India’s Agricultural Sector on Track to Triple: McKinsey Highlights $3.1 Trillion Potential by 2047

18 June 2025, New Delhi: India’s agriculture sector, already one of the world’s largest, is set to undergo a historic transformation. According to a comprehensive McKinsey report titled “Value Creation in Indian Agriculture”, the sector could potentially triple in size—from its current estimated value of $580–650 billion to between $1.8 and $3.1 trillion by 2047. This transformation will be fueled by structural reforms, growing domestic demand, innovations in agritech, and an expanding export footprint. For agribusinesses, the opportunity to scale, innovate, and contribute to this growth has never been more promising.

Foundation of Growth: India’s Five Structural Advantages

India holds five key structural strengths that are uniquely positioning it for agricultural growth. First, its large and expanding middle-class population is significantly altering consumption patterns, increasing demand for high-value products like dairy, fruits, vegetables, and processed foods. By 2031, India could have the world’s largest middle class, with growing discretionary incomes pushing for more branded and value-added food items.

Second, India’s cost advantages in manufacturing make it globally competitive. Labor and electricity costs are substantially lower than in peer countries, creating a favorable environment for both domestic and global agribusinesses to invest in value-added processing and bio-based manufacturing.

Third, India enjoys significant feedstock advantages. As the world’s second-largest producer of rice, sugarcane, and wheat, and fifth-largest of maize, the country has high production volumes at globally competitive costs. This abundance of raw material supports the potential for downstream value creation in areas like bioethanol and other biochemical products.

Fourth, India’s public digital infrastructure—particularly the Unified Payments Interface (UPI) and Aadhaar ecosystem—is the largest in the world. This has laid the foundation for digital agri-finance, input marketplaces, and data-driven decision-making at scale. More than 350 million users conduct approximately 15 billion UPI transactions annually, and around 770 million Indians have internet access, creating unprecedented digital touchpoints in rural areas.

Finally, innovation is thriving. India is home to nearly 2,800 agtech start-ups that are pushing boundaries across biotech, climate-resilient farming, digital advisory, and post-harvest solutions. The emergence of phygital (physical plus digital) models is helping these start-ups scale by integrating traditional relationships with modern technology.

A Complex Sector with Transformational Momentum

Despite the promising outlook, Indian agriculture operates in a deeply fragmented and complex environment. More than 86 percent of farmers hold less than five acres of land, and average landholding size has declined to around 2.7 acres. This fragmentation hampers productivity and mechanization. The sector, while contributing 16–18 percent of GDP, employs about 46 percent of the national workforce, reflecting low productivity compared to developed economies.

Yet, the past six years have demonstrated resilience and growth, with agriculture expanding at 5 percent per annum. This performance has been enabled by structural reforms, such as the Kisan Credit Card (KCC) scheme, the E20 ethanol blending mandate, and the Digital Agriculture Mission. Formalization has also increased, with agricultural credit growing more than 14 percent annually between 2022 and 2024, reaching $292 billion.

Opportunities Across the Value Chain

McKinsey’s analysis identified 40 agricultural sub-segments that together form a revenue pool of approximately $533 billion and a profit pool of $42 billion (as of 2024). Upstream sectors such as fertilizers, agrochemicals, seeds, and agri-lending contribute $7 billion in profits. The production phase, which includes integrated value chains like livestock and plantation crops, adds another $4 billion.

However, it is the downstream processing and trade segment that presents the biggest opportunity, contributing nearly $30 billion in profits. This includes processed fruits, vegetables, staples, and high-value bio-building blocks. Industrial bioeconomy applications, such as bioethanol and bioplastics, offer new, scalable revenue streams rooted in India’s abundant feedstock.

Four Big Bets for Future Growth

The report spotlights four key areas that are particularly promising for value creation. First is the industrial bioeconomy, especially bioethanol and bio-butanediol, where India has a strategic advantage due to policy support, low-cost feedstock, and growing demand. Bioethanol blending already exceeds 18 percent, inching close to the 20 percent national target for 2025–26.

Second is the agrochemicals sector, which includes both domestic crop protection products and export-oriented manufacturing. The Indian market, currently worth $10 billion, could reach $25–30 billion by 2047. Strategies such as direct grower engagement and differentiated products will be key.

Third is the rapidly growing agribiologicals segment, comprising biostimulants and biocontrols. This market is expected to grow at a 9–10 percent CAGR and reach $600–640 million by 2030. Its success will depend on targeted distribution, brand discipline, and strong farmer education efforts.

Fourth is processed food. India’s processing sector, valued at $330 billion today, stands to gain significantly from rising incomes and shifting dietary habits. Companies that combine strong branding with efficient supply chains and cultural resonance will likely dominate this space.

Credit, Collectivization, and Digitalization Strengthen the Ecosystem

The shift toward formal finance is enabling smallholder farmers to invest more in modern equipment and high-quality inputs. The Kisan Credit Card scheme now supports over 77.5 million cardholders, with higher credit limits announced in the Union Budget 2025–26. Crop insurance penetration has also improved, with 37 percent of farmers now covered under schemes like PM Fasal Bima Yojana.

Collectivization is another vital trend. Farmer producer organizations (FPOs) and cooperatives are giving farmers better access to markets, inputs, and capital. Successful examples include Amul, which works with 3.6 million dairy farmers, and ITC, which engages over 1.7 million farmers through structured procurement systems.

The Road Ahead: Scale, Resilience, and Export Focus

Despite India’s status as a top producer of several commodities, its share in global agricultural exports remains around 2 percent. Most exports are unprocessed, and in key categories like maize and oilseeds, India’s global export rankings remain modest. However, export infrastructure is improving. Platforms like the government’s e-Mandi and the Open Network for Digital Commerce (ONDC) are enhancing price transparency and market access.

If India accelerates crop yields, increases adoption of agri-tech, and improves downstream processing, the sector can add an additional 1–2 percentage points of growth above its historical rate. That alone could unlock $400 billion more by 2035 and an extra $900 billion by 2047.

A Defining Moment for Agribusiness

India’s agriculture is at a strategic inflection point. The coming decades present immense potential for businesses that align with the sector’s growth vectors—be it bioeconomy, food processing, input innovation, or digital finance. However, success will depend on how well these businesses adapt to India’s unique agri-ecosystem—marked by fragmentation, price sensitivity, and evolving consumer behavior. Those that build scale with agility, leverage India’s structural advantages, and create farmer-centric solutions are likely to shape the future of one of the world’s most dynamic agricultural economies.

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