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India’s agriculture sector plays a pivotal role in the country’s development, offering numerous benefits and growth opportunities for investors. With a rapidly increasing population, the demand for food and agricultural products is set to rise, driving expansion within the industry. Here’s a closer look at why investing in agriculture stocks in India can be a wise decision.
The Government of India is actively implementing various initiatives and policies to support and promote the agricultural sector. These include subsidies, improved infrastructure, and farmer welfare schemes, all aimed at enhancing productivity and profitability in agriculture.
Key statistics and global standing
- Primary source of income: Agriculture serves as the primary source of income for approximately 55% of India’s population.
- Global rankings: India boasts the world’s largest cattle herd (buffaloes) and the largest area under rice, wheat, and cotton cultivation. It also ranks first globally in milk, pulses, and spice production.
- Second-largest producer: India is the second-largest producer of fruits, vegetables, sugarcane, tea, farmed fish, and sugar.
Despite a significant decline in its contribution to India’s GDP from 1990-91 to 2022-23 due to industrialization, the agricultural sector has managed to demonstrate an average CAGR of 4% over the past five years.
In response to the sector’s challenges, the Government of India allocated approximately 1.9% of the total Union Budget for Agriculture and Allied sectors for the fiscal year 2023-24. Around 1.3% of this allocation assists small and marginal farmers through the PM KISAN Yojana. A significant portion, about 8.3%, is dedicated to major subsidies, including those for food, fertilizer, and petroleum.
Best Agriculture stocks in India
Coromandel International Limited
Coromandel International Limited is a leading agricultural solutions provider in India. Established in 1906, the company has two main segments: crop nutrition and crop protection. It is the world’s biggest producer of neem-based bio-pesticides and a top marketer of organic fertilizers, with the country’s largest agri-retail network of over 750 stores.
PI Industries Limited
Incorporated in 1946, PI Industries Limited is a major agrochemical manufacturer headquartered in Haryana. The company offers a wide range of products, including fungicides, pesticides, herbicides, plant nutrients, and specialty products. It also provides research and development services and has a significant international presence in countries like Japan, Germany, and China.
Sumitomo Chemical India Limited
Founded in 2000, Sumitomo Chemical India Limited (SCIL) is involved in manufacturing, importing, and marketing products for crop protection, rodent control, grain fumigation, and more. The company operates in two main segments: Agro Chemicals and Others (concerning environmental health and animal nutrition), and has its own research and development facility.
UPL Limited
Formerly known as United Phosphorus Limited, UPL Limited is a major player in the crop protection market. The company manufactures and trades agrochemicals, field crops, and vegetable seeds, as well as industrial chemicals. UPL also offers crop care services and a range of public health solutions like termite and mosquito control.
Before investing in agriculture sector stocks in India, it’s crucial to understand the potential risks. Changes in government regulations, ineffective marketing strategies, unpredictable weather patterns, and financial risks like cash flow shortages can all impact performance. A comprehensive understanding of these factors is essential before making investment decisions.
Investing in agriculture stocks in India presents promising growth opportunities. However, it is vital to assess factors like financial health, technology integration, and the regulatory environment before making decisions. With thorough research and understanding of the associated risks, adding agricultural stocks to your portfolio can prove to be a valuable investment.