is expected to be 3878.71 IND Billion by the end of the first quarter of 2016, according to Trading Economics global macro models.
  • In the long-term, the India GDP from Agriculture is projected to trend around 3913.57 IND Billion in 2020, according to Trading Economics econometric models.
  • Food Processing is also a very promising sector as it is an ancillary sector to agriculture because it holds an important link between agriculture and industry and is expected to grow at a faster pace in the coming years. India is the world’s largest producer of food only after China.
  • By a little push from the government on research, it is estimated that India’s food production is likely to double in the next decade and would eventually open up the markets for food processing areas like canning, packaging, frozen food and thermo processing.
  • Other factors like lower average age, higher levels of disposable income and increasing working couples have further led to the progress of the food processing unit.
  • The reforms which could be expected from the Budget 2016 – 2017 for the agricultural sector can be under The National Mission for Sustainable Agriculture under Krishi Unnati Yojana, provision for a comprehensive crop insurance, and enhanced irrigation facilities for alleviating farm woes.

Market Outlook

  • The agricultural sector in India is expected to grow at a better momentum in the next few years due to increased investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage.
  • Factors such as reduced transaction costs and time, improved port gate management and better fiscal incentives would contribute to the sector’s growth. Furthermore, the growing use of genetically modified crops will likely improve the yield for Indian farmers.
  • The 12th Five-Year Plan estimates the food grains storage capacity to expand to 35 MT. Also, a 4 per cent growth would help restructure the agriculture sector in India in the next few years.
  • Exchange rate used: INR1= US$ 0.0154 as of October 26, 2015

Distribution Chain Analysis

  • Roadways is the most preferred transport within the country.
  • Export is done by waterways to other countries.

Competitive Landscape

Competition is from the import of commodities from other countries.

Competitive Factors

  • Fertile lands.
  • Introduction of new technology in the farming.
  • Hybrid seed technology.

Key Market Players

Government of India is the sole contributor of commodities.

Strategic Conclusion

As India is growing at a rapid pace, it is necessary for the agriculture sector to keep up with it. India is at the forefront of producing and exporting various products, India is the largest producer, consumer and exporter of spices and spice products.

It ranks third in farm and agriculture outputs. Agricultural export constitutes 10 per cent of the country’s exports and is the fourth-largest exported principal commodity. As most of the Indian population is still reliant on agriculture it is necessary to provide and implement various schemes for the betterment of the farmers and to hope for an enlightened future both for the nation and industry.


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