Indian agro-chem industry poised for robust rebound; to touch $14.5 b by FY28, says report

Despite witnessing a minor downturn during FY24, the Indian agrochemical industry is poised for a robust rebound with a projected compounded annual growth rate (CAGR) of 9 per cent on strong exports and steady domestic demand, a report said.

The Indian agrochemical industry, which enjoyed a 10-year long run of consistent expansion, experienced a contraction of around 3 per cent on a year-on-year basis during FY24 with revenues falling to around $10.3 billion from the previous year’s $10.6 billion, the Rubix Industry Insights on Agrochemicals said.

Factors such as global de-stocking trend, influx of competitive products from China and reduced demand during rabi season due to low reservoir levels impacted the industry. The report said the resurgence will be fuelled by factors such as sustained government support, advancements in technology, and the expansion of the export market, all of which will propel the industry size to reach $14.5 billion by the close of FY28, the Rubix report said.

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“India has a unique characteristic driving the growth of the industry. Its current agrochemical usage sits at a mere 0.6 kg per hectare, a fraction compared to the Asian average of 3.6 kg/ha and a mere quarter of the global average of 2.4 kg/ha. This low utilisation signifies immense potential for market expansion in the coming years, presenting a fertilse ground for the industry growth,” Rubix said.

India has become the world’s second largest exporter of agrochemicals with US and Brazil being the top two export destinations. Exports account for over half of the production exceeding domestic sales. India’s agrochemical exports have risen from $3.1 billion in FY19 to $5.4 billion in FY23 with herbicides dominating the category. The share of herbicides have increased from 31 per cent of total exports to 41 per cent between FY19 and FY23.

• Also read: Erratic monsoon impacts use of agrochemicals

Pros and cons

Factors such as thrust on backward integration to reduce the dependency on Chinese imports, diversification of product portfolio, increase in registration of new agrochemical molecules despite perceived complex registration process and regulatory support for curbing imports to boost the prospects of Atmanirbhar Bharat among others have contributed to the growth of the industry. Also, initiatives such as Drone Didi scheme to encourage drone application and the Government’s focus on digital services through the Digital Agriculture Mission are seen driving the growth of the sector.

However, the industry faces challenges such as the limited R&D efforts resulting in high reliance on generics, low availability of raw materials and lack of very large production facilities, exclusion from the production linked incentive scheme, the report said.

Underscoring the rising demand for agrochemicals, the average capacity utilisation across the industry exhibited a steady upward trajectory, reaching 68 per cent in the period FY18 to FY22. This growth trajectory remained consistent barring a temporary dip during the Covid period, the report said.