Prospects in India’s Agrochemical Sector

India’s agrochemical sector has witnessed enormous growth in recent years, positioning itself as a major contender in the global market. With an export size that reached US$5.5 billion in 2022, the sector is projected to reach a market value of US$14.5 billion by FY 2027-28, up from around US$10.3 billion currently.

Prime Minister Modi’s 100-day action plan under the new NDA government includes developing strategies to improve the efficiency of fertilizer subsidy administration. On June 10, PM Modi authorized the 17th installment of the PM Kisan Nidhi scheme, anticipated to assist 93 million farmers.

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Industry watchers expect the new government to prioritize the farming and agriculture sectors, potentially revisiting the rules and regulations pertaining to plant chemicals, fertilizers, and seeds—the input side of the agriculture business. India’s champion sector now awaits a production-linked incentive (PLI) scheme of its own to augment production capacity and export size.

Indian agrochemical exports soaring high

With a projected market value of US$36.42 billion in 2023, the United States leads the world in agrochemical manufacturing. However, per the World Trade Organization (WTO), India was the world’s second-largest exporter of agrochemicals in 2022, with major export markets being China, Japan, Brazil, and the USA. India’s US$5.5 billion worth of agrochemical exports in FY 2022-23 exceeded US exports worth US$5.4 billion.

**India’s final agrochemical export figures for FY 2023–24 are yet to be released by the Department of Commerce, GoI.

India’s agrochemical sector experienced a trade surplus of INR 289.08 billion (US$3.46 billion) in FY 2022-23 owing to heightened export activities.

These figures indicate that India’s potential to become a major global manufacturing powerhouse remains strong. With a comprehensive plan that includes cooperative alliances and regulatory compliance, India is well-positioned to meet domestic agricultural needs and emerge as a leader in addressing global agricultural challenges.

Selling to overseas markets

Indian producers offer competitively priced generic agrochemicals, attracting interest globally and boosting export volumes. The affordability and high quality of agrochemical products make India an attractive destination for agrochemical manufacturing.

Data Source: ITC Trade Map, Department of Commerce, GoI

India presently supplies agrochemicals to over 140 nations globally. This expansive market reach is largely driven by post-patent drugs, which constitute more than 75 percent of the generics industry. With the disruption of food supplies in the European Union due to the conflict in Ukraine, nations are turning to India and other regions to fulfill their urgent food requirements, prompting Indian enterprises to also export to the EU.

Growth drivers for India’s agrochemical sector

Key drivers for India’s agrochemical sector growth include significant regulatory reforms affecting trade, marketing, production, manufacturing, product registration, and intellectual property rights, coupled with substantial research and development (R&D) efforts. These policy reforms are expected to boost agricultural output, thereby contributing significantly to India’s economic growth.

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Moreover, India is set to introduce a PLI program for the agrochemical sector, offering output incentives ranging from 10 percent to 20 percent. This initiative aims to enhance employment opportunities, bolster domestic manufacturing, and enhance India’s competitiveness on the global stage.

Recognizing the pivotal role of the agrochemical sector, the Indian government, as per the Federation of Indian Chambers of Commerce and Industry (FICCI), has designated it as one of the top 12 sectors targeted for achieving global leadership.

Read: India’s Chemical Industry Expected to Reach US$304 Billion by 2025

Strategic initiatives to enhance India’s agrochemical export reach

According to a market report released in May 2024, the Indian agrochemical market (production and domestic demand) can reach upto to US$14.5 billion by FY28 from the current levels of around US$10.3 billion. To achieve such growth, experts stress the urgent need for intensified focus on R&D, expediting product registrations, and strengthening intellectual property rights (IPR) within the sector. Enhancing these aspects is critical to positioning India as a leader in agrochemical exports.

Industry insiders emphasize the necessity for reforms in the seed and plant chemical sectors, citing lengthy regulatory and approval processes. It is anticipated that the new administration may introduce favorable policies aimed at boosting agrochemical exports and attracting global investment, all while safeguarding the interests of local and small businesses.

Scope for reform: What stakeholders want

The current registration process in India’s agrochemical sector is often seen as complex, costly, and time-consuming. Significant R&D investments are required to develop new compounds and secure production and sale registrations, posing challenges even for large local enterprises and multinational corporations. To improve the sector, it is essential to establish plug-and-play industrial parks with ready environmental clearances, centralized pollution treatment facilities, and essential infrastructure like power and water. Providing affordable industrial land, particularly outside established industrial zones and Special Economic Zones (SEZs) and enhancing road and port infrastructure are also vital for reducing logistics costs and time.

Strategically, India should focus on identifying key products and chemistries for investment in backward integration and intermediate manufacturing, based on market trends, import competition, and national advantages. The emphasis should be on higher value addition from the intermediates level, discouraging low-value technical additions to support the ‘Make in India’ initiative. Investments in basic building blocks and feedstocks for agrochemicals and fine chemicals are necessary to achieve scale. Encouraging R&D investment to develop cost-effective processes, reduce raw material costs, minimize waste, and lower pollution is critical. This approach should target the production of both patented and off-patent molecules, as well as Contract Research and Manufacturing Services (CRAMS).

Developing novel formulations and biologicals for domestic and export markets is also important. Promoting public-private partnerships can facilitate collaborations between agrochemical companies and government research institutes. Ensuring compliance with global Health, Safety, and Environmental (HSE) standards is crucial, particularly for serving global customers and exports, by expanding infrastructure for effluent management and discouraging non-compliant units.

Policy recommendations

• Reforming the Insecticide Act & Rules: Major reforms are needed to streamline the implementation of existing regulations, encourage the introduction of new molecules, ensure quality standards, and create an ecosystem that meets global compliance.
• Encouraging investment: Investment should be directed towards building and expanding facilities for manufacturing essential chemical building blocks and R&D capabilities to establish a globally competitive supply source.
• Improving ease of doing business: Indian agrochemical companies face significant barriers related to ease of doing business and specific policies and processes that hinder exports. Addressing these issues is crucial for the sector’s growth.
• Incentives for growth: There is a lack of targeted incentive packages aimed at accelerating the growth of the agrochemical industry across manufacturing, R&D, and exports. Developing such incentives is essential to fostering rapid industry expansion.
• Promoting the agrochemical sector: Aggressive promotion of India’s agrochemical sector involves enhancing visibility and competitiveness on the international stage.

(US$1 = INR 83.58)

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