Israel-India Business Guide - Agriculture &Water
26
Agriculture in India
Business Opportunities in
India’s Agriculture Sector
Since India is among the 10 leading exporters of agricultural products in the world,
Solid understanding exists to take the cooperation to the next level
Sateesh Kulkarni *
I
ndia still has a predominantly agriculture-based
economy and agriculture and its allied sectors, is the
largest livelihood provider in India. Most industries
depend upon the sector for their raw materials. The
sector has undergone rapid transformation in the
past two decades and this has resulted not only in
commercialisation and diversification, but also triggered
various technological and institutional innovations owing
to investments from corporate entities.
India is the largest producer of pulses, milk, tea, cashew
and jute; and the second largest producer of wheat, rice,
fruits and vegetables, sugarcane, cotton and oilseeds.
Total food grains production in India reached an all-time
high of 259.32 million tonnes in 2012.
India is among the 10 leading exporters of agricultural
products in the world; the country accounted for 2.07 per
cent of global agricultural trade in 2012. Total agricultural
exports from India registered 24.1 per cent compound
annual growth rate (CAGR) to reach US$ 39 billion during
2007-12. The domestic demand for agricultural and
allied products has not only been rising due to rising
population, but also as a result of greater consumption
by a wealthier population. Indian agriculture has also
benefitted from rising external demand and the sector’s
wider participation in the global economy.
Investment by Private and Public Sector
Private Sector:
In order to promote private sector
participation, the Indian government has allowed 100 per
cent ForeignDirect Investment (FDI) in several segments of
the agriculture sector. These include fertilisers, agricultural
machinery, horticulture, development of seeds, animal
husbandry, pisciculture and the cultivation of fruits and
vegetables. Private sector investments are expected to
boost agricultural R&D, develop technologies for energy
saving, and protect the environment, which could help
increase yield.
Public Sector:
In terms of gross capital formation (GCF),
investment in agriculture as a percentage of GDP in
agriculture and allied services increased considerably. GCF
as a percentage of agri GDP (a key investment indicator)
increased considerably in the 11th Five Year Plan (2007–
12).
Investments in food storage infrastructure
Infrastructure investments would include:
• Traditional farming techniques
• Distribution
• Quality control
• Manufacturing
• Food processing
• Quality control
• Storage and warehousing
• Logistics
• Packaging
• Automatic route through 100% FDI has been permitted
for companies investing in food storage infrastructures.
• Full exemption on service tax along with the 5%
concession on stamp duty is allowed for companies
investing in cold storage expansion plans in India.
• The refrigerator units for the storage vehicles like trucks
and vans are completely exempt from customs duty.
Foreign companies investing in the agricultural industry
in India will need to invest at least 50% of the total
investment amount on infrastructure and back-end
facilities. A timeframe of 3 years is given to the companies
after the induction of FDI. However, money which is being
spent on rentals and land costs will not be considered as
back-end infrastructure investments.
Major Recent Developments
• The National Bank for Agriculture and Rural
development (NABARD) has opened a lending window
to private sector companies for creation of warehouse
Agriculture
