Structural advantages compared to other agricultural economies if leveraged to their potential, India’s agriculture sector could witness acceleration to $1.4 trillion by 2035 and $3.1 trillion by 2047, consulting firm McKinsey & Company has said on Wednesday.
According to the report titled ‘value creation in Indian agriculture’ the agriculture sector currently contributes 16% to 18% or $580 billion to $650 billion, to India’s GDP.
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While stating that India’s agriculture sector is at a strategic juncture, the report said factors ranging from structural reforms to digital and technological innovation have propelled it to emerge as one of the world’s largest and fastest-growing agricultural economies.
The sector has grown at 5% CAGR over the past six years. With improved productivity and value-addition, it could grow at 6 to 7%, potentially adding an incremental $400 billion by 2035 to reach $1.4 trillion.
The report proposed the inclusion of improving crop yields by an estimated incremental 15% to 40% by using better inputs such as high-yielding variety seeds, specialty fertilizers, biologicals, and improved farming practices, expanding downstream processing for greater value-addition potential.
The report has identified structural advantages in country’s agriculture – rising demand for high-value and processed agricultural products such as fruits and vegetable, manufacturing cost advantages, feedstock advantage for ethanol production, public digital payments infrastructure and rising agtech businesses
India is the world’s second-largest producer of rice, sugarcane, and wheat while the country has the lowest cost of production for rice and maize and the second lowest for sugar globally.
The sector employs about 270 million people, roughly 46% of the country’s workforce.
It noted that agricultural financing has increased by more than 14% annually from 2022 to 2024, up to Rs 25 lakh crore (about $292 billion), despite challenges such as regional disparities in credit access and limited visibility on creditworthiness. Marginal adverse impact on vegetable crop from early monsoon, May rains
The report stated that factors ranging from structural reforms to digital and technological innovation have propelled India to emerge as one of the world’s largest and fastest-growing agricultural economies. “However, the sector is still highly labor-intensive, and productivity is lower than in other regions,” it stated.
Stating that the agriculture sector is built on a fragmented base of farmers and value chains, making it challenging to profitably scale solutions, the report notes that despite its complexity, India’s agriculture sector is also host to multiple structural advantages that could create new opportunities and further accelerate growth. The report identified four areas of growth potential – bio building blocks, agrichemicals, agri biologicals, and processed foods for the sector.
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