Impact: Agriculture sector negative

Brief: Fertilizer imports expand by 27.5% in YTD FY19 as compared to a contraction, same time last year; Domestic players however are having sluggish growth primarily due to input cost pressures and inability to meet strong demand.

India’s fertilizer imports have been witnessing strong growth in FY19 due to strong consumption driven by agricultural sector. In terms of quantity, import of this commodity has been expanding by 27.5% in FY19 (YTD) as against a de-growth of (-)4% during the same period in FY18. In value term, import of the commodity has been growing at 64% during the in FY19 as compared to (-) 13% during the corresponding period, the previous year. The higher import is due todomestic industry’s inability to cope with input pressures.

A healthy monsoon, in continuation to the previous year has also been a trigger here as agricultural sector is the demand driver, as mentioned. Due to higher water storage level (Reservoir Level), area under sown is expected to remain high during the Rabi crop as well. This indicates higher consumption of fertilizer over this financial year.

However, primary concern remains domestic production. Despite a strong demand and favorable base effect, domestic production has been growingat a sluggish rate of 4.4% during the reference period in FY19.

The lukewarm growth in domestic production is on account of higher input cost, which is primarily attributing to higher price of natural gas and weaker domestic currency. We believe that both the factors are expected to remain unfavorable over the year for the industry. Therefore, this core industry is likely to keep the production level low.

Percent Change in Quantity

Source: CMIE