The agriculture sector in India contributed to 17% of the overall GDP in 2009. Nearly two-thirds of the population depends on agriculture for their livelihood. The overall economic growth would be improved by a better performing agricultural sector, which is why growth in this sector is a priority for the Indian government.
The government maintains a costly price support system for wheat and rice, and also subsidizes fertilizers. State governments provide farmers with free or subsidized electricity and irrigation water. The cumulative effect of these interventions has been to distort prices, planting patterns, and marketing. Efforts to improve city-level and regional-level infrastructure such as roads, telecommunications, and electricity have been consistently made to increase access to markets.
The optimism in the food retail sector stems from a vibrant and growing economy and increasing purchasing power. This provides an opportunity for the supply of various U.S. food products, food processing technology, agro technology, and production tools to India. However, success in introducing a new product in this highly price sensitive market depends on an effective pricing strategy and familiarity with India’s myriad food laws. High import tariffs and competition from inexpensive domestic and third country products are other challenges.
