Structural gains to drive India’s agri-sector to US$ 1.4T by 2035

India’s agriculture sector possesses numerous structural advantages over other agricultural economies, which, if fully utilized, could propel its growth to US$ 1.4 trillion by 2035 and US$ 3.1 trillion by 2047, reveals a recent by consulting firm McKinsey & Company. Key growth areas, as highlighted by the report, include bio building blocks, agrichemicals, agribiologicals, and processed foods.

Success requires strong feedstock sourcing, R&D, and innovative marketing. Despite challenges like labour intensity and credit gaps, leveraging India’s cost advantages and digital infrastructure positions businesses to benefit from this expanding, diverse agricultural landscape.

India’s agriculture sector, if its structural advantages are fully leveraged, could expand significantly to reach US$ 1.4 trillion by 2035 and US$ 3.1 trillion by 2047, according to a new report by McKinsey & Company titled “Value Creation in Indian Agriculture.” Currently, the sector contributes 16–18% to India’s GDP, amounting to US$ 580–650 billion.

The report highlights that India’s agriculture is at a critical turning point, driven by structural reforms, digital infrastructure, and technological innovation. These factors have positioned India as one of the world’s largest and fastest-growing agricultural economies, with the sector recording a 5% CAGR over the past six years. With enhanced productivity and greater value addition, it could accelerate to a 6–7% growth rate, generating an additional US$ 400 billion by 2035. However, the report noted that the sector remains heavily labour-dependent, with productivity levels lagging behind those of other regions.

Key enablers identified include raising crop yields by 15–40% through better inputs—such as high-yielding seeds, specialty fertilizers, biologics, and modern farming techniques—as well as expanding downstream processing to boost value-added output.

India enjoys several strategic advantages: growing domestic and global demand for high-value and processed foods (like fruits and vegetables), cost leadership in producing crops such as rice, maize, and sugar, abundant feedstock for ethanol, a robust digital payments ecosystem, and a surge in agritech innovation. Notably, India ranks as the world’s second-largest producer of rice, sugarcane, and wheat, and holds a competitive edge with the lowest production costs globally for rice and maize, and the second-lowest for sugar.

The sector supports nearly 270 million workers, making up around 46% of the national workforce.

Agricultural financing has also seen robust growth, increasing over 14% annually from 2022 to 2024 to reach ₹25 lakh crore (approximately US$ 292 billion). However, challenges remain, including credit access disparities and low productivity compared to global benchmarks, driven in part by a fragmented farmer base and complex value chains.

Four areas of potential opportunity

McKinsey report identifies four promising growth areas for the sector: bio-based building blocks, agrichemicals, agri-biologicals, and processed foods. If addressed strategically, these could unlock new opportunities and sustain long-term growth.

Bio Building Blocks (Bio-to-X): India’s bioeconomy has witnessed extraordinary growth, rising from US$ 10 billion in 2014 to US$ 165.7 billion in 2024—a 16-fold increase—driven largely by government support. Within this space, bioethanol and bio-butanediol (BDO) are emerging as major growth opportunities. To fully leverage bio-based manufacturing and tap into both import substitution and export markets, companies must focus on securing low-cost, dependable feedstock, selecting strategically located production sites, and adopting flexible, multi-feedstock systems. These elements are critical for maintaining cost efficiency, supply stability, and long-term competitiveness.

Agrichemicals: India’s agrichemicals sector, currently valued at US$10 billion (US$4 billion domestic and US$ 5.5 billion exports), is projected to scale up to US$ 25–30 billion by 2047. The domestic market is growing at 3–5% annually, while exports are rising at 5–6%. To thrive locally, companies should engage directly with farmers, offer tailored distributor incentives, and provide high-quality, differentiated products. In the CDMO/CMO segment, success depends on advanced chemistry capabilities, strong R&D, manufacturing excellence, and customer-focused strategies. Key enablers include cost-effective scaling, regulatory compliance, and close alignment with evolving client demands for long-term profitability and competitiveness.

Agribiologicals: India’s agribiologicals market—which includes biostimulants (such as biofertilizers) and biocontrols—is projected to grow at a CAGR of 9–10%, reaching US$ 600–640 million by 2030, up from US$ 350 million in 2024. To drive this growth, companies must adopt a focused approach at the micromarket level, generate farmer-led demand, streamline product offerings, and build a strong distribution strategy. Success will depend on identifying high-potential micromarkets, implementing targeted pull-based models, and making disciplined investments in brand development.

Processed Foods: With the expansion of India’s middle class, demand for processed foods is expected to rise significantly. Currently valued at around US$ 330 billion, the agricultural processing sector plays a vital role in connecting farm production to consumer needs while generating added value and economic growth. Companies in the processed foods space can achieve success by leveraging capital-backed scale, extensive distribution networks, and innovative approaches, alongside building strong brands that resonate culturally. This combination drives cost efficiency, broad market penetration, and deep consumer loyalty.

The report concludes that Indian agriculture offers vast opportunities across a complex landscape, requiring entrants to develop unique capabilities to create and capture value. Critical capabilities include secure access to feedstock through strong sourcing, robust R&D and innovation with effective talent management, and channel excellence via innovative marketing and distribution. Scaling operations depends heavily on the specific value chain segment targeted. By leveraging India’s inherent strengths, businesses can better position themselves to participate in and benefit from the significant growth potential of the country’s agriculture sector.