Overview
India is an agrarian economy with half of its labor market representing agriculture-related sectors and more than 54 percent of the nation’s land categorized as arable. India is among the world’s leaders in terms of production volume for commodities such as rice, wheat, cotton, sugar, horticulture, and dairy. Agriculture and related sectors such as forestry and fisheries account for 20.2 percent of the country’s GDP. Consequently, the agricultural sector plays an important role in Indian economics, politics, and society.
Indian agricultural production for food staples is highly monsoon (seasonal rainfall) dependent, and farm yields are generally below world averages. Low productivity is caused by many factors, including inadequate farmer education and training, heavy government regulation, an inefficient food distribution system, poor infrastructure (which results in post-harvest losses of up to 40 percent for certain products), unpredictable weather, small average farm sizes (2.7 acres/1.08 hectares and shrinking), inadequate plant and animal genetics, and domestic agriculture support programs and subsidies that distort market signals and hamper investment.
The Indian agricultural sector is slowly shifting from traditional farming to horticulture and livestock production (poultry, dairy, and fisheries). The demand for fresh and processed products of all types is increasing as the population urbanizes, incomes rise, and consumption habits change. The growth of an efficient cold chain network from “farm to fork” will help curb the spoilage rate of agricultural output while helping producers capture value as products retain quality and provide increased benefits to consumers.
Consumer-oriented food imports, led by tree nuts and fresh fruits, are among the fastest growing segments of imported agricultural products and reached $6.14 billion in 2021. The market for imported foods has steadily grown and is impacted by a growing middle class, affluent professionals, brand-oriented importers, modern retail outlets, e-commerce retailers, and trend-setting restaurants.
Imported nuts and fruits feed into India’s traditional retail channels, with an estimated 90 percent of imported fresh fruit sold in roadside stands and open markets. Imported packaged and consumer-ready foods are found in gourmet grocery stores, imported food sections of larger format stores, and in thousands of small neighborhood shops, or kirana (mom and pop) stores. While opportunities for imported foods are improving in the hotel, restaurant, and institutional and food processing sectors, the Indian market remains relatively small and volatile due to high tariffs, import restrictions, and domestic industry competition.
India’s food and grocery retail business is estimated at $570 billion. The sector is dominated by traditional trade formats like neighborhood shops (kirana stores), which hold approximately 88 percent of the total market share in sales. The market share held by modern trade formats such as supermarkets and hypermarkets, along with E-Commerce retailers, will continue to expand rapidly over the next five years as it fulfills evolving consumer needs.
The retail and e-retail sector continues to grow at a rapid pace. According to Forrestor, India’s online retail market is forecast to grow at an annual rate of 19.8 percent and reach $85.5 billion by 2025. India’s e-retail grocery sector totaled $2.9 billion in 2020, primarily due to the lockdowns resulting from the COVID-19 pandemic. The sector is forecast to continue its growth in the next few years due to expanding internet connectivity and rising consumer demand for convenience, value, safety, hygiene, ease of payment, and product variety. Opportunities for U.S. exporters exist in consumer-oriented products, especially tree nuts, fruits, and packaged/processed foods.
The emergence of larger chains and stores began around 2005, and by 2021 the sector has grown to over 8,000 modern retail outlets across India. While many retailers are expanding and opening new stores, profitability continues to be an issue, partially due to high real estate costs.
India’s casual dining and quick service restaurant sector is also on the rise, with nearly 60 foreign restaurant brands across the country. Another emerging trend is the rise of “themed” dining restaurants serving cuisines with a fusion of national and international foods. The use of e-commerce has also expanded dramatically in this sector. Due to lockdown restrictions and social distancing norms brought on by the pandemic, Indian customers pivoted to e-commerce platforms to secure essential food supplies. The e-commerce sector has seen significant changes as many food manufacturers, retailers, distributors, importers, and e-commerce firms have come together to develop new distribution networks. For example, leading food delivery and taxi aggregator apps such as Swiggy, Uber, and Zomato have partnered with traditional and modern retail companies to deliver groceries.
Since late 2020, increased consumer demand for goods has placed extraordinary pressure on India’s food and agricultural supply chains. Exacerbated by the COVID-19 pandemic and Russia’s invasion of Ukraine, shipping container shortages and high freight costs have constrained maritime trade through India’s major ports. Despite earlier challenges, India’s port operations have mostly normalized and returned to pre-pandemic levels in terms of port traffic. However, supply chain challenges and trade disruptions have endured for agricultural and related products, including agricultural fertilizers.
India has developed export competitiveness in a range of specialized agricultural and related products, making it the world’s 9th largest exporter. In 2021, India realized an $11.8 billion global trade surplus of agricultural and related products. Leading exports consisted of Basmati rice, prawns, shellfish, carabeef, spices, and refined sugar.
|
|
2017 |
2018 |
2019 |
2020 |
2021 |
|---|---|---|---|---|---|
|
Total Exports |
32.2 |
32.7 |
31.0 |
33.4 |
43.2 |
|
Total Imports |
27.8 |
22.3 |
22.7 |
22.1 |
31.4 |
|
Imports from the United States |
1.9 |
1.9 |
2.1 |
1.6 |
1.7 |
Data Source: Directorate General of Foreign Trade, Ministry of Agriculture and Farmers Welfare, Trade Data Monitor
Agricultural Commodity Trade Subsectors (Alphabetical Order)
Condiments and Sauces
In 2021, Indian imports of condiments, sauces, jams, and jellies reached $29.8 million, of which nearly $6.8 million were from the United States. Other large suppliers included Thailand, China, Malaysia, UAE, and several European countries. Retail and restaurant sector offerings are growing in India, and demand for imported condiments and sauces is on the rise as consumers and restaurants experiment with imported products.
Cotton
India is one of the world’s largest producers and exporters of cotton. Nonetheless, India will continue to import extra-long staple and quality long staple cotton (28-34 mm), with occasional imports of medium staple cotton when international prices are favorable. On April 13, 2022, the Indian government rescinded its 10 percent cotton import duty through September 30, 2022, to support the textile sector as it deals with record high domestic fiber prices. The United States has been one of the leading suppliers of cotton to India over the past few years. U.S. cotton exports to India in 2021 were valued at $214 million, a 31 percent increase year-on-year, having rebounded from 2020’s export totals of $147.0 million, which were low due to the pandemic. The United States has remained the leading supplier of medium to long staple (average staple length of 28 mm) cotton to India over the past few years. Since 2015, the United States has also been the leading supplier of Pima cotton to India, surpassing Egypt. Indian mills importing U.S. Pima and upland cotton recognize its quality and consistency and are ready to pay a premium over competing foreign origin supplies. However, U.S. cotton faces competition from suppliers such as Brazil, Egypt, and Australia due to occasional freight advantages and shorter delivery periods.
Wines and Spirits
India’s alcoholic beverage sector is the world’s third largest, valued at $35 billion. Despite India’s high import tariff structure, state specific regulations, and at times limited opportunities for the marketing of alcoholic beverages, the sector continues to witness significant growth. In 2021, India’s imports of wines and distilled spirits shot up to $319 million, representing an impressive 40 percent year-on-year increase. In 2021, U.S.-origin exports of American wines and distilled spirits to India rose by 114 percent on a year-on-year basis to $7 million.
Craft Beer and Beer Ingredients
The Indian craft beer market is poised for tremendous growth, though it is still considered niche. There are more than 200 operating microbreweries and brew pubs across India, up from only 45 in 2016. Supplying ingredients such as malt, hops, and yeast for these businesses, and supplementing the breweries and pubs with imported beers is an emerging market opportunity as evidenced by growing trade and industry demand. Preferences for, and acceptance of, craft beers is expanding as the sector sees growth and market penetration across India in states that allow alcohol consumption. The microbrewery sector accounts for one percent of the total beer sector. A handful of breweries are expanding production lines and adding bottled or canned craft beers.
Fresh Fruits
India provides market access for most fresh fruits. With a growing segment of consumers insisting on high quality standards and year-round availability, there is an increasing demand for imported fresh fruits. Imports of U.S. fresh fruits (including, but not limited to apples, pears, cherries, and blueberries) into India in 2021 were valued at $24.2 million, with apples having the highest market share at $22.5 million. This represented a significant decline from 2020, due to India’s tariff increase on apples from 50 percent to 70 percent in retaliation for U.S. steel and aluminum tariffs and trade disruptions arising from the pandemic. Nonetheless, imports within the fresh fruits segment are expected to grow over the coming years, with new products entering the Indian market. U.S. processed fruit exports have quickly grown, including dried cranberries, prunes, jams, and jellies. In 2021, the United States exported $12.4 million in processed fruit, a 34 percent year-on-year increase. Imports of dried blueberries grew from a negligible amount in 2009 to 180 metric tons in 2021. This rise in demand is also due to growing awareness about the health benefits of U.S. fruits, and their use as a value-added ingredient in many products.
Hides and Skins
India’s hides and skins imports grew for the first time in six years, reaching $24.8 million in 2021, a 26 percent increase year-on-year. U.S. hides and skin exports also recovered to $853 thousand, a 58 percent growth from the previous year. Raw hide imports have a zero tariff in India, while tanned leather imports have a tariff of 15 percent (basic duty). Imported raw material is primarily used by the local leather industry, though some is re-exported.
Pulses
India is the world’s largest producer, consumer, and importer of pulses (peas, lentils, and beans), with annual imports reaching $2.1 billion in 2021. In 2016, imports reached a record 6.99 million tons, valued at $3.9 billion, mostly from Canada, Burma, Australia, Russia, China, and the United States. However, since then the Indian government has taken a series of measures to restrict imports of pulses, raising the import duties on various pulses from zero to 30 to 60 percent, and imposing quantitative restrictions on imports of major pulses. In April 2022, to address food inflation concerns, the government announced its quantitative restrictions removal of select pulses, including black gram lentils and pigeon peas. However, imports of other peas (i.e., green, yellow, Dun) and of mung beans remain on the restricted list, and no import quotas have been announced.
Historically, the United States has been the supplier of higher priced green and yellow peas, lentils, and garbanzo beans (chickpeas), with imports reaching a record $183 million in 2014. However, due to trade restrictions, imports of pulses from the United States declined sharply, from 369,000 metric tons in 2014 to 12,500 metric tons in 2021. Market sources report that imports of various pulses have declined to current levels due to government-imposed restrictions that have blocked out-of-quota imports and increased domestic production.
Snack Foods
Evolving consumer lifestyles and increasing disposable income levels are leading to increased demand for imported snack foods, even with increased competition from local players. The sweets and snacks market continues to expand rapidly thanks to rising incomes and holiday and corporate gifting. The pandemic accelerated the industry’s adoption of digital marketing and delivery platforms across India, leading to new partnerships with organized retailers. Manufacturers are increasingly procuring high-value, specialty ingredients in response to an ongoing shift in consumer tastes and preferences, including increased demand for healthier sweets and snacks options. Opportunities for U.S. exporters exist in consumer-oriented products, especially tree nuts, fruits, and seasonings. The industry reached sales of over $13 billion in fiscal year 2019-2020. While the industry suffered a significant reduction in sales due to the pandemic, it is recovering and is expected to reach revenues of $8.56 billion in fiscal year 2022.
Tree Nuts
Tree nuts are one of the leading U.S. agricultural exports to India. In 2021, imports of tree nuts from the United States exceeded $889 million. The United States is the largest supplier of tree nuts to India, with almonds (mostly in-shell) being the dominant export to India in 2021, valued at $750 million. Other tree nut suppliers include Australia, Tanzania, Benin, UAE, Syria, Iran, and Afghanistan. Almonds are a preferred nut in India and are gaining popularity among the growing middle-income population due to their health benefits. India also imports significant quantities of walnuts, pistachios, and hazelnuts, mainly from the United States, Iran, Afghanistan, Pakistan, and the Middle East.
For more information on commodities and agricultural items, please contact USDA’s Foreign Agricultural Service in New Delhi and Mumbai.
Please also review the USDA FAS Exporter Guide and the Food and Agricultural Import Regulations and Standards – Annual Country report.
USDA Cooperators and State and Regional Trade Groups Active in India
Almond Board of California
American Pistachio Growers
American Hardwood Export Council
California Table Grape Commission
California Walnut Commission
California Olive Committee
Cotton Council International
Cranberry Marketing Committee
Distilled Spirits Council of the United States
Food Export Association of the Midwest USA
Food Export USA-Northeast
Pear Bureau Northwest
Softwood Export Council
Southern United States Association
United States Soybean Export Council
U.S. Grains Council
U.S. Apple Export Council
U.S. Dry Pea and Lentil Council
U.S. Dry Bean Council
U.S. Pecan Council
U.S. Highbush Blueberry Council
Washington State Apple Commission