In May 2020, when the economy and citizens were fighting against a sudden onslaught of the pandemic, the Union government sprinkled optimism with the vision of an Atmanirbhar Bharat. The special economic and comprehensive package of ₹20 lakh crore -- equivalent to 10 per cent of India’s GDP -- grabbed the headlines.
The Centre’s objective of transforming India into a $5 trillion economy by 2025 is a lofty ambition that will necessitate significant growth in all industries. Agriculture and allied sectors would need to grow at a compound annual growth rate (CAGR) of 9.3 per cent until 2025 to contribute the same proportion of gross value added (GVA) as they do now in a $5 trillion economy, which is nearly two-and-a-half times the CAGR of 3.8 per cent registered by these sectors between 2015-20.
Three-pronged approach
The proposed objective would warrant a three-pronged approach. The primary focus must be on promoting domestic consumption, nurturing India’s export capabilities, and building support for technology interventions. It must be closely followed by establishing a culture and ecosystem for agro-innovation through government and industry-supported research and development programmes.
And finally, for the country to leave an indelible mark as a global agrochemical hub, the industry requires a favourable policy environment for agrochemical exports. In addition, it is necessary to position India as an attractive destination for foreign investments, while safeguarding the interests of small and regional players operating in the industry.
Unfortunately, data show that India’s dependence on agrochemical imports has increased over the last decade even though the domestic industry has attempted to move up the product chain to alleviate this dependence.
Dwarfed by China
A closer look at the provisional data by the CHEMEXIL for the April-February 2022 period, India exported 5.93 lakh tonnes (lt) of agrochemicals against 1.25 lt of imports. Export grew by 22 per cent in volume terms and 35.68 per cent in value terms during this period. However, compared with China, these figures dwarf in sheer volume and size. In 2021, China exported around 1.87 million tonnes (mt) of agrochemicals from January to September, a 63.3 per cent increase year to date.
In a recent survey, CRISIL predicted a 15 per cent growth in the current fiscal on the back of continuing healthy demand from Brazil and the US (which consist of at least 45 per cent of India’s exports) and Europe (which form 15 per cent of India’s exports).
But delays in policy announcement and the absence of impartial implantation can adversely impact the current momentum of the Atmanirbhar agrochemical sector, if not addressed within due time.
PLI scheme
For instance, in November 2021, the Centre announced plans to introduce a PLI scheme to promote the domestic manufacturing of agrochemicals. In line with the Atmanirbhar Bharat vision, leading agrochemical companies are striving to reduce dependence on imports or on a single market, as well as, strengthen its presence in the global markets through indigenous production of intermediates and agrochemicals. The collective mission is to incentivize India’s objective of being a global champion in agrochemical manufacturing.
However, the industry witnessed an interminable pause post-November as clamant business leaders voiced their concerns across industry forums. Consequently, PLI schemes with an outlay of ₹1.97 lakh crore were announced in Union Budget 2021-22 for 13 key manufacturing sectors.
To the disappointment of the sector, it was deprived of this opportunity despite being one of the only sectors where exports have statistically outperformed domestic consumption. Yet, India’s agrochemical industry continues to be optimistic. The opportunity is immense as the global market shifts towards a ‘China-plus-one’ strategy.
Attractive option
The industry has shown credible evidence and empirical proof of its capability to manufacture complex chemistries for domestic and global markets as per the highest standards. The agrochemical export volumes have soared in the last few years, despite the hurdles of the Covid-19 pandemic.
The opportunity in West Asia , Brazil (among others), isn’t inconspicuous to the world. India is an attractive option for global players due to its strategic location, large domestic market, favourable policy ecosystem and skilled and low-cost labour.
As strong demand and alternatives to agrochemicals manufactured in China climb up, the industry continues to wait for an opportune moment to make a move. A supportive ecosystem, and policy and incentives will provide the much-needed fillip to the agrochemical industry.
Lest we forget, China, too, will wade through its current challenges and look at alternative markets to widen its manufacturing capability by dodging domestic policy challenges and plateauing production capabilities.
(The author is Managing Director, Godrej Agrovet Ltd)