Move over China? Not so fast!

The World Bank projects that India will be the world’s fastest growing economy by 2017. If true, it would surpass China, the poster child for economic growth for the last ten years.

It’s an impressive reversal of fortune for India, thanks in large part to Prime Minister Narendra Modi’s government which has implemented or projected much-needed reforms. We’ve written about India’s unfulfilled potential, noting that its influence on world food markets will depend on its future overall economic growth. There’s little doubt that its projected economic growth will translate into higher incomes for Indian households – always good to grow Canada’s ag exports.

And there’s clearly room for growth in India’s demand for food. The Food and Agricultural Organization estimates that India's daily average food energy intake per person is below 2,500 kcal. This compares to over 3,500 kcal on average for Canadians.

However, their reliance on a diet based on legumes is so strong that most projections suggest India won’t surpass China any time soon as the engine of growth for agricultural demand. While China’s economy is going through a transition, Chinese households’ purchasing power is still growing. This translates into higher demand for meat, grains and oilseeds in the world markets.   

Growing Canada’s exports to India?

Look at the top five Canadian exports of agricultural commodities and food to India – and by “top five”, I mean the top two. Lentils and peas represent more than 95% of our exports. Animal feed, canola oil and vegetable oil are, respectively, the 3rd, 4th and 5th largest exports, but they’re far behind pulse crops.  

The outlook for Canada’s pulse crops appears particularly positive. Over the last ten years, seeded acres have increased of both commodities - lentils by 57% and peas by 18%. With India’s strong demand likely to grow, the only question is whether we can grow production. Canada is currently India’s top import source for peas (71% of total pea imports) and lentils (79% of total imports).

The promising outlook for demand suggests the possibility of an equally positive production outlook for India’s producers as economic growth also implies stronger business sentiment, higher investments and ultimately productivity gains.

The bottom line?

I suspect China will remain the engine of growth in agricultural markets for the foreseeable future. But the “India growing” headline bodes well for the Canadian agriculture industry.  It offers great potential to diversify our agricultural production base.

 

JP Gervais, Chief Agricultural Economist