Agriculture sector’s integral role in India
The Indian Parliamentary Standing Committee on Agriculture, Animal Husbandry, and Food Processing recently investigated farm mechanization and equipment spanning 2020-23. While representatives from the Ministry of Agriculture and Farmers Welfare provided a thorough briefing on the status of modernization in farming, it did raise concern about the lack of foreign direct investment (FDI) flow in the sector. The parliamentary committee meticulously reviewed and sanctioned the report during their meeting on July 14, 2023.
ndia’s farming and allied sectors play a pivotal role, supporting 17 percent of the global population and contributing 20 percent to the nation’s GDP. With an average growth rate of 2.8 percent, nearly half of the population relies on agriculture.
According to a 2022 report, 47 percent of agricultural operations in India are mechanized, which is lower compared to developing counterparts like China, with 60 percent, and Brazil, with 75 percent farm mechanization. Further, the mechanization levels range between 40-45 percent in states like Punjab and Haryana while it is negligible in other areas like the north-eastern states of India. The country’s agriculture landscape is dominated by small and marginal holdings, constituting less than 2 hectares, which cover approximately 86 percent of the total operational holdings. The small size of landholdings is one of the main causes of the decreased use of modern farming machinery.
In 2023, it was predicted that achieving 75–80 percent mechanization in the country would take approximately 25 years. While existing initiatives like the Sub-Mission on Agricultural Mechanization (SMAM) are promoting the adoption of modern equipment in farming, India must focus on prioritizing mechanization efforts specifically targeting small farms. Prospects exist for private sector-led innovation but that will require clear policies and incentives.
Farm mechanization as a catalyst for growth
The Indian agricultural machinery market is estimated at US$16.73 billion in 2024 and projected to reach US$25.15 billion by 2029. Major growth drivers include favorable government policies, rising farm incomes, and the imperative role of mechanization.
Farm mechanization proves instrumental in reducing cultivation costs and enhancing productivity through efficient resource utilization. As per India’s National Bank for Agriculture and Rural Development (NABARD), powered machines contribute 40-45 percent to various farm activities.
Approximately 50 percent of India’s population is employed in agriculture, which provides the majority of the country’s income and raw materials for numerous industries. The need for modern farm equipment arose from the increased production of grains, cereals, and oil seeds, which necessitates intensive harvesting procedures to maximize yield and minimize waste. The Ministry of Agriculture and Farmers Welfare (India) estimated that at the end of the fiscal year 2022, India had produced more than 288 million MT of cereals (such as rice, wheat, barley, millet, ragi, etc.). India is the second-biggest producer of wheat and rice worldwide. Therefore, farmers are pushed toward agricultural mechanization as a result of the increasing farming operations needed to maintain the output.
India’s farm equipment landscape
Agriculture, as a major industry, demands continuous modernization. The diversity in farming, whether large-scale or small-scale, necessitates a spectrum of agricultural equipment. From basic tractors to sophisticated combine harvesters, the sector requires a nuanced understanding of the equipment’s specific applications. Livestock farming, too, has its specific requirements, spanning feeding equipment, poultry tools, corral systems, and more.
Categorizing agriculture equipment manufacturing companies in India, the classifications include (i) tractors (less than 50 HP, 50 to 75 HP, 76 to 100 HP, 101 to 150 HP, greater than 150 HP); (ii) equipment (plows, harrows, rotovators and cultivators, seed and fertilizer drills, and other equipment); (iii) irrigation machinery (sprinkler, drip irrigation, and other irrigation machinery); (iv) harvesting machinery (combine harvesters, forage harvesters, and other harvesting machinery); (v) and haying and forage machinery (mowers and conditioners, balers, and other haying and forage machinery).
Challenges and opportunities for farm mechanization in India:
- While India has made progress in increasing power availability per hectare, with an increase from 0.3 kw in 1970 to 2.54 kw, the target of 4 kw per hectare by 2030 remains.
- There’s a direct correlation between farm power availability and yield, emphasizing the need to increase farm power availability.
- The proportion of budgetary allocation for the Department of Agriculture and Farmers Welfare (DA&FW) compared to the total budget of the Government of India has consistently decreased.
- Budget allocations for the Research and Development (R&D) to Farm Mechanization Scheme have seen a steady decline over the past four years, with a significant decrease of approximately 30 percent from 2019–20 to 2022–23.
- Rapid urbanization in India is leading to a shrinking agricultural workforce, with data showing a decline in the percentage of people employed in agriculture from 44 percent in 2017 to 41.4 percent in 2020. Shifting worker preferences from farm-oriented to allied industries contribute to labor deficits in agricultural operations. Manpower scarcity is expected to increase demand for farm equipment in the coming years, even as market demand will continue to accelerate.
- Tax and duty incentives to support manufacturing units in low mechanization areas are essential for sustainable growth.
- India’s farmtech startup sector raised US$1.1 billion in 2022, a slight drop from US$1.3 billion in 2021. In the coming years, funding attention is likely to get increasingly directed towards upstream agriculture technology or the production side of the agri-supply chain, as well as climate related agritech solutions and innovation.
Market outlook
The global agriculture and farm equipment/machinery market is witnessing robust growth, reaching US$174.12 billion in 2023, with projections to reach USD 184.69 billion in 2024, reflecting a 6.1 percent CAGR. This growth is attributed to factors such as education, research, infrastructure development, industrialization of agriculture, advancements in crop science, and rural labor scarcity.
Anticipated trends include rising global food demand, increased mechanization and automation, adoption of smart farming solutions, sustainable agriculture initiatives, and precision agriculture, making the sector more investment-friendly. Key trends in the forecast period involve collaboration, labor scarcity and efficiency, customization, climate change adaptation, and IoT sensor adoption.
In India, the growth of agriculture and farm equipment markets is influenced by a rapidly expanding global population. The United Nations predicts India’s population to increase by two billion people in the next 30 years, reaching 9.7 billion by 2050. Mechanization of farms is essential to meet the growing food demand. The correlation between population growth and increased food demand highlights the importance of agricultural machinery in enhancing productivity and addressing food demand.
Moreover, a surge in demand for organic food is expected to propel the growth of agriculture and farm equipment markets. Organic food, produced without synthetic pesticides, fertilizers, GMOs, antibiotics, or other artificial additives, benefits from agricultural machinery for increased efficiency, precision farming, weed and pest management, and soil health promotion.
The Indian government is mulling over the following proposed measures to increase quality farm mechanization:
1. Standardizing the design of equipment, attachments, and parts at the Bureau of Indian Standards (BIS) level, with the implementation of these standards at the manufacturer’s level.
2. Conducting testing on equipment, attachments, and parts manufactured by different companies to ensure adherence to BIS standards and specifications.
3. Promoting the use of standard parts available on the market in the manufacturing processes of various companies. The availability of standard parts simplifies production and enhances the interchangeability of components and attachments.
4. Providing training to manufacturers in manufacturing technology, specifically focusing on the use of jigs, fixtures, die-punches, templates, and other tooling aids. This training aims to improve the quality of manufacturing processes and enhance the compatibility and matching of components.
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