Thursday, 19 June 2025
India’s agriculture sector is on the brink of a significant transformation, with the potential to triple in value by 2047. According to a new report by McKinsey & Company titled “Value Creation in Indian Agriculture,” the sector, currently valued at $580–650 billion, could grow to between $1.8 and $3.1 trillion over the next two decades. This projected growth will be driven by a combination of structural reforms, rising domestic demand, increased agritech adoption, and a stronger export presence. For agribusinesses, the opportunities to scale operations, innovate, and shape the sector’s future are expanding rapidly.
The report outlines five long-term advantages that place India in a strong position to unlock this potential. A growing middle class is shifting food consumption patterns toward high-value products such as dairy, fruits, vegetables, and processed foods. By 2031, India is expected to have the world’s largest middle-class population, with increased spending on quality, branded food items. India’s manufacturing cost advantage, supported by low labor and energy costs, also makes the country an attractive destination for investment in value-added food production and bio-based industries. India’s agricultural production is another key strength. As one of the world’s leading producers of rice, wheat, sugarcane, and maize, India has access to abundant, low-cost feedstock for downstream applications such as bioethanol, bioplastics, and specialty chemicals. The digital ecosystem, led by platforms like UPI and Aadhaar, supports scalable solutions in rural finance, input delivery, and advisory services. With over 350 million digital payment users and more than 15 billion UPI transactions per month, India is building a digital foundation for inclusive agricultural growth. Innovation is also gaining momentum. India hosts around 2,800 agritech startups offering solutions in climate-smart agriculture, post-harvest technology, and digital farm management. Hybrid models that combine traditional networks with digital tools are helping these ventures scale and reach underserved farming communities.
Despite its potential, Indian agriculture remains fragmented and underproductive. Over 86 percent of Indian farmers cultivate less than five acres, and the average holding size has fallen to 2.7 acres. The sector employs nearly half the national workforce but contributes only around 16–18 percent of GDP, reflecting structural inefficiencies. Yet, signs of positive change are emerging. Between 2018 and 2024, agriculture grew at 5 percent annually, supported by major reforms such as the Kisan Credit Card (KCC), the E20 ethanol blending program, and the Digital Agriculture Mission. Formal financial access is improving, with agricultural credit rising to $292 billion by 2024.
McKinsey’s analysis of 40 agricultural sub-sectors reveals a combined revenue pool of $533 billion and a profit pool of $42 billion. Upstream segments such as agri-inputs and lending contribute $7 billion in profits, while the production phase—including livestock and plantation crops—adds another $4 billion. The most lucrative opportunities lie downstream, in processing and trade, which account for nearly $30 billion in profits. These include packaged foods, processed fruits and vegetables, staples, and industrial bioproducts derived from agricultural feedstock.
The report highlights four high-growth areas with strong potential to drive future value. The industrial bioeconomy, especially bioethanol and green chemicals, offers long-term promise given India’s policy support and resource base. The agrochemicals sector is projected to expand from a $10 billion market today to $25–30 billion by 2047, driven by domestic demand and export competitiveness. Agribiologicals, a fast-growing category that includes biostimulants and biocontrols, is expected to grow at 9–10 percent annually and reach $600–640 million by 2030. Processed foods, already a $330 billion sector, will benefit from evolving consumer preferences and rising urban demand for high-quality, convenient, and culturally resonant products.
Formal finance, collectivization, and digital tools are playing a growing role in strengthening the agricultural ecosystem. The Kisan Credit Card now serves over 77.5 million farmers, with increased limits announced in the 2025–26 Union Budget. Crop insurance coverage has expanded, with 37 percent of farmers enrolled in schemes like PM Fasal Bima Yojana. Farmer collectives such as FPOs and cooperatives are also becoming more influential, helping smallholders access better inputs, financing, and markets. Leading examples include Amul, which works with 3.6 million dairy farmers, and ITC, which sources from over 1.7 million farmers through its structured procurement channels. Meanwhile, government-backed digital platforms like e-Mandi and the Open Network for Digital Commerce (ONDC) are making price discovery and market linkages more transparent and efficient.
India remains one of the world’s top producers of several agricultural commodities, but its global export share remains modest at around 2 percent. A large portion of its exports are raw or unprocessed, and the country continues to rank low in global export standings for key categories such as maize and oilseeds. However, with better infrastructure, value chain integration, and quality standards, there is significant room to grow. If India can accelerate yields, expand agritech adoption, and invest in downstream processing, agriculture could grow at 1–2 percentage points above historical averages. This would unlock an additional $400 billion in value by 2035 and up to $900 billion more by 2047, putting India’s agricultural sector firmly on the path to global leadership.
