The Van Trump Report

What You Need to Know About India’s Agricultural Sector…and Opportunities for US Exports

Over the next five years, Indian households are predicted to become the biggest spenders among the G20 countries, a group composed of most of the world’s largest economies. Already, India has the largest population of any country in the world at an estimated 1.4 billion in 2023. According to the United Nations, that equates to roughly 18% of the total global population. These factors make India an increasingly important prospect for US exports, including agricultural products.

According to the USDA, India’s rapidly expanding distribution and retail network are making imported food and other agricultural products more accessible to a higher proportion of the population. USDA also says that agricultural imports will become increasingly critical as India’s ability to feed its growing population on its own will be challenging amid depleted water reserves, soil degradation, increasingly erratic weather, and labor migrating to urban areas.

India has the second-largest agricultural land area in the world and the agriculture sector supports some 70% of the population. The country boasts the world’s largest cattle herd (cows and buffaloes), and ranks as the largest producer of milk, pulses, and spices. India is the second-largest producer of fruits, vegetables, tea, farmed fish, cotton, sugarcane, wheat, rice, and sugar.

Out of the 93.09 million agricultural households in India, over 80% are small and marginal farmers, typically holding less than 2 hectares (approximately 5 acres) of land. With the average monthly income of Indian farmers hovering around US $125 USD per month, it’s not surprising that many agricultural households are still sustenance farmers, meaning they grow crops just to meet the needs of themselves and their families.

India’s highly fragmented farmland and low-farmer income levels also equate to lower efficiency and productivity compared to similar countries. Technology uptake is low with a huge gap in the market due to a lack of education and penetration to smallholder farms, often due to a lack of affordability. What’s more, around 70% of the country’s agricultural areas are completely reliant on annual monsoon rains for water needs.

Bottom line, while India’s domestic agricultural sector has huge potential, it has miles to go before it can comfortably and consistently feed its ballooning population. That means the country is currently dependent on many ag imports, and likely to remain so for years to come.

India’s agricultural and related products imports in fiscal year (FY) 2023 came to $37 billion, according to USDA. That’s an increase of +51% from 2019’s total of $12.5 billion. However, proportional to its population, India’s ag imports are relatively small. China, for instance, which has a comparable population, imported $262.7 billion worth of agricultural and related products in 2023. Below are some areas where USDA sees opportunities for US agriculture:
Vegetable oils, by far the country’s top imported agricultural product, account for much of India’s import growth in recent years. Imports of vegetable oil increased by +$9 billion, nearly doubling in 5 years, to a total of $18.4 billion in FY 2023. Palm oil, a product that the US does not produce in substantial quantities, comprises more than half of India’s vegetable oil imports, totaling $9.9 billion in FY 2023. Soybean oil is India’s second most imported oil, totaling $4.8 billion and comprising more than a quarter of vegetable oil imports in FY 2023. The US has only occasionally been a supplier of soybean oil to India when market conditions are favorable. Because the country remains a price-sensitive market, imports face stiff competition from other cheaper oils like palm and sunflower, as well as imports from low-cost soybean oil suppliers Argentina and Brazil.

Pulses, a category that contains legumes such as lentils and beans, is an area that USDA believes has high potential for US exports. India is the world’s largest importer of pulses, which are a major source of protein for the country’s large number of vegetarians. India imported $2.6 billion of pulses in FY 2023. According to the USDA, the US is not a top supplier to India, despite being the world’s fourth largest exporter of pulses in FY 2023. Top suppliers currently  include Burma, Canada, and Australia. Less than $1 million of the United States’ $880 million total pulse exports went to India last year. This is down significantly from the record year, FY 2014, when the US exported $174 million of pulses to India. A major constraint in recent years was the imposition of Indian retaliatory tariffs affecting major US pulse products in 2018. Retaliatory tariffs on U.S.-origin chickpeas and lentils were removed in 2023, allowing U.S. pulses to resume competitiveness and paving the way for increased exports to India. Restrictions facing imported yellow peas and lentils have also been eased, exempted from duties through March 2025.

Cotton is another high-potential product for US exporters. While India is a major cotton producer, its large domestic textiles sector relies on imported cotton to meet demand, as domestic supply is not consistently sufficient for all types of cotton. While India was only the seventh largest destination for US cotton in FY 2023, it was the largest destination for US extra-long staple Pima cotton, accounting for $122 million of the total $283 million exported to the world. USDA expects US cotton supplies to fill a growing role as India’s textile sector continues to expand especially high-quality long and extra-long staple products. However, it is important to note that cotton imports overall face tariffs that significantly limit market access.

Ethanol is imported by India for medical and industrial uses, and the US has long been the top supplier, capturing 84% of the import market in FY 2023. Importing ethanol for fuel blending is prohibited as the country’s domestic production supports its ambitious fuel blending mandate. However, ethanol is also used in manufacturing to produce disinfectants and hand sanitizers, as well as solvents, carriers in foods and cosmetics, commercial deicers, pharmaceuticals, and organic chemicals. USDA believes growth in India’s manufacturing of these products will boost import demand, providing growth opportunities for US exporters.

Dairy products are widely consumed in India, and most are supplied by domestic production. Despite this, India imported a substantial amount from the world in FY 2023, valued at $363 million. Dairy products are also among the top US products exported to India, with exports consisting mostly of milk albumin (such as concentrates of two or more whey proteins) and lactose. These products, used in manufacturing, are often destined for non-food uses such as pharmaceuticals and in the production of dietary supplements. (Sources: USDA, UN FAO, Harvard Business School, Economic Times)

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