India Report: Population Prosperity
13 October 2011 India will become the most populous nation in the world by 2030, with almost 18% of the world’s population, according to 2011 census data.
A rising middle class and burgeoning domestic demand for high-quality food have propelled India’s agrochemical industry growth to a rate of 20% per year. A rise in crop yields and labor wages has provided more disposable income for the growing Indian population, which surpassed 1.2 billion people in 2011.
In turn, a surge in crop input sales has occurred as farm incomes have risen. India’s agrochemical market value stands at $3.7 billion, with more than half attributed to domestic sales, according to the Pesticide Manufacturers and Formulators Association of India (PMFAI). If this trend continues, many Indian companies are forecasting double-digit growth in the next five years.
Consumption on the Rise
India’s population increased 181 million from 2001 to 2011, according to the 2011 Indian census.
Farmers are continuing to use technological and crop protection advancements to keep up with a rising demand for food. As demand for agrochemicals increases, the domestic retail market business is expected to grow 10% annually in the next 4 to 5 years.
“As farmers continue to realize more from their produce, they are inclined to produce more from the same land holding they have, leading to more usage of crop chemical products including fertilizers,” says Rajesh Kumar, deputy general manager, Willowood Limited.
The increase in per-acre consumption of agrochemicals in the Indian market is less than 1 kg/acre compared to 6-10 kgs/acre in developed markets, according to Aseem Kumar, vice president of corporate planning, Nagarjuna Agrichem Ltd.
“In the Indian agrochemical market we are seeing ample opportunity to remain competitive to cater to domestic as well as international market,” Aseem Kumar says.
While the entire agrochemical market is experiencing growth, the fungicide sector has been rising at a rate of 40% per year. The herbicide sector has also grown about 20% to 25% per year.
High commodity prices are causing farmers to spend more money on crop inputs and specialty fungicides, specifically conazole and strobilurin fungicides, says Elizabeth Shrivastava, executive director, AIMCO Pesticides.
AIMCO is researching strobilurin fungicides and some neo-nicotinide insecticides, she says.
With commodity prices increasing, a farmer is looking forward to newer solutions for increasing his crop productivity, including newer fungicides, says Bimal Shah, director, Sulphur Mills Limited.
“We are looking at a wide basket of different fungicides of different classes including strobilurins, triazoles and organic fungicides,” he says. “We have also developed various new formulations of different classes of fungicides and certain specialized combinations.”
Government Mandates Drive Growth
Government mandates such as the National Rural Employment Guarantee Act (NREGA) have somewhat unexpectedly expanded the use of pesticides, especially chemical weeding. The policy has also created labor shortages and higher labor costs, according to industry leaders.
Farmers have increased herbicide applications because unemployment wages mandated by the act and set by the state government have outpaced regular pay, making hand weeding an unsustainable practice.
“If an unemployed worker is being paid $100 a day by the government or $30 a day for weeding, they are now saying, ‘Why should we work?’” says Atul Churiwal, managing director, Krishi Rasayan Exports Pvt. Ltd.
In addition, the shortage of man power and additional rural credits have caused many farmers to resort to mechanization. The government has been helping farmers by providing high subsidies on fertilizers as well. As long as these policies continue, the agrochemical industry will grow, Rajesh Kumar says.
“The government policy in India has been pro farmer, and they try to favor the same with increased focus on the agricultural sector,” Rajesh Kumar says. “We see the same policies of the government will continue and the focus will remain the same. As long as these pro-agriculture and pro-farmer policies of the government continue, it will indirectly continue to benefit the crop chemical industry.”
Growth Plans
Agrochemical companies are taking advantage of the growth in domestic demand with hopes of keeping their market share.
Whatever each company’s growth plans are, one common goal is to expand capacity either by building new plants or adding on to existing facilities.
Willowood Limited, which entered the Indian market four years ago, has grown into a $66 million enterprise, according to Rajesh Kumar. The company is currently setting up a second formulation plant in Gujarat and is also considering opening a technical plant in Dahej.
“We are working on a business model to vertically integrate our business from research to distribution,” he says. “To this effect, we are working on setting up a GLP lab and research center, a technical manufacturing facility, and launching our brand business in 2012. We shall continue to come up with new products to add to our existing line of products and hope that shall give us the desired growth in this segment.”
Nagarjuna Agrichem Ltd. also has plans to expand plant capacity if needed, but the company also wants to increase its presence in the contract manufacturing business and enhance the customer base.
“Lower import prices from China are making us consider backward integration to remain competitive,” Aseem Kumar says. “Ever-increasing stringent environmental norms in India are making us pull out some products from manufacturing. With the fine and specialty chemicals market growing in India, we are striving to keep our foothold in this segment.”
Other companies such as Krishi Rasayan Exports Pvt. Ltd. have a simple strategy: “Our target is to beat industry growth,” Churiwal says.
Krishi Rasayan, which projects its revenue will rise 15% this year to $160 million, will focus on manufacturing paraquat, atrazine and glyphosate products.
Churiwal says he expects that double-digit growth will continue for his company and for other companies poised to capitalize on one of the fastest growing economies in the world.
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