Insight – Export opportunities in India’s booming grocery and food sector

15 July 2022

India’s growing population, rising incomes, and increasing rates of urbanisation are driving demand for agricultural, fisheries and forestry (AFF) products.

  • The ‘grocery and food retail market’ is the largest segment of the Indian retail sector, valued at US$570 billion in 2021. This is forecast to rise to US$850 billion by 2025 (Invest India 2022).
  • Indian imports of AFF products reached a record US$37.3 billion in 2021 (UN Comtrade 2022).

The value of Australian AFF exports to India peaked at $2.57 billion in 2017. The value of exports in 2021 was $634.8 million, 75.3% lower than 2017 levels. This decline was due to lower pulse and wheat exports (see Figure 1).

Australian exporters are well positioned to capitalise on new commercial opportunities in India. This is due to the Australia-India Economic Cooperation and Trade Agreement (AI-ECTA), counter-seasonality and geographical proximity.

Figure 1: Australian AFF exports to India January 2016 to April 2022 (in A$ billion)

Figure 1 - Australian AFF exports to India January 2016 to April 2022 (in A$ billion)

Rapidly growing grocery and food retail market

India’s grocery and food retail market is rapidly evolving because of a growing economy and changing demographics.

  • India has been one of the world’s fastest growing economies over the last two decades with rapid GDP per capita growth (World Bank 2022) (See Figure 2).
  • India is the world’s sixth largest economy (World Bank 2022). It is projected to become the world’s third largest economy by 2030 (Lowy Institute 2021).
  • India is the world’s second most populated country and is forecast to become the largest by 2027 (Our World in Data 2022).
  • India is becoming increasingly urbanised. The percentage of the population living in an urban environment has increased from 28% in 2000 to 35% in 2021 (World Bank).

These changes are expected to result in higher agri-food consumption over the long term (ABARES 2020). India’s grocery and food retail sector is growing rapidly. It is expected to increase in value from US$570 billion in 2021 to US$850 billion by 2025. 

Consumption of agri-food products in India consists of 80% staple foods and fresh produce. Consumers look for products with strong food safety and sustainability standards (Invest India 2022).

In the long term, India’s agri-food consumption will become more diverse with higher intakes of dairy products, seafood, fruit and vegetables (Source: OECD-FAO 2022). The change in consumption is expected to occur most among urban households where income growth is expected to be the largest. Confectionaries, beverages and snacks are also growing rapidly.

Figure 2: Indian GDP per capita by state or union territory (in ₹)

Drivers of rising Indian AFF imports

The value of Indian AFF imports rose by 45.3% from US$25.7 billion in 2020 to US$37.3 billion in 2021 (UN Comtrade 2022) (see Figure 3). This was a result of increased import volumes and high international prices.

Figure 3: India AFF trade, 2011 to 2021 (in US$ billion)

Figure 3 - India AFF trade, 2011 to 2021 (in US$ billion)

The following products had substantial year-on-year import growth:

  • Animal and vegetable oils increased 61.8% from US$10.75 billion in 2020 to US$17.39 billion in 2021.
  • Pulp of wood or of other fibrous cellulosic material recovered (waste and scrap) paper or paperboard increased 81.8% from US$1.81 billion in 2020 to US$3.29 billion in 2021.
  • Rubber and articles thereof increased 77.3% from US$1.28 billion in 2020 to US$2.27 billion in 2021.
  • Residues and waste from the food industries or prepared animal fodder increased by 72.5% from US$684 million in 2020 to US$1.18 billion in 2021.

India remains a complex market with substantial barriers to entry from tariffs and non-tariff barriers. There is also strong competition from domestic and international companies (USDA 2021). Tariffs on many AFF products range between 30% to 55% (see Figure 4).

Figure 4: India tariffs on selected AFF products

Figure 4 - India tariffs on selected AFF products

The AI-ECTA includes tariff reductions for a range of AFF commodities. These include sheep meat, wool, wine, horticulture, fisheries and forestry products. This will increase the competitiveness of Australian AFF exporters in the Indian market. A summary of the key outcomes for Australian agriculture is available here.

The AI-ECTA is expected to enter into force in 2022, after both countries complete domestic and parliamentary processes.

Strong competition from local and international businesses

There is strong competition in the Indian grocery and food retail sector from Indian producers and international exporters.

India has a diverse climate and areas with highly fertile land such as the Indo-Gangetic Plain. This enables Indian firms to produce a wide range of AFF products at low costs. Australian exports will likely need to compete on quality.

There is also strong international competition from the United States and the European Union. However, Australia benefits from counter-seasonality, proximity and the AI-ECTA.

Table 1: Competitors for selected commodities 2021 (in A$)

Commodity

Australian exports to the world

Indian imports from the world

Major Suppliers

Tariff

Almonds

$127.9m

$1.31b

1.       US (79.1%)

2.       AUS (10.3%)

3.       UAE (4.1%)

TRQ1
(34,000 tonnes)

Infant formula

$414.7m

$27.5m

1.       THA (65.5%)

2.       SGP (28.9%)

3.       EU (5.6%)

0%1

Oranges and mandarins2

$439.2m

$126.3m

1.       EGY (76.4%)

2.       ZAF (17.2%)

3.       AUS (2.8%)

TRQ
(13,700 tonnes)

Sheepmeat

$4.035b

$441,600

1. NZL (77.9%)

2. AUS (22.1%)

 

0%1

Greasy wool

$118.7m

$173.6m

1.       AUS (68.8%)

2.       ZAF (6%)

3.       NZL (5.3%)

0%1

Raw cotton

$84m

$693.8m

1.       US (42.9%)

2.       EGY (28.37%)

3.       AUS (12.7%)

5% - 30%

Wine

$12m

$31.6m

1.       AUS (40.5%)

2.       EU (33.3%)

3.       SGP (8.5%)

See Austrade Insight

Source: ABS & UN Comtrade

1 Preferential treatment under AI-ECTA

2 Including tangerines and satsumas

Resources

The Australian Government’s network of Agriculture Counsellors provided information for this article. More information about the Agriculture Counsellor network, including contact details, is available on the Department of Agriculture, Fisheries and Forestry website.

Austrade has more information on the Indian economy and doing business in India.

More information about the benefits of AI-ECTA, including key tariff reductions, is available on the Department of Foreign Affairs and Trade website.

Visit Austrade’s Australia India Business Exchange webpage for more insights, updates and events.

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