Indian Economic Overview
Global economies were impacted over the last 2 years by uncertainties and volatility on
account of Covid-19 fallout, prolonged Russian-Ukraine conflict and monetary tightening by
central banks amidst inflationary trends. Despite this, India maintained its position of
the fastest growing economy in the world for both these years. India’s Gross Domestic
Product (GDP) is estimated to have expanded by 7.2% in FY 2022-23 as per the latest
estimates released by Central Statistical Office (CSO). Relatively quicker recovery from
pandemic and robust GDP growth in FY 2022-23 was reinforced by buoyant private consumption
and strong capital formation bolstered by the government’s continued capital
expenditure push even during the pandemic period. Government’s continued policy
thrust on capital expenditure through infrastructure spending was visible in the Union
budget for FY 2023-24 as well with increased capital investment outlay by ~37% to 10 Lakh
Crore. Reserve Bank of India’s [RBI] Economic Survey released in February’23 has
listed number of positive factors supporting robust growth momentum such as:
a. Universal vaccination coverage enabling rebound of spending on contact-based
services (restaurants, hotels, shopping malls, and cinemas) and the return of migrant
workers in construction industry b. Performance of high-frequency indicators such as GST
collections crossing the 1.4 lakh crore benchmark for twelve successive months, increasing
electronic toll collection levels, robust energy demand, robust tractor sales, auto sales
and high UPI transactions c. Increased credit appetite of well-capitalized public sector
banks and the credit growth to the Micro,
Small, and Medium Enterprises (MSME) sector etc. d. Strengthening of the corporate
balance sheets
India is set for another record year of merchandise exports having registered 6%
year-on-year growth to reach an estimated $447.5 billion during FY 2022-23.
The sustained resilience of Indian economy amidst global uncertainties is expected to
continue in FY 2023-
24 as well. As per consensus forecasts, India’s GDP growth in FY 2023-24 is
expected to be in the range of 6.0% - 6.5%. The primary growth drivers include robust
private consumption.
Government’s firm focus on infrastructure spending and enhanced credit growth
supported by deleveraged corporate balance sheets coupled with improved asset quality of
the banks. Strong infrastructure push under the Gati Shakti (National Master Plan for
Multimodal Connectivity) initiative and logistics & industrial corridor development is
expected to drive industrial competitiveness in the long term and support future growth.
In FY 2022-23, the world also witnessed the end of quantitative easing by all the major
central banks. Major central banks in fact resorted to Quantitative Tightening to rein in
the soaring inflation. Following aggressive rate hikes by US Federal bank from 0.4% in
April’22 to 4.9% in March’23, RBI also raised the repo rates by
250 bps from 4.0% to 6.5% during the same period. Inflationary pressures have now
started easing with a transmission of softening WPI inflation expected soon on CPI
inflation. Forecasts by various international agencies show moderating inflation in India
in FY 2023-24 in the range of 5.0%- 6.0%, within RBI’s target range.
Indian Agricultural Sector Overview
Agriculture and allied sectors continue to remain one of the most important sectors of
the Indian economy and is the main source of livelihood for ~55% of India’s
population (Source: India Brand Equity Foundation).
India is the largest producer of milk and pulses globally and continues to be the
second largest in production of rice, wheat, sugarcane, cotton, groundnuts and fruits
& vegetables. India also ranks amongst the top economies in production of fish,
spices, poultry and livestock. The agriculture and allied sectors have remained resilient
throughout the several external disruptions and is estimated to have grown by 4.0%. In FY
2022-23, as per third advance estimates by Central Statistical Office (CSO). The sector
accounted for 18.3% of the total gross value added (GVA) during the FY 2022-23. While
headline rainfall numbers for FY 2022-23 reflect above average monsoon, the season was
marked by highly erratic spatial distribution, extended withdrawal of monsoon and
instances of flooding & crop damages. Out of 36 subdivisions, 12 (40% of total area)
received excess rainfall and 6 (17%) received deficient rainfall. Southern and Western
parts of the country received excess rains while Eastern region witnessed rainfall deficit
for the entire season. Uneven monthly as well as geographic spread of south-west monsoon
led to lower sowing of Kharif crops, mainly paddy and foodgrains. Rabi season was also
delayed due to extended withdrawal of southwest monsoon and untimely & heavy rainfall
in October.
Nonetheless, India’s total food grains production was estimated to reach all-time
high of 330.53 million MT in FY 2022-23, a growth of 4.7% year-on-year led mainly by rice,
wheat and cereals (as per third advanced estimates). Backed by remunerative prices
globally, India’s Agri export also reached all-time high of 32 billion in FY 2022-23,
a growth of 11% year-on-year. In 2023, overall monsoon is expected to be normal with
expected rainfall at 96% of Long-period average (LPA), despite delayed start (Source:
Indian Meteorological Department). While it is too early to predict evolving El-Nino
conditions, any kind of impact is likely to be in the end-stages of monsoon. In the Union
Budget for FY 2023-24, Government of India has continued to focus on this sector and has
made substantial budgetary allocations as below: Union Budget FY 2023-24 Highlights for
the agriculture sector
Agricultural Credit target of 20 Lakh Crore for FY 2023-24, an increase of 11%
year-on-year
Rs. 8,514 Crore has been allocated to the Department of Agricultural Research and
Education.
Plan to set up a digital public infrastructure for agriculture as an "open source,
open standard, and interoperable public good". This will enable inclusive
farmer-centric solutions, market intelligence and support for the growth of Agri-tech
industry.
The Agriculture Accelerator Fund to be established with corpus of Rs. 500 Crore over a
period of 5 years to encourage Agri-startups by young entrepreneurs.
Allocation of Rs. 450 Crore for Digital Agricultural Mission and 600 Crore for the
promotion of Agriculture sector through technology. In view of the abovementioned,
agriculture output is expected to remain robust and the sector is likely to continue on a
growth path. With regards to commodity prices, FY 2022-23 witnessed a softening of key
commodity prices in the latter half of the year with world adapting to geo-political
tensions, opening of grain export corridor from Ukraine and bumper sowing of all the major
crops in key producing nations such as Soybean in Brazil and Maize in
US. As per the World Bank report on Commodity market outlook, the World Bank commodity
price index fell by 32% from its historic peak in June 2022. In addition, crude oil prices
fell from high of $138/barrel in March’22 to Low of $70/barrel in March’23 amid
the apprehension of deeper global slowdown. Nevertheless, as per the World Bank,
"commodity prices still remain well above their pre-pandemic (2015-2019) and
Agricultural prices are projected to decline 7% in 2023 and ease further in 2024".
INDIAN RICE INDUSTRY Indian Rice Market Analysis
The India Rice Market size is expected to grow from USD 51.58 billion in 2023 to USD
58.07 billion by 2028, at a CAGR of 2.40% during the forecast period (2023-2028).
According to the FAO, rice production in India accounted for 178.3 million metric tons
in 2020. The cultivation of high-yielding rice varieties such as IR 64, CR 2301, Kudrat 5,
etc., makes India the second-largest rice producer in the world after China, with more
than 11.0% of the global production share. Rice production in the country has increased by
3.5 times in the last 60 years. According to the Rice Exporters Association, Indian rice
exports touched 20 million tons in 2021, including 16 million tons of non-Basmati rice.
Rice being an essential commodity, no country-imposed restrictions on its import, making
the country to become the top exporter of rice in the world. The overall production was
ample enough to support exports of around 16 million tons of non-Basmati rice. Higher
demand for Indian rice from the North American and European regions in recent years and
good climatic conditions are supporting the growth of the Indian rice market.
The timely onset of monsoons, such as South-Western monsoons and North-Eastern monsoons
in India, is a major driver for high rice production. This also results in higher
productivity than in other Asian countries such as Thailand and Indonesia, as these
countries are affected due to fluctuating rainfall causing floods and drought. The major
rice-producing states in India are West Bengal, Uttar Pradesh, Andhra Pradesh, Punjab,
Haryana, Tamil Nadu, Odisha, and Bihar.
Indian Rice Market Trends
September 2022: The Government of India has prohibited the export of broken rice
through an amendment made to the export policy, which is aimed at increasing the domestic
availability of broken rice amid rising demand from the poultry industry and increasing
ethanol production as part of Ethanol Blended Petrol (EBP) program in the country.
July 2022: United Arab Emirates has announced an investment of over USD 2.0 billion in
India aimed at developing food parks in the country to increase food security in South
Asia and the Middle East regions. The food parks are aimed at developing relations between
farmers, processors, and retailers by using advanced climate technology to maximize yields
in rice, onion, and potatoes as a priority.
June 2022: Vida Carbon Corp. signed an Emission Reduction Purchase Agreement with Core
CarbonX Solutions Pvt Ltd, an established climate and sustainability consulting firm based
in India. The agreement is aimed at improving the cultivation and water management
practices of rice farmers on over 100,000 hectares in the state of Telangana in four
phases, thereby increasing production.
Agricultural Production and Exports
The performance of the agriculture sector has been buoyant over the past several years
supported by measures undertaken by the government to augment crop productivity, ensure
certainty of returns to the farmers through price support, promote crop diversification,
improve market infrastructure through the impetus provided for the setting up of farmer
producer organizations and promotion of investment in infrastructure facilities through
the Agriculture Infrastructure Fund. The Indian agriculture sector is projected to grow by
3.5% in FY 2022-23.
As per the second advance estimate released by the Ministry of Agriculture and Farmers
Welfare, foodgrain production for 2022-23 is estimated at 324 million Tonnes, 2.5% higher
than in 2021-22 which includes cereals 288 million Tonnes (up by 2.6%) and 28 million
Tonnes (up by 1.9%) of pulses. The oil seeds are expected to grow by 5.4% to reach 40
million Tonnes and Sugar cane by 6.7% to reach 469 million Tonnes. Cotton at 34 million
Bales to grow by 8.4%.
Agriculture exports remained buoyant in FY 2022-23 despite the restriction of some
commodities supported by global demand and food prices. India continued to be a net
exporter of agricultural products and expects the total agriculture exports to cross the
USD 50 billion mark recorded in FY 2021-22.
Opportunities, Strengths, Concerns
Opportunities and Strengths
Increase market share in existing business verticals: Several sectors in which your
Company operates are largely unorganized, therefore, cost leadership is a key enabler for
your Company to increase the market share of its products in those segments. The
Company’s ability to increase sales will be strengthened by continued focus on
offering a wide range of innovative products across all business verticals which will help
in gaining market share. Additionally, in the medium-term, due to supply chain disruption
and lack of liquidity leading to the closure of smaller business units, larger players
with strong balance sheets will gain market share.
Pan-India presence with extensive supply and distribution network to benefit the
Company in the long-run: Your Company has a pan-India presence and operations spanning
across 5 (five) business verticals. The Company has set up processing facilities and
supporting infrastructure as well as R&D to develop a modern operating platform across
key agriculture verticals. As a result of its widespread network and significant
operational experience, the Company is well placed to identify key market trends and
introduce a range of innovative and value-added products in the market to cater to the
evolving needs of the customers. The nationwide footprint also allows the Company to
leverage the competitive advantages of each location to enhance competitiveness and reduce
geographic and political risks in businesses.
Diversified businesses with synergies in operations: Segmental and geographical
diversification across business verticals provide a hedge against the risks associated
with any particular industry segment or geography while benefiting from the synergies of
operating in diverse but related businesses. Synergies across diverse businesses provide
the ability to drive growth, optimize capital efficiency and maintain competitive
advantage. The Company also derives operational efficiencies by centralizing and sharing
certain key functions across businesses such as finance, legal, information technology,
strategy, procurement and human resources.
Strong Research & Development (R&D) Capabilities: The Company’s emphasis
on R&D has been critical to its success and a differentiating factor from competitors.
Dedicated R&D is undertaken in existing products primarily with a focus to improve
yields and process efficiencies. The Company also focuses on R&D efforts in areas
where there is significant growth potential. Through our subsidiary Astec Life Sciences
Limited, your company has access to strong R&D capabilities in the contract
manufacturing. Investment is also being made in developing innovative technologies to
further grow our product portfolio across businesses.
Focus on inorganically growing business offerings: Your Company will evaluate inorganic
growth opportunities, in keeping with the strategy to grow and develop market share or to
add new product categories. Your Company may consider opportunities for inorganic growth,
such as through mergers and acquisitions, if, amongst other things, they consolidate
market position in existing business verticals or achieve operating leverage in key
markets by unlocking potential efficiency and synergy benefits. Your Company can also look
at opportunities that will strengthen and expand its product portfolio and increase its
sales and distribution network.
Concerns
Unfavorable local and global weather patterns can have an adverse effect on the
business: As an Agri-based Company, the businesses are sensitive to weather conditions,
including extremes such as drought and natural disasters. The availability of raw
materials required for operations and the demand for products may be adversely affected by
longer than usual periods of heavy rainfall in certain regions or a drought in India. The
occurrence of any unfavorable weather patterns may adversely affect business, results of
operations and financial condition.
Availability of raw materials and arrangements with suppliers for raw materials: Each
of the businesses depends on the availability of reasonably priced, high-quality raw
materials in the quantities required by operations. The price and availability of such raw
materials depend on several factors beyond the Company’s control, including overall
economic conditions, production levels, market demand and competition for such materials,
production and transportation cost, duties and taxes and trade restrictions. The Company
typically sources raw materials from third-party suppliers or the open market which
exposes the Company to volatility in the prices of raw materials and dependence on
third-party for delivery of raw material. Also, any inability to procure raw materials
from alternate suppliers in a timely fashion, or on commercially acceptable terms, may
adversely affect operations.
Improper handling, processing or storage of raw materials or products: The products
that your Company manufactures or processes are subject to risks such as contamination,
adulteration and product tampering during their manufacturing, transport or storage.
Inherent business risks exist in form of product liability or recall claims if products
fail to meet the required quality standards or are alleged to result in harm to customers.
Such risks may be controlled, but not eliminated, by adherence to good manufacturing
practices and finished product testing. Although the Company has product liability
insurance cover for domestic and international markets for businesses, it cannot assure
that this insurance coverage is adequate or that any losses will be adequately compensated
by the insurers in the event of a product liability claim.
Seasonal variations in the businesses: Your Company’s businesses are subject to
seasonal variations that could result in fluctuations in performance. For example, in the
animal feed business, the Company sells lower volumes of cattle feed during the monsoons
due to the availability of green fodder. In the poultry and processed foods business, the
demand for poultry products is higher in the second half of the Financial Year since the
consumption of poultry meat and eggs is higher during winter months, while the sale of
such products is lower during certain religious festivals. As a result of such seasonal
fluctuations, sales and results of operations may vary by fiscal quarter. The sales and
results of operations of any given fiscal quarter may not be relied upon as indicators of
the sales or results of operations of other fiscal quarters or future performance. In
addition, financial performance is also impacted by other risks such as inability to
manage diversified operations, dependency of revenue from animal feed business and
dependency of the utilization of services of third parties for our operations.
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