New Market Report: India Agribusiness Report Q2 2016

We hold a positive view on the outlook for India 's agribusiness sector, as the country will remain an agricultural powerhouse and should be able to maintain high levels of self-sufficiency for major food crops. Production growth of various commodities will be driven by strong government support and robust demand growth for manufactured foodstuff. We see significant growth opportunities in sub-sectors such as dairy, coffee and livestock. However, India will be increasingly vulnerable to exceptional weather phenomena and serious water shortages. Moreover, the country will remain prone to erratic government interventions, which seriously hamper its reputation as an international provider.

India's government, led by Narendra Modi, has made several announcements regarding agricultural reforms. However, no real tangible progress has been made so far, as the implementation of reforms will take time to unfold. Looking ahead, the government looks committed to improve India's grains marketing system, its supply chain and its agricultural infrastructure.

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We continue to believe that, by implementing these reforms, particularly in the field of yields and supply chains, India has the potential to overcome lingering under-nutrition problems to become a large and, more importantly, stable exporter of a large number of commodities. Increasing yields for grains will also allow farmers to diversify their crops and increase production for other, more value-added commodities.

Key Forecasts

Sugar production growth to 2019/20: 10.1% to 31.2mn tonnes. Inefficiencies in the pricing policy will constrain growth. Output expansion will mainly come from the liberalisation of the market, of which the first signs can be observed.

Palm oil consumption growth to 2020: 28.8% to 11.7mn tonnes. Domestic palm oil consumption will be propelled by strong demand for domestic food use, which makes up about 80% of total domestic palm oil demand.

Beef & veal production to 2019/20: 22.8% to 5.3mn tonnes. Growth will be driven by the improvements in breeding techniques, and by the robust expansion of the milk sector. Export demand for Indian beef will also support investment in the sector.

Agribusiness market value: USD275.4bn in 2016 (up from USD263.5bn in 2015; forecast to grow annually by 5.6% on average from 2016 to 2020).

2016 real GDP growth: 7.2% (down from 7.3% expected in 2015; predicted to average 6.8% from 2016 to 2020).

2016 consumer price inflation: 4.8% y-o-y ave (down from 5.1% expected in 2015; forecast to average 4.4% from 2016 to 2020).

Industry Developments

India's 2015 summer monsoon ended up being the driest in six years, as rainfall was 14% less than the 50-year average. This is the first back-to-back shortfall in three decades. We believe the main implications of a weak monsoon in 2015 will be the following:

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