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Understanding the Role of FDI in Agricultural Sector of India

Understanding the Role of FDI in Agricultural Sector of India

Agriculture is the main source of livelihood for the majority of the Indian population. FDI in Agriculture Sector is a potential source of increased productivity, especially for domestic enterprises in companies such as India. The food and grocery market of India is the sixth largest market in the world. Retail constitutes about 70 per cent of the sales.

The food industry of India is poised for massive growth, raising its contribution to the world food trade every year due to having abundant potential for adding value, specifically within the food processing industry.

FDI in the Agriculture Sector of India

FDI in Agriculture sector of India is necessary as any increase in the equity stakes of foreign investors in existing joint ventures or the purchase of the portion of stock in local enterprises will not immediately change the orientation of the firm. The objective of the investors would be to benefit from the profit earned from the Indian market. As a result, the FDI Inflows in such cases do not require to be accompanied by a major increase in exports, regardless if the investments are leading to the modernization of the domestic capacity or not. 

As a result, utilizing FDI as a potential source of increased productivity for domestic enterprises, specifically in agriculture, is really tough in a country like India. 

FDI Rules in the Indian Agricultural Sector

Agriculture is a huge part of the economy of India, accounting for over 19 per cent of the country’s GDP. It is the lifeline of the Indian economy, as it is the backbone of rural India. It constitutes about 70 per cent of the country’s population and supports poor families. 

Activities where complete FDI is allowed are listed below-

  • Horticulture
  • Floriculture
  • Seed Development
  • Animal husbandry
  • Pisciculture
  • Aquaculture
  • Vegetable Cultivation
  • Services related to agro and allied sectors

Numerous FDI Inflows Challenges in Indian Agriculture

  • A Lack of Awareness

Farmers in India are more cautious and don’t have much access to information on foreign direct investment. The vast majority of the agrarian population of India is uninformed about foreign investment. 

A smooth flow of information to farmers through government and government-nominated agencies, along with advertisements, can solve the problem of awareness. 

  • Lack of Technology and Knowledge

Technology is the backbone of progress. Adapting to digital innovation and advancing in physical technology can transform the agrarian culture completely. Farmers in India continuously utilize the traditional ways of agriculture to this day. 

Welcoming FDI in Agriculture Sector aids in the revolution of agricultural technology. But due to FDI being banned in some areas of agriculture and related activities, India continues to stay behind regarding the adoption of modern technologies of farming. 

  • Loans and a Lack of Financial Support

Agriculture in India suffers from a lack of official financing, especially among marginalized farmers. Farmers are defiant to several technological advancements because of financial constraints. Agriculture can be revolutionized only if the participation of foreign investments is active in the financing process.  

Consult With Our Experts

We at FDI India, aim to simplify the complex structure of foreign investments and transactions under FDI through years of experience in the field. Our aim is to transform the face of the facilitation services of FDI in India by keeping our focus on sustainable investments and loans to help the businesses of India. FDI India is transforming the investment climate of the country by keeping the business environment simple for investors. Its experts specialize across different states and Csectors of India, handholding investors through their investment lifecycle right from pre-investment to aftercare. 

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