Already the world’s fourth largest producer of agrochemicals (after the US, Japan, and China), India is poised to expand its agrochemical industry by another 14.5% over the next five years. Following is a closer look at some of the key drivers, challenges, and opportunities that this critical industry will face as it continues to develop.
Major market segments
- Insecticides and fungicides—used to prevent crops from being harmed or damaged by pests and disease, respectively.
- Herbicides—one of the fastest-growing segments of India’s agrochemical industry, herbicides destroy the weeds that compete with agricultural crops for food and space.
- Bio-pesticides—featuring pesticides derived from animals, plants, and certain minerals and bacteria, this market segment is expected to see significant growth in the coming years thanks to a greater focus on the development of more sustainable pesticide options.
- High demand and limited farmland availability
Home to 16% of the world’s population and less than 2% of its land mass (of which the maximum of available arable land is already under cultivation), India must turn to technological innovation in order to increase its per-hectare yields and help secure its national food security and crop self-sufficiency. Agrochemicals enable farmers to produce higher and more consistent crop yields and help to minimize the impact of adverse climate conditions and other environmental factors.
- Booming horticulture and floriculture industries
In the few years prior to 2010, the Indian floriculture industry experienced a massive growth spurt, increasing its production levels by 50%. At that time, the country’s government made a commitment to doubling horticulture and floriculture production again within the next few years. The major growth in this industry has sparked a matching spike in agrochemical demand, particularly for fungicides.
- Growing exports
As of 2009, only about half of India’s agrochemical production was used domestically. The other 50% was exported internationally. This figure is expected to increase as the amount of available global arable land per capita slowly declines.
- Increasing awareness of agrochemical techniques
About six years ago, estimates from the government of India put the value of crops lost to non-use or improper use of pesticides at around $17 billion. Since then, a major push has occurred to train farmers in proper agrochemical use, including appropriate quantities, better matching of pesticide types to those pests targeted, and correct application methodologies. This increasing awareness of the value of proper pesticide use has in turn boosted agrochemical demand.
- High R&D costs
As is the case with technological innovation in any sector, the time and capital required to develop new agrochemical molecules and compounds is remarkably high: research timelines of nine years and development costs of $180 million are common. Indian companies face significant challenges in procuring the necessary capacity to develop new agrochemicals while remaining cost competitive.
- Counterfeit products
Unfortunately, India is home to a significant amount of counterfeit agrochemicals, whose value was estimated at $233 million in 2009. These products cannot only potentially harm crops, farmers, and the environment, but they can also have a substantially negative impact on revenue for the organized, legitimate agrochemical sector.
- Increased focus on organic farming
The fact that companies, citizens, and farmers around the world are paying more attention to organic farming practices represents both a challenge and an opportunity for India’s agrochemical sector. While some pesticide and other chemical use may gradually be phased out, the demand for effective bio-pesticides is now greater than ever.
- Scope for increased usage
Only about 35-40% of India’s total farmland is currently under crop protection, which means that there is a significantly unserved market that the agrochemical industry can potentially access. Furthermore, agrochemical consumption can be expected to increase as farmers become more educated and better trained about proper agrochemical use.
- Export potential
As mentioned above, global exports represent a significant opportunity for Indian agrochemicals, particularly given the fact that the country can take advantage of its global status as a low-cost producer.
- Patent expiry
In the period from 2009 to 2014, many proprietary agrochemical molecules and compounds went off patent, opening the market up to generic players. This was and continues to be an important opportunity for India’s agrochemical sector, allowing the country to delve into new molecule development while minimizing its R&D costs and time frames. The total value of the opportunity represented by these bulk patent expiries was estimated at more than $3 billion.
- Portfolio expansion
While the agrochemical industry will continue to focus on key market segments, including insecticides, fungicides, and herbicides, a larger reorientation is expected to take place as the sector repositions itself to address new consumer needs, such as organic farming practices. The result of this repositioning will likely be a broadened range of product offerings, including a full slate of agri-inputs and traditional agrochemicals, thus opening the sector up to an even wider market.