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Government Strategies Enhancing Indian Agriculture Sector and Stocks Involved

19 September 20246 mins read by Angel One
India’s agriculture sector, vital for 55% of the population, is supported by major government initiatives like e-NAM and the Agri Infrastructure Fund, boosting productivity and exports.
Government Strategies Enhancing Indian Agriculture Sector and Stocks Involved
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India’s agriculture sector plays a vital role in the economy, providing livelihoods for ~55% of the population. As one of the world’s leading agricultural nations, India boasts the largest cattle herd (buffaloes), the largest area planted with wheat, rice, and cotton, and is a top producer of milk, pulses, and spices. It also ranks as the 2nd largest producer of fruits, vegetables, tea, farmed fish, cotton, sugarcane, wheat, and rice. With the 2nd largest agricultural land area globally, the sector is crucial in generating employment for about half of the country’s population, making farmers integral to India’s sustenance and economic stability. 

In the fiscal year 2024-25 (April-May), India’s key agricultural exports include:

  • Marine Products: USD 1.07 billion
  • Basmati and Non-Basmati Rice: USD 1.96 billion
  • Spices: USD 769.22 million
  • Buffalo Meat: USD 551.78 million
  • Sugar: USD 454.89 million
  • Miscellaneous Processed Items: USD 302.07 million
  • Oil Meal: USD 246.19 million

These figures underscore India’s significant role in global agricultural trade and reflect the country’s diverse and robust agricultural output. 

To support this growth, the Indian government has implemented several initiatives to enhance agricultural productivity and infrastructure. Some of these initiatives are: 

Agri Infrastructure Fund

A notable initiative is the Agri Infrastructure Fund, announced on May 15, 2020. This ₹1 lakh crore (USD 12 billion) fund aims to finance farm-gate infrastructure projects, supporting Primary Agricultural Cooperative Societies, Farmers Producer Organizations, and agricultural entrepreneurs. 

The fund is intended to develop affordable and viable post-harvest management infrastructure and aggregation points. As of December 31, 2022, ₹14,118 crores had been sanctioned, with ₹9,117 crores disbursed. The remaining amount will be distributed by the end of the Financial Year 2025-26, with loans having a repayment period of up to 7 years, including a 2-year moratorium.

National Agriculture Market Scheme

Launched in 2022, the National Agriculture Market (e-NAM) Scheme is to promote a competitive, transparent, and online bidding system. It now involves 1.74 crore farmers and 2.39 lakh traders. This initiative aims to streamline market access and reduce inefficiencies in the agricultural supply chain.

Digital Infrastructure

The government has also advanced digital initiatives to support agriculture. Programs such as the National e-Governance Plan in Agriculture and the creation of Digital Public Infrastructure aim to enhance IT access and digitise land records, which are crucial for modernising agricultural practices.

Grain Storage and Food Processing

In December 2023, NBCC signed a memorandum of understanding with the National Cooperative Development Cooperation (NCDC) and NABARD for constructing 1,469 grain storage units, marking the largest grain storage plan in the cooperative sector globally. This initiative aims to significantly boost the capacity for grain storage and manage food security.

Additionally, the government approved several projects under the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) in January 2024, including 41 Mega Food Parks, 399 Cold Chain projects, 76 Agro-processing Clusters, 588 Food Processing Units, and various other projects. These investments are expected to enhance the food processing infrastructure, improve logistics, and create backward and forward linkages.

Union Budget 2024-25 and Future Developments

In addition to the support through these initiatives, in the Union Budget 2024-25, the Indian Government has made a provision of ₹1.52 lakh crore (US$ 18.26 billion) for agriculture and allied sectors.

The Government is also preparing to launch Kisan Drones, designed for crop assessment, digitisation of land records, and the application of insecticides and nutrients. These drones are expected to revolutionise agricultural practices by providing real-time data and enhancing precision in farming operations.

Stocks Involved 

Apart from the government support, there are several companies listed on the stock market as contributing to the agricultural and allied sector growth. Some of these companies are Fertilisers and Chemicals Travancore Limited, with a market cap of ₹64,619.84 crore, Coromandel International of market cap ₹50,252.11 crore and UPL Ltd with a market cap of ₹46,477.63 crore. (Note: The market cap of the stocks here is as of September 11, 2024.) 

Future Outlook

The Indian agricultural sector is projected to reach USD 24 billion by 2025. The Indian food and grocery market is the world’s sixth largest, with retail contributing 70% of sales. This growth is driven by both government efforts and private sector contributions, which together enhance agricultural productivity and market access.

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.

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