A year of hits and misses: Indian agriculture in 2019

The growth rate and gross value added (GVA) by agriculture and allied sectors had improved from a negative 0.2% in 2015 to 6.3% in 2017, only to slow down to 2.9% in 2019 as per the Economic Survey 2019. While the crop sub-sector witnessed negative growth, fisheries and aquaculture, and livestock, grew steadily over the past few years. In terms of value, exports of agricultural commodities and processed food increased by 7% in 2019 to ₹1.28 lakh crore from ₹1.20 lakh crore in the 2017-18. This growth was propelled mainly by the dairy sector, which saw a 72% increase in exports from ₹1,955 crore in 2018 to ₹3,376 crore in 2019, and pulses, the export value of which increased by 22% from ₹1470 crore in 2018 to ₹1,795 crore in 2019. The export value of basmati rice and poultry products increased slightly, while that of non-basmati rice, wheat and buffalo meat decreased.

The government and the private sector are making efforts to improve agribusiness in the country. Entrepreneurship, digital interventions in agriculture, irrigation, crop diversity, fisheries, import substitution, export enhancement and sustainable agriculture are some of the thrust areas the government is working on to improve the scope of agribusiness in India. In the start-up ecosystem, online trade platforms for farmers, custom hiring services, precision agro-tech and agro-biotech are some of the areas where PwC is actively working.

In 2019, erratic weather patterns especially rainfall, disrupted agricultural activities throughout the country, and severely affected the states of Maharashtra, Karnataka, Kerala, Andhra Pradesh, Madhya Pradesh, among others. Soaring onion prices across the country in the third quarter of this fiscal year are not only an indicator of the economic effects of untimely rainfall, but also bring to the fore the pressing need for climate-resilient agriculture, production management and food processing as necessary steps for preventing agricultural and economic losses in the face of climate change.

Water use efficiency

NITI Aayog’s Composite Water Management Index of 2019 states that 74% and 65% of the country’s wheat and rice cultivation areas face serious water scarcity. As per available data, out of 140 million hectares of net sown area, less than 50% is net irrigated and a meagre 3% is irrigated using micro-irrigation. Also, 89% of total groundwater extracted in the country is used for irrigation. The government of India (GoI) had announced a slew of measures over the past few years to tackle the issues of water use, through various schemes and programmes. However, water use efficiency across the country continues to be low at 30 to 40%. Hence, the strategy to address this situation should also change its focus towards shifting from cultivation of water-guzzling crops to crops which consume less water. Simultaneously, GoI is working towards maximising the penetration of micro-irrigation and improve the water use efficiency of major irrigation projects.

Precision technology

Precision technologies enable producers to use inputs in precise amount and obtain the desired output. Micro-irrigation, fertigation, sensor-based production and farm management systems are some of the technologies being used in India for open cultivation, protected cultivation in shade nets and greenhouses. GoI has been testing the use of drones, soil-based remote sensing, artificial intelligence (AI) and geographic information system (GIS). These technologies will be used by GoI and the state governments to assess crop loss, water availability or the lack thereof, soil conditions, etc.

Large agribusinesses make use of these technologies in large-scale farming activities such as spraying of pesticide by using drones, assessing plant health based on foliage, using fully automated fertigation systems enabled by soil sensors. Currently there are more than 35 drone-based startups in India. Urban farmers are using high-tech farming systems in a controlled environment to produce high-value crops such as lettuce, microgreens, Italian herbs. Though this form of production uses high-end technology, it forms a minuscule part of the food production system and caters to high-end consumers and the hotel, restaurant and cafe (HoReCa) segment.

Sustainable materials

The ban on plastic bags and products in many states in India and the overall shift towards using eco-friendly, biodegradable materials has opened up a huge opportunity for alternate products from agricultural sources. Following the international trend, India is also focusing on bamboo as not only an eco-friendly and sustainable raw material but also exploring its usage for livelihood generation and conservation of the ecosystem. The National Bamboo Mission, which was restructured and launched in 2018 with a budget outlay of ₹1,290 crore, is working towards bringing more bamboo products into the mainstream. Such a step, along with policy reforms such as reducing GST on bamboo furniture and flooring to 12%, and the amendment of the Indian Forest Act, 1927, to classify non-forest bamboo as grass to facilitate its smooth trade, are expected to further boost the sector. The north-eastern region, which has around 66% growing stock of bamboo, holds immense potential to revive its bamboo industry.

GoI is also exploring the large-scale use of biofuel obtained from sugar and bamboo. At the Global Bio-India 2019 event in New Delhi, Dharmendra Pradhan, minister of petroleum and natural gas and minister of steel, emphasised on the need to use biofuels. Agricultural waste has become an important commodity as it can be utilised for industrial purposes such as the manufacturing of pulp, composite boards and packaging materials. Large-scale use of agricultural waste is also expected to provide an alternate solution to the very persistent problem of stubble burning in the states of Punjab and Haryana, which results in severe air pollution across the National Capital Region (NCR). Startups have already begun work on pilot projects to convert rice straws into biodegradable packaging material.

Looking ahead

Some of the other key trends in agriculture, that could strengthen the sector in the coming years:

1. There has been a renewed focus on allied sectors, and a separate ministry for animal husbandry, dairy and fisheries has been created. In the livestock sector, efforts are being made to bring in good quality breed, improve artificial insemination technology, prevent diseases such as foot and mouth disease (FMD), and further improve access to good quality fodder.
2. GoI continues its focus on the food processing sector with emphasis on near-production processing, preferably by producers/follow on public offers (FPOs). It is expected that ethnic, processed food will be promoted for exports.
3. A shift in the export sector is also expected. From the current model of residual export after catering to domestic demand, exports are expected to become more targeted and based on international buyer preferences. Exports or ban on exports will not be only used as a price control mechanism, but to establish India as a stable supplier in the global market, as per the Agriculture Export Policy approved in December 2018.
4. The packaged food industry in India is expected to cross $65 billion by 2023 in terms of value and the country is expected to become the third-largest market for packaged food. In addition to dairy, poultry and meat, the demand for health-based food and beverages will also increase, according to India Brand Equity Foundation (IBEF)’s January 2019 report
5. Efforts are being made by GoI, as well as multilaterals, to make inroads into the north-eastern region. Investment in infrastructure will pave the way for development of agriculture and allied sectors in the region.

The author is leader – food and agriculture, PwC India.