Understanding the Prevalence of FDI in Indian Agriculture Sector

India is normally an agrarian economy. With the presence of 157.35 million hectares under agriculture, it holds the second biggest agricultural land in the world and is included among the fifteen leading exporters of products in agriculture in the world. FDI in agriculture sector of India helps to support economic growth, raise technological levels, and create new jobs.

With increasing population, globalization, and rapid economic growth along with a sudden huge increase in demand, it is not surprising that India will benefit from growing foreign investments in the agricultural sector.

Currently, 100% FDI in the agriculture sector is permitted via the automatic route in India for the following activities-

• Floriculture, horticulture, apiculture, and cultivation of vegetables and mushrooms under restrained conditions.
• Developing and producing seeds and planting materials.
• Animal husbandry (which includes breeding of dogs), fish farming, and aquaculture under restrained conditions.
• Services that are related to agriculture and its connected sectors.

Apart from these activities, FDI in agriculture sector is allowed 100% in the tea sector, which includes tea plantations.

Agriculture in India is a highly lucrative sector. Other than the traditional opportunities, it provides several opportunities with its value chain to investors who are looking to invest in this profitable sector.

Some interesting areas include services regarding farm management, agricultural inputs, Services, regarding logistics (for example- cold storage), amongst several others.   

Land Acquisition

One of the key issues that come in the way of greater investments in the Agricultural sector of India is issues related to land acquisition in the country.

As per the master circular related to the acquisition and transfer of immovable property in India by NRIs/PIOs/foreign nationals of Indian Origin that is circulated by the Reserve Bank of India (RBI), foreign nationals of non-Indian origins don’t hold the permit of acquiring any immovable property in the nation.

An exception to this rule is the property acquired via inheritance from an Indian resident.

Numerous states have their own laws on this issue and might contain different guidelines to follow. States such as Maharashtra and Karnataka only allow individuals to acquire agricultural land; on the other hand, states like Delhi, Goa, Bihar, and Tamil Nadu allow both individuals and organizations to acquire land for agriculture for the aim of executing agricultural activities.

The sale and purchase of land for agriculture by a non-Indian resident are strictly prohibited.

Contract Farming

Under the National Agricultural Policy, the government of India helps to promote the participation of the private sector in the agriculture sector via the concept of contract farming and land leasing.

This permits the transfer of accelerated technology, capital inflow, and assured market for the production of crops, especially oil seeds, cotton, and horticultural crops. This promotion of agri-tech led to a huge investment of over $10 million in 2017.

The government of India is eager to promote FDI in the agriculture sector of India while protecting the interests of its domestic farmers and consumers too.

About FDI

We at FDI India, help to simplify the complex structure of the foreign investments and transactions which come under FDI via years of experience in the field. Our aim is to transform the face of FDI facilitation services in India by keeping our focus on sustainable investment or loans to help the businesses of India, such as those that need FDI in agriculture sector.

FDI India transforms the investment climate of the country by making the business environment simple for investors. Its experts specialize across different states and sectors of India, handholding the investors via their investment lifecycle directly from pre-investment to after-care.