A breakdown of how Indian policies are killing the Indian agrochemical industry, and consequently, Indian agriculture.
On paper, India’s agrochemical industry appears to be a success story. Valued at around USD 11.2 billion in FY2025 and projected to reach USD 14.5 billion by FY2028, the industry seems to be growing at a healthy pace. For a country that heavily relies on agriculture, this should be a positive sign. India is, after all, the world’s fourth-largest producer and third-largest exporter of agrochemicals.
However, behind these impressive numbers lies a more concerning truth: an industry that appears busy but struggles to grow in a meaningful manner. A clear sign of this is the fact that imported agrochemicals dominate the domestic market, while companies that export “Made in India” products rely heavily on China for technical-grade active ingredients and other key inputs.
Beneath surface-level statistics, the industry remains stagnant due to critical policy gaps. Companies that try to innovate, expand, or break free from the chains often fall into these cracks, not for lack of will or skill, but because the system itself works against them.
Where the Cracks Begin
To see the problem clearly, it helps to look at what goes into making an agrochemical.
Every formulation needs active ingredients (AIs) and inert ingredients. Indian manufacturers rely on Chinese suppliers for both, leaving the industry exposed to supply chain disruptions and price volatility.
Why this reliance on China? For years, India has focused its chemical production on generic compounds, such as polymers, and overlooked specialised chemicals that form the backbone of modern agrochemicals. As a result, while India produces some active ingredients locally, it still imports large quantities of technical-grade AIs, and in some cases, such as Muriate of Potash (MOP), India imports 100% of its requirement.
This year, the Chairman of the Crop Care Federation of India also highlighted a 53% surge in agrochemical imports, rising from Rs 9,096 crore in FY2020 to Rs 13,998 crore in FY25. This sharp increase has occurred despite over Rs 40,000 crores in domestic investment in the industry.
This import dependence naturally raises a question: why can’t India make these ingredients itself?
Innovation in the Indian Agrochemical Industry is Stuck in Red Tape
The short answer is weak research & development and unfriendly regulations.
The Indian agrochemical sector invests significantly less in R&D compared to its global peers. Their focus has long been on producing generic, off-patent molecules rather than developing new ones. Without a strong research infrastructure or incentives, most companies lack the expertise to create advanced molecules from scratch.
Even when they try, they face an uphill battle. To introduce a new compound, a company must undergo a lengthy, expensive registration process that typically takes 1 to 3 years for approval. By the time approval arrives, global competitors often launch similar products, leaving Indian companies with wasted time and investment.
More than a business problem, these bureaucratic hurdles are a policy failure that has made even motivated manufacturers stop trying.
The Indian Agrochemical Industry Faces A Tariff Trap
The problem doesn’t end with red tape. India’s inverted tariff structure adds another layer of difficulty.
The country charges a 10% import duty on finished agrochemical formulations, mainly from China again, but a 20% duty on technical-grade AIs, the very raw materials needed to make these formulations in India.
This means it’s cheaper to import finished products than to produce them in India. Domestic manufacturers pay more to make their own formulations, while imported agrochemicals flood the market. Meanwhile, roughly 50% of the agrochemical manufacturing units in the country collect dust.
Indian manufacturers that import AIs or inert ingredients necessary for survival often export their own products, made with these imported AIs, to other countries instead of selling them domestically.
For a policy built around “Make in India,” this is a contradiction that doesn’t make sense.
The External Shocks
For a while, the Indian agrochemical system limped along. Then came two external shocks that deepened the cracks.
First, new U.S. tariffs. Herbicides, organic fertilisers, fungicides, and rodenticides, together making up over $660 million in US exports, now face a 50% rise in cost penalty. This will make it harder for Indian manufacturers to sell as much and hurt profits.
Second, the European Green Deal (EGD). The EU now requires strict checks on all imported chemicals and products, demanding proof that production processes are safe for both people and the environment. Indian manufacturers must trace every step of their supply chain, even back to factories in China, to prove compliance with labour, carbon, and sustainability norms. It’s a massive task, made harder by India’s dependence on imported inputs.
But the battle for Indian manufacturers is not just on the external front. Importing Active and inert ingredients is also no longer easy. Since December 2022, Indian manufacturers have been required to register every imported technical-grade AI to ensure chemical and environmental safety. The policy advocates say that the measure is to discourage imports and promote local production. Still, the trouble of the inverse tariff structure in India and the limitations on R&D make it difficult to believe so.
All in all, Indian agrochemical manufacturers require substantial capital to first register to import technical-grade AIs, then purchase them, and subsequently manufacture and produce EGD compliance reports, all while operating in a tiny market.
When Industry Suffers, Farmers Pay
The combined effect of domestic red tape and global regulation has now started suffocating India’s agrochemical industry. Policymakers talk about promoting innovation, but Indian companies receive far fewer incentives compared to their U.S. or Chinese counterparts.
The result is an industry trapped in the past, relying on old, generic products while the world moves toward sustainable, traceable, and cleaner chemistry.
But the biggest downside of this entire situation is the impact on Indian farmers. When new compounds take years to gain approval, whether for import or local manufacture, Indian farmers lose access to safer, modern agrochemicals that could boost yields and reduce toxic residues. Without faster reform, farmers will remain tied to outdated solutions, and India risks falling behind not only in sustainable farming but in global trade as well.
How Long Can This Continue?
The questions are urgent. How long can this industry sustain itself on generic products? How long will policymakers continue to ignore the fact that their inaction is harming the very system that supports our farmers and food security?
India’s agrochemical industry remains highly promising. With better policies, fair tariffs, and stronger support for research and innovation, it can grow and become a driver of sustainable progress for Indian agriculture. But we need action now.
