Among the few sectors that remained immune to the covid pandemic and the Russia-Ukraine crisis, agriculture tops the list, thanks to steady growth during the last two years. Though agriculture may not be the largest contributor to GDP, it continues to be the biggest employment generator for the country, accounting for more than half of the country’s workforce.

The budgetary allocation towards agriculture has increased at an annualised rate of almost 20 per cent in the last nine years. For 2022-23, the allocation stood at a massive ₹1.32 lakh crore, from ₹27,662 crore in FY14. Given the need to feed India’s growing population through limited means, technology adoption for sowing, and irrigation and focus on research to develop superior inputs, which can help improve productivity manifold, is the need of the hour.

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It is imperative for the Government to ensure the viability of agriculture as a business by way of policy initiatives so that the farming community is better placed to manage natural risks such as weather, rainfall etc.

The expectation from the Government, more than higher budgetary allocation, would be the roadmap to ensuring long-term viability of the industry and managing the inherent risks such as weather, more efficiently, thereby bringing in stability in the farm income. This has a bearing on the demand growth from the bottom-of-the pyramid.

Incentivising and encouraging technology and innovation through higher exemption on research and development spend is one move which will encourage companies to focus on the long term and build real solutions.

Incentivising domestic production and investment into capacity creation– particularly for Agri-inputs such as fertilisers and agrochemicals, where there is significant dependence on imports, will pave the way to achieving India’s goal of self-reliance. This will benefit fertiliser and agro chemical manufacturers.

Stocks in Focus

Efficient players such as Coromandel International, GSFC, GNFC, and Chambal Fertilisers are better placed to benefit from any such structural move, which will incentivise investment in the fertiliser space.  For agrochemical players such as PI Industries, Insecticides India, Bharat Rasayan, and Sumitomo Chemicals, who spend on product research and development, any tax benefit on such spend will have a positive impact on earnings.

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Agriculture credit and crop insurance will be critical for increasing investments in this sector and go a long way in bringing in stability and eliminating risks. The benefit of higher agri credit will have a positive rub off on agri input manufacturers, and other agri commodity producers such as sugar, rice and other food processing players who source the agri produce from farmers.

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