This article has been published by Chambers and Partners at Agribusiness 2025 – India | Global Practice Guides | Chambers and Partners.

Introduction

The agricultural sector in India is undergoing a significant structural transformation, supported by the nation’s robust and diverse agricultural ecosystem, a rapidly expanding consumer market and recent legislative developments. This includes new antitrust and data protection laws, capital markets and insolvency rules, stricter food safety standards, and simplified tax structures. Previously characterised as a primary exporter of raw agricultural produce, India is now emerging as a reliable global provider of value-added food products, and advanced supply chain and logistical solutions. This shift presents significant opportunities for investors seeking scalable, resilient and long-term value, making India’s agribusiness sector a priority for global and domestic investors. Policy attention to food security, food processing, storage and logistics, digital public goods and environmental attributes is shaping opportunities for accelerated sector growth. This chapter of the guide outlines the key issues faced in India’s agribusiness transactions, financings and disputes, and identifies practical considerations for clients seeking to enter or expand their operations in India.

Key Factors Influencing India’s Agribusiness Ecosystem

Demands and margins across India’s agribusiness value chain are influenced by food inflation, monsoon variability and rural incomes. The demand for input materials and equipment is supported by public capital expenditure on irrigation, rural roads, warehousing facilities and power supply. Whereas private investment supports food processing, cold chain and packaged food businesses, monetary policies implemented by the Reserve Bank of India aim at containing inflation whilst sustaining economic growth, which affects working capital costs and rural purchasing power.

India’s transition towards a digital economy has facilitated enhanced formalisation and traceability within the agribusiness sector indicated by the expansion of e-invoicing mandates, goods and services tax (GST) analytics, and digital payment infrastructure including Aadhaar-enabled systems and the unified payments interface. This digital economy system also includes sector-specific platforms such as the electronic national agriculture market, open network for digital commerce pilots and electronic negotiable warehouse receipts (e-NWR), which collectively aid in improving auditability, subsidy targeting and regulatory compliance without imposing disproportionate administrative burdens on small-scale market participants.

Foreign Investment and Market Entry

India remains open to foreign investment across most agribusiness segments, with the exception of investment in agricultural land. The Foreign Direct Investment Policy, 2020 (the “FDI Policy”) allows 100% of foreign direct investment (FDI) through an automatic route in the following:

• floriculture, horticulture, cultivation of vegetables and mushrooms under controlled conditions;
• development and production of seeds and planting material;
• animal husbandry, pisciculture, aquaculture and apiculture; and
• services related to agriculture and allied sectors.

However, approvals still apply where national interest or security is engaged, and Press Note 3, 2020 continues to require prior approval for foreign investments from countries with a land border nexus (ie, from countries sharing a land border with India, such as China, Pakistan, Bangladesh) and for changes in beneficial ownership that create such nexus.

As set out above, foreign ownership of agricultural land is restricted and existing operating models typically rely on contract farming, procurement from farmer producer organisations (FPO) and long-term leases for processing and warehousing. In multi-brand retail, 100% FDI is permitted for trading (including e-commerce) of food products manufactured or produced in India, under the government approval route. While 100% FDI in food processing is typically available through the automatic route, compliance with the Food Safety and Standards Act (FSSA) and state licences is central to execution. Warehousing, cold storage and logistics are generally liberalised but may involve state-level approvals to be obtained, as well as incentives available for conducting business in these sectors.

Agricultural Produce Market Committee (APMC) frameworks (also known as the “mandi”, ie, local marketplace system) differ by state, affecting direct procurement, mandi fees and licensing. Many states permit direct purchase from farmers, private markets and contract farming (such as Rajasthan, Gujarat and Karnataka), while others retain tighter mandi controls (such as Punjab and Haryana). Early regulatory mapping – covering FDI, APMC rules, FSSAI permissions, labour, pollution control and warehousing (including Warehousing Development Regulatory Authority’s registration for e-NWR) – should be completed by investors at term sheet stage, as is market standard in similar transactions in India. Special Economic Zones set up in India (such as GIFT City) have also become relevant for trade finance, commodity hedging and fund platforms linked to agribusiness cash flows.

Agricultural Reforms and Trade Agreements

In 2020, the government of India (GoI), with the aim of transforming agriculture in the country, introduced three farm laws. The first bill, ie, Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, aimed to liberalise agricultural markets. Earlier, farmers were required to sell their produce in physical markets notified under various state APMC laws; however, the bill aimed at permitting inter-state and intra-state trade of produce outside the APMCs, facilitating direct farmer-buyer agreements. The second bill, ie, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, aimed to promote contract farming, empowering farmers to enter into direct arrangements with private corporations, online grocers, supermarket chains or other buyers to produce a certain crop for a predetermined price, thereby providing price assurance before cultivation and reducing market risk. The last law, namely the Essential Commodities (Amendment) Act, 2020, aimed to do away with the central government’s power to impose limits on stockholding (ie, the maximum quantity of a commodity that a person or company is legally allowed to store of cereals, pulses, onions, potatoes, oilseeds, etc) of food items, except in extraordinary cases. It also aimed to encourage private investment in storage and supply chains.

These farm laws, collectively known as the “black laws”, were met with significant opposition from farmers, political leaders and the nation due to their ability to destabilise the reliable system of APMCs, and impact the well-established principle of minimum support prices (MSP) guaranteed by the central governments on select crops to farmers. The power given to private enterprises to determine prices for crops under the black laws was feared due to their ability to create corporate domination and loss of MSP protection for the farmers. In light of the public outrage for the black laws, the GoI formally repealed the black laws on 1 December 2021.

In recent years, there has been considerable traction in the deal activity in food processing, dairy, edible oils, spice and flavours, packaged foods, animal feed, cold chain and logistics, as well as inputs such as seeds, fertilisers and crop-protection. India concluded negotiations for a free trade agreement with the EU on 27 January 2026 (EU FTA), improving India’s access to EU markets. The EU FTA provides India with unprecedented market access for more than 99% of Indian exports and reduces tariffs on EU agrifood exports including olive oil, processed foods and wines in a phased manner. Keeping in mind the importance of farmer’s livelihood, price stability and food security, India has protected some of its sensitive agricultural sectors from tariff liberalisation under the EU FTA such as dairy, cereals and other staple grains. Additionally, India and the USA have issued a joint statement announcing an interim trade framework on 6 February 2026, which provides for reduced tariff concessions, highlighting that many agricultural products of Indian farmers will be exported to the USA with zero tariffs. This reduced tariff has been applied to products like spices, tea, coffee, coconut, coconut oil and cashew nuts. However, agricultural products from the USA will not receive similar concessions in India. Nevertheless, India has agreed to tariff reductions on US products such as red sorghum and distillers dried grains with solubles imported to India as animal feedstock.

Competition Law and Deal Clearance

The recent Competition (Amendment) Act, 2023 is now notified and applicable and affects agribusiness consolidation in the following ways.

• The new “deal value” threshold may capture acquisitions of brands, seed portfolios or platforms with modest Indian turnover but significant consideration, especially where there are substantial operations in India.
• Gun-jumping enforcement remains robust. Clean teams are important where parties exchange sensitive information on procurement prices, farmer networks, mandi auction strategies or capacity plans.
• Commitments and settlements frameworks can be useful in distribution and exclusivity cases. Well-designed commitments may cover access to storage, fair dealing in procurement, and avoidance of “most-favoured” clauses that foreclose smaller distributors.

Early discussions with the regulator helps in deals where the same groups are active at more than one stage of the chain (inputs, processing, retail), or where a large buyer could put pressure on farmer suppliers. Companies should bring clear facts on the intended purchase models (mandi versus direct purchase), if any extra capacity is planned or available, and whether imports provide a real alternative.

Digital Economy, Data and Cybersecurity

India’s Digital Personal Data Protection Act 2023 (the “DPDP Act”) has recently become applicable across the country in a phased manner, and this will bring in key improvements for the digitisation of agribusiness transactions. Agricultural businesses collect farmer, supplier and consumer data through procurement apps, loyalty programmes, internet devices and telematics. The DPDP Act’s principles on lawful purpose, consent (and deemed consent), purpose limitation, minimisation, security and breach notification now shape product and supply-chain design.

Important factors to keep in mind, from the DPDP Act perspective, are as follows.

• Build consent records that work in practice through field apps and customer relationship management tools, with clear, multilingual notices for farmers.
• Review contracts with processors and group entities to set out controller-processor roles, cross-border transfer terms, audit rights and any data-localisation requirements.
• Plant and logistics systems often hold both operational and personal data: accordingly, set clear internal triggers for when to escalate an incident and how to preserve evidence.
• Watch for sensitive inferences (ie, farm location or productivity) and provide extra transparency and easy opt-outs in farmer-facing tools.

Artificial intelligence is now widely used for demand forecasts, product grading and satellite-based agronomy. In contracts, spell out who owns the training data and the results, set clear performance standards, require basic checks for errors and bias, and ensure ability to review how the system reached its output.

Sustainability, Climate and Natural Resources

Sustainability has moved from simplistic ESG compliance to a day-to-day operating priority for agribusiness in India. Climate variability, resource constraints and customer standards now shape capital plans, procurement and contracts.

Food processing units are increasingly adopting captive renewables, biomass boilers and heat recovery to reduce costs and meet customer targets. Biofuels and ethanol blending policies support demand for molasses and grain-based feedstocks and compressed biogas projects create offtake for agricultural residues. Importantly, the recent push for setting up sustainable aviation fuel (SAF) manufacturing plants in India, to meet the target of blending 1% SAF by 2027 in the fuel of all commercial domestic flights, will increase the demand for biofuels, providing increased support to the feedstock and agri-residue industries. Agricultural waste and manure serve as raw materials for the production of both electricity and biochar. India, which generates 350 million tonnes of agricultural waste annually, has the potential to generate over 18,000 MW of power annually. The GoI is implementing various policies to promote circularity in agriculture and allied sectors by converting waste into valuable resources. Initiatives such as Galvanising Organic Bio-Agro Resources Dhan and Crop Residue Management schemes are transforming agricultural, animal and food waste into organic manure. Co-processing in cement and thermal power plants is being actively promoted, with biomass co-firing mandates requiring coal-based power plants to substitute 5–7% of coal consumption with agro-residue pellets. Green waste processing facilities are similarly converting agricultural waste into wooden pellets as an eco-friendly alternative to coal with India’s first green waste processing plant, developed through a public-private partnership model in Indore, Madhya Pradesh. Further, the Pradhan Mantri Kisan Urja Suraksha Evam Utthaan Mahabhiyan Scheme – an initiative designed to provide energy and water security to farmers while also promoting renewable energy adoption in India’s agricultural sectors – continues to drive solar pump deployment in the agricultural sector, targeting 34,800 MW of solar capacity by March 2026 with central financial support of INR34,422 crore (1 crore = 10 million) for standalone solar pumps, solarisation of grid-connected pumps, and decentralised renewable energy plants on farmers’ land.

Sustainable plantation, agroforestry and soil carbon projects are drawing interest from investors across the world. Project developers should verify eligibility and methodology selection, and address additionality, permanence, leakage and double counting. Land tenure and consent require close review, including farmer/FPO agreements, benefit-sharing, and rights over credits separate from produce. Measurement, reporting and verification arrangements and registry selection (including the emerging domestic compliance framework alongside voluntary standards) should be built into contracts. Where projects use intercropping or harvest cycles, baseline and leakage assumptions must reflect actual practice in the market, along with alignment of credit claims with buyer requirements on deforestation-free supply and biodiversity safeguards.

Investors are increasingly considering sustainable agricultural projects for carbon trading and carbon offset mechanisms, and platforms such as Verra and Gold Standard provide standardised carbon offset frameworks and benchmarks which enable project developers to adopt innovative agricultural practices and register their carbon offset projects with such platforms. In the absence of similar domestic platforms, alignment to the Verra and Gold Standard methodology requirements becomes a prerequisite for project registration. Further, Indian tax and GST treatment of credit issuances and sales, and the accounting policy for recognition of revenue should be considered if credits are intended for export, along with monitoring of rules on cross-border transfers and corresponding adjustments.

Taxation and Incentives

Agricultural income

Agricultural income in India enjoys constitutional protection and is exempted from central income tax pursuant to Section 10(1) of the Income Tax Act, 1961 (the “IT Act”), while states retain the power to tax such income, agriculture being a state subject under the Indian Constitution. The IT Act defines “agricultural income” to include:

• rent or revenue derived from agricultural land situated in India;
• income derived from such land through agricultural operations (including processes ordinarily employed by a cultivator to render produce fit for market);
• income attributable to farm buildings required for agricultural operations; and
• income from saplings or seedlings grown in nurseries irrespective of land-based operations.

Where income is partly agricultural and partly non-agricultural, the Income Tax Rules, 1962 prescribe statutory apportionment ratios – such as 60:40 for tea, 65:35 for rubber, 75:25 for coffee grown and cured, and 60:40 for coffee roasted and ground – allocating exempt and taxable components. In cases where both agricultural and non-agricultural income are earned, the partial integration method applies, whereby agricultural income is aggregated with non-agricultural income solely to determine the applicable tax slab, subject to prescribed thresholds.

Agricultural land

The tax treatment of agricultural land further depends on its classification as rural or urban agricultural land: rural agricultural land is excluded from the definition of “capital asset” under Section 2(14) of the IT Act, whereas gains arising from the transfer of urban agricultural land are taxable as capital gains. In India, transfers of agricultural land are generally not subject to tax deduction at source under Section 194-IA, though appropriate disclosures remain mandatory. The IT Act also provides capital gains exemptions where proceeds from the transfer of urban agricultural land are reinvested in new agricultural land within a period of two years, subject to usage conditions.

Benefits and incentives

In addition to direct tax reliefs, agribusinesses benefit from extensive governmental support through priority sector lending mandates, interest subvention on crop loans, and subsidised crop insurance under the Pradhan Mantri Fasal Bima Yojana. The Income Tax Bill, 2025 (effective from 1 April 2026) restructures and tabulates previously scattered exemption provisions relevant to agricultural income, streamlines definitions and clarifies documentation requirements for claiming agricultural exemptions, thereby reducing ambiguity and compliance risk. Under the bill, stricter verification of genuine cultivation activity is mandated to ensure that only bona fide agricultural undertakings benefit from tax exemptions and a clear categorisation of what constitutes agricultural allied activities aims to reduce historical disputes over classification of income, thus enhancing certainty for agribusiness taxpayers.

In terms of incentives, the production-linked incentives are available for food processing target categories such as ready-to-eat/ready-to-cook, marine products, fruits and vegetables, and branded staples. Disbursements hinge on investment and output milestones with compliance on quality, traceability and audit. Importantly, since states also regulate the sector, different states offer specialised capital subsidies, State Goods and Service Tax refunds, power incentives and land support for food parks and cold chain warehouses, depending on the nature of agribusiness in the relevant state and the demand.

Employment and Workplace

India’s four new labour codes are now in force, consolidating 29 central labour laws into a single framework on wages, industrial relations, social security, and occupational safety and working conditions, with commencement from 21 November 2025, as notified by the GoI. The codes create a more uniform set of definitions, processes and entitlements, though many operational details continue to depend on central and state rules during the transition period, thereby requiring employers to monitor state notifications closely and align policies accordingly.

For agribusiness employers, the practical effects are largely fivefold.

• Pay structures are required to reflect the new uniform wage definition, under which “wages” must be at least 50% of total remuneration – this typically increases bases for provident fund, gratuity, bonus, overtime and other statutory payouts, and may require redesigning of existing allowance-heavy structures and payroll systems.
• Social security coverage has expanded through these amendments, including recognition of gig and platform workers and pro rata gratuity for fixed-term employees after one year. Accordingly, establishments must ensure timely registrations and contributions where applicable and understand aggregator contribution obligations where relevant in their value chains.
• Permission thresholds for retrenchment, lay-offs and closure now apply at 300 workers, there is a statutory reskilling fund contribution for retrenched workers, and standing orders apply at higher headcount. Grievance committees are required at 20+ workers, with specified composition.
• Safety and working conditions provisions have consolidated, including an eight-hour day within a 48-hour week, annual health check-ups in defined cases, a broadened establishment scope, and consent-based night work for women with prescribed safeguards. Given the digital economy push, digital registers and appointment letters are mandatory, supporting formalisation across factories, packhouses and warehouses.
• While the compliance mechanisms set out in the codes themselves seem to simplify registration and allied processes – single registration, licence and return, inspector-cum-facilitator approach – implementation remains state-specific, so companies should retain robust documentation, digital registers and audit trails during the transition from the old regime.

Intellectual Property, Food Safety and Consumer Protection

Over the past few decades, brand and content disputes have increased, with the growth of e-commerce and direct to consumer foods acting as the primary factor. Businesses must comply with FSSAI licensing and labelling, ingredient and additive standards, shelf-life and recall procedures, and consumer protection rules on product information, returns, warranty and advertising claims. Social media influencer guidelines require clear disclosures and substantiation of claims (eg, “natural”, “high protein”, “organic”).

In the case of intellectual property, courts in India typically grant early injunctions for trade mark and packaging disputes that are clear infringement cases. For seeds and plant varieties, the framework under the Protection of Plant Varieties and Farmers’ Rights Act, 2001 governs protection and farmers’ rights; agreements should address breeder rights, benefit-sharing and biosafety where applicable.

India offers scale and sustained growth across agribusiness, from inputs and on-farm services to processing, logistics and branded foods. The most successful participants pair early regulatory mapping (FDI, APMC, FSSAI and state rules) with disciplined procurement, robust quality systems and clear risk allocation. With continued policy attention on food processing, storage and the digital economy, opportunities remain broad along the value chain. Viewing India as a long-term operating market – and building resilient regulatory, contractual and organisational arrangements – will better position businesses to navigate policy cycles, commodity swings and climate variability in the agribusiness sector.