sarveshwar foods ltd Management discussions

OVERVIEW OF ECONOMY

GLOBAL ECONOMY OVERVIEW:

The global economy is set to expand 5.6 percent in 2021—its strongest post-recession pace in 80 years. This recovery is uneven and largely reflects sharp rebounds in some major economies. In many emerging market and developing economies (EMDEs), obstacles to vaccination continue to weigh on activity. By 2022, last years per capita income losses will not be fully unwound in about two-thirds of EMDEs. The global outlook remains subject to significant downside risks, including the possibility of additional COVID-19 waves and financial stress amid high EMDE debt levels. Policy makers will need to balance the need to support the recovery while safeguarding price stability and fiscal sustainability and to continue efforts toward promoting growth-enhancing reforms.

INDIAN ECONOMY OVERVIEW:

Indias Economic Performance in 2020-21

• Indias real GDP to record a 11.0% growth in FY2021-22 and nominal GDP to grow by 15.4%.

• India expected to have a Current Account Surplus of 2% of GDP in FY21, a historic high after 17 years.

• India remained a preferred investment destination in FY2020-21 with FDI pouring in amidst global asset shifts towards equities and prospects of quicker recovery in emerging economies:

• Net FPI inflows recorded an all-time monthly high of US$ 9.8 billion in November 2020, as investors risk appetite returned.

• India was the only country among emerging markets to receive equity FI I inflows in 2020.

• V-shaped recovery is underway, as demonstrated by a sustained resurgence in high frequency indicators such as power demand, e-way bills, GST collection, steel consumption, etc.

• India became the fastest country to roll-out 10 lakh vaccines in 6 days and also emerged as a leading supplier of the vaccine to neighbouring countries and Brazil.

• India adopted a four-pillar strategy of containment, fiscal, financial, and long-term structural reforms:

• Calibrated fiscal and monetary support was provided, cushioning the vulnerable in the lockdown and boosting consumption and investment while unlocking.

• A favourable monetary policy ensured abundant liquidity and immediate relief to debtors while unclogging monetary policy transmission.

INNOVATION

• India entered the top-50 innovating countries for the first time in 2020 since the inception of the Global Innovation Index in 2007, ranking first in Central and South Asia, and third amongst lower middle-income group economies.

OVERVIEW OF INDUSTRY:

Global Basmati Rice Market Outlook

The global basmati rice market is being aided by the rising export demand for rice, globally. Basmati rice accounts for 2.1% of the total rice production. In 2020, the global production of rice reached almost 497.76 million metric tons.

The Asia Pacific is the leading producer of rice, globally. The region accounts for almost 90% of the global production. China is the leading rice producer, followed by India. However, basmati rice, specifically, is primarily grown in India and Pakistan. India is the largest producer of basmati rice, accounting for over 70% of its output in the global basmati rice market. In 2018, its production attained almost 5.03 million tons. The country is also the leading exporter of basmati rice. The countrys export of the basmati variety of the paddy crop is projected to reach a peak at INR 30,000 crore in FY2020. The strengthening exports is a combined result of an increasing demand from Iran and the rise in prices that have been taking place over the last three years. Haryana, Punjab, Himachal Pradesh, Uttarakhand, Uttar Pradesh, Jammu and Kashmir, and Delhi are the major basmati rice producing states in India. In Pakistan, the Punjab province is the largest producer of the paddy crop.

The Middle East and Africa is a significant consumer of basmati rice, which accounts for 37.5% of their total consumption of the paddy crop. GCC countries are the major importers of the basmati variety of the paddy crop. The steady increase in imports from Saudi Arabia and Iran is driving the rise of Indian exports of basmati rice. Between 2017-2018, Iran was the leading importer of the grain from India. Iran was followed by Saudi Arabia and the United Arab Emirates as the other significant importing countries of the basmati variety from India. Algeria, Somalia, and Kenya are the major importing countries in Africa. Europe and the US are also significant consumers of the basmati variety.

Rice is broadly divided into basmati and non- basmati varieties. Basmati is a rice type which was originally found in the Indian subcontinent and is traditionally consumed as part of Indian and other South Asian cuisines. It has a long and slender grain and is aromatic when cooked. It is either served plain or with accompaniments. It is also cooked with spices to make savoury rice dishes. They are available in either raw or parboiled forms. The report on the global basmati rice market looks into the consumption of basmati riced in the various regional markets like North America, Latin America, the Middle East and Africa, Europe, and the Asia Pacific, along with covering its production in countries like India and Pakistan, among others.

MARKET ANALYSIS

The global basmati rice market is being aided by the superior quality, taste, and aroma of the product, which are driving the consumer preference for the product. The basmati variety forms an integral part of the Middle Eastern cooking. It is used to cook lavish dishes which contain layers of rice, meats, and dried fruits. It also forms a part of the staple diet of many cultures, thus, further aiding the industry growth. The increasing export demand from the Middle Eastern countries is also propelling the global basmati rice market forward. The US and Europe, too, are significant importing countries. The rising population is also acting as a catalyst for the growth of the global basmati rice market. The increasing disposable income in the major consuming nations is driving the market growth. The rising disposable income is leading to increased consumption of premium products and, thus, is providing further impetus for the global basmati rice market growth as basmati rice is perceived as a premium variety. With the increasing health consciousness among the consumers, the basmati variety is being increasingly preferred due to being rich in nutritional value and having a lowerfat content.

IMPORTERS OF RICE

CHINA:

As per industry insiders, Indian exporters have offered broken rice at $300-350 per tonne to Chinese buyers, lower than ruling global prices of $390-400 per tonne. China are expected to soar threefold this year going by a spike in orders from the neighbouring country for non- basmati broken rice, which they use in making noodles and wine, exporters said."In FY21, China had started sending import queries from November; but in the current fiscal, we are seeing that the country has become active from the very beginning, and they are placing substantial orders with the Indian rice companies"

BANGLADESH:

Bangladesh has floated a tender to buy 50,000 tonnes of non-basmati rice from India, adding to the growing overseas demand for the commodity and raising hopes that this fiscal will be good for Indian rice exporters. Furthermore, Bangladesh is likely to buy the 50,000 tonnes of rice through the National Agricultural Cooperative Marketing Federation of India (Nafed).

PHILIPPINES:

India set to export rice to the Philippines after reduction of import duty to 35%. indian Rice exporters are gearing up to ship the grain to the Philippines as the southeast Asian nation has reduced the import duty on rice being shipped from 35% to 50%.

Philippines is the second-largest importer of the commodity in the world. The annual rice import in the Philippines is estimated to be about 2.5 million tonnes ,about 2 million tonnes of high quality rice and half a million tonnes of lower quality rice.

BELGIUM, NETHERLANDS:

Rising demand for basmati rice in these European countries has resulted in better price realisation for farmers , the common variety of basmati rice ,1121 Pusa , which is commonly exported has been fetching a15% higher price at the farmgate from November 2020. Indias export for basmati rice to Belgium have increased 60% in the first eight months of the financial year, while imports by the Netherlands have almost doubled.

ORGANIC FARMING MARKET:

COVID-19 Growth and Change to 2030 provides the strategists, marketers and senior management with the critical information they need to assess the global organic farming market.The global organic farming market is expected to grow from $95.38 billion in 2020 to $103.36 billion in 2021 at a compound annual growth rate (CAGR) of 8.4%.

The growth is mainly due to the companies resuming their operations and adapting to the new normal while recovering from the COVID- 19 impact, which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges.

The market is expected to reach $151.36 billion in 2025 at a CAGR of 10%.

The organic farming market is associated with the sales of produces by farms that produce them in organic ways. The organic farming is an alternative form of farming for crops and livestocks produce which doesnt use pesticides, artificial fertilizers, genetically modified organisms and antibiotics to increase the production. This has many benefits to the environment and the individuals using these yields.

Environmental gain from organic farming is expected to drive the organic farming market. Organic farming is highly beneficial to the environment as it does not use any chemical fertilizers or pesticides that cause soil and groundwater contamination. Also, the usage of non-renewable resources that are needed for the development of such artificial fertilizers is less. Organic farming preserves biodiversity of the soil. Therefore environmental benefits of organic farming coupled with health benefits of organic products is increasing the demand for organic food (food produced through the process of organic farming) which in turn is driving the market for Organic farming.