Agribusiness & rural Markets

The agriculture sector accounted for 14.2 per cent of India’s gross domestic product (GDP) in 2010-11, according to the Central Statistical Organisation’s (CSO) estimates. As per this indicator, the sector’s importance to the economic, social and political fabric of the country cannot be undermined.
In fact, there is a growing momentum in the agri-business and allied activities in the recent past, due to increasing improvements in the agriculture sector and adoption of innovative management practices, in both on-farm and off-farm operations. Entrepreneurs in the agri-business are fast realising the importance of providing quality products and value-adding in the sector by providing modern technology, knowledge and financial assistance to the farmers. Further, post liberalisation, the sector has witnessed opening of new vistas for the development of the rural economy, and thereby, strengthening the domestic market as well. The need of the hour is to combine entrepreneurial expertise with Government initiatives to help the agri-business sector grow rapidly.
Key Indicators
• Farm sector in the first half of 2010-11 grew by 3.8 per cent and is estimated to reach 5.4 per cent during the fiscal
• The total expenditure in the first four years of the Eleventh Five Year Plan (2007-12) is estimated to be US$ 9.98 billion, up from US$ 3.36 billion in the entire five-year period of the Tenth Five Year Plan (2002-07), according to the Annual Report of the Department of Agriculture and Cooperation, Ministry of Agriculture
• The Gross Capital Formation, or investment, in agriculture sector related to GDP has shown a substantial increasing trend from 15.8 per cent in 2005-06 to 22.3 per cent in 2009-10
• Exports of agricultural products are expected to cross US$ 22 billion mark by 2014 and account for 5 per cent of the world’s agriculture exports, according to the Agricultural and Processed Food Products Export Development Authority (APEDA).
Trends
Food processing industry
India’s share in global food trade is expected to increase to 3 per cent over the next four years from the current 1.5 per cent, according to a document, ‘Vision 2015′, prepared by the Ministry of Food Processing. The country’s food industry is valued at US$ 180 billion of which the food processing industry is estimated at US$ 67 billion, according to a report ‘Food Processing and Agri Business’, by KPMG.
The industry accounts for 32 per cent share in the entire food industry and comprises of 2 per cent of fruits and vegetables and 15 per cent of processed milk. The industry’s contribution towards GDP is around 6.3 per cent and about 13 per cent to export production. The sector is predicted to witness a growth of 10 per cent in the recent years.
Further, the food processing sector attracted US$ 130 million of foreign direct investment (FDI) in the first eight months of the fiscal and a total of US$ 1.2 billion FDI during April 2000 to January 2011.
Dairy sector
The Indian dairy market is largely unorganised in nature and is currently estimated at US$ 47.6 billion, growing at the rate of 7.5 per cent annually. It is predicted that due to growing increase in consumption pattern, rising income and growing consumer purchasing power, the sector would witness strong demand in the recent future.
Spices
India is the world’s largest producer, consumer, exporter and importer in spices, with its market size also being the largest globally. The export of spices and spice-based value added products during April-February 2010-11 was US$ 1,323.28 compared to the US$ 1,063.44 in the same period last year.
Agri-infrastructure
In order to meet the increasing demand of food, it is imperative to invest in the agri-infrastructure sector as well. Various known players are investing into supply chains, developing cold chain networks and establishing warehouses, for ensuring the preservation of the produce. Further, changes in consumer pattern towards processed foods also indicate towards the need to increase storage capacities. Moreover, the Government is also planning to create 30 mega food parks across the country.
Farm mechanisation
In the recent years, farm mechanisation has witnessed growing importance, which is steadily helping in increasing the land and labour productivity in the country. Mechanical equipments for various farm operations such as sowing, tillage, irrigation, threshing etc are being used by the farmers throughout the country. Even the small farmers are adopting modern technology for efficient farm management.
Food packaging sector
Food packaging in India is also witnessing significant changes, with companies increasingly using it as an important vehicle for product differentiation. With the changes in food consumption patterns and demographics, the consumers are increasingly turning towards ready-to-eat and packaged foods. The packaging sector is being driven by trends such as freshness and improved shelf life, convenience of usage, packing to position and promote the brands and sustainability.
Marine products
Marine products in the country have been growing continuously with improvement in productivity and utilisation of untapped resources. Marine exports increased 6.6 per cent in quantity during April-December 2010, crossing the US$ 2 billion mark. This is the first time that the marine exports have crossed US$2 billion in the first nine months of the financial year. According to the latest data on exports, frozen shrimp continued to be the major export item accounting for 48.61 per cent of the total earnings. Shrimp exports during the period increased 12.54 per cent in quantity, 40.72 per cent in dollar terms.
Source: KPMG India, FICCI

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