Weak monsoon, weaker rupee weigh on agrochemical demand, July exports provide support: Report
New Delhi, August 7
Weak monsoon conditions and a weaker rupee have put pressure on India's agrochemical sector, with domestic demand remaining subdued, although demand has started showing signs of recovery since July while exports continue to remain relatively stronger, according to a report by Equirus Capital.
The report said the southwest monsoon remained significantly below normal, with cumulative rainfall around 38 per cent below the long-period average (LPA).
The weak rainfall affected agricultural activity and weighed on demand for agrochemicals and fertilizers in the domestic market. At the same time, the depreciation of the rupee increased the cost of imported raw materials, adding pressure on companies operating in the sector.
Highlighting the sector's outlook, the report said, "Domestic demand is expected to remain weak, although recovery may begin from July and exports remain relatively stronger."
According to Equirus, while domestic demand has been impacted by lower-than-normal rainfall and higher import costs, exports continue to provide support to agrochemical companies. The report indicated that stronger overseas demand could help offset part of the weakness in the domestic market.
It stated "Rainfall ran approx. 38 per cent below normal (June approx. 40 per cent short) with a below-normal July outlook, directly hurting agrochemicals and fertilizers; the rupee also weakened to approx. 95.55/USD, raising import costs"
The report said weather conditions will continue to be an important factor for the sector. Better rainfall is expected to support agricultural activity and improve demand for crop protection products and fertilizers.
Based on the report's assessment, domestic demand has started showing signs of recovery since July, while export demand has remained relatively stronger.
Despite the near-term challenges, Equirus remains positive on select companies in the agrochemical space.
The report also noted that the sector continues to face near-term headwinds from weak domestic demand and higher input costs due to the weaker rupee.
However, improving demand trends since July and relatively stronger exports are expected to provide support to the industry going forward.
The report also highlighted the government's policy support for the chemicals sector. It noted that the Union Cabinet has approved the BHAVYA Rasayan Scheme with a total outlay of Rs 30,300 crore to develop three dedicated chemical parks during FY27-FY31.
Under the scheme, the Centre will provide grants of up to Rs 10,000 crore per park for common infrastructure.
This is the "first dedicated budgetary support for chemical park infrastructure", aimed at strengthening India's chemicals manufacturing ecosystem.
— ANI
Reader Comments
Finally some good news in this uncertainty - exports are holding up! Indian agrochemical companies have built a strong reputation globally for quality and cost-effectiveness. The export market is our silver lining. But we seriously need better monsoon forecasting and water management systems. Relying on rain when climate patterns are becoming more unpredictable is not sustainable planning.
The BHAVYA Rasayan Scheme with Rs 30,300 crore for chemical parks is a welcome move, but let's be honest - will it actually reach the ground level? These big-ticket announcements often get stuck in bureaucratic red tape. We need faster implementation and easier access for small and medium agrochemical manufacturers. Also, $10,000 crore per park sounds great on paper, but let's see the actual infrastructure and timeline.
Living in the US but my heart is always with India. This report highlights a critical issue - climate change is making monsoons more erratic. I hope the government and private sector are investing in drought-resistant crops and alternative irrigation methods. The agrochemical industry needs to innovate with more eco-friendly products too, considering the long-term soil health. Let's use this challenge as an opportunity to modernize!
As a farmer from Karnataka, I can tell you the ground reality - we're literally praying for rain here! The 38% deficit is really hitting us hard. I had to cut down on buying pesticides and fertilizers this season because of the rupee depreciation and price increase. It's a vicious cycle... if the monsoon is weak, I have less income to spend on inputs, which further hurts the agrochemical companies. Something has to give.
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