Export thrust needed for all farm goods

In the midst of the headline-grabbing farmers’ agitation, a small news item surfaced recently about China buying rice from India. The development came in the backdrop of continuing border tensions and prolonged negotiations to resolve them. The purchase was unavoidable for China owing to global shortages and competitive prices being offered by Indian suppliers. The relatively small shipment of rice to the northern neighbour may be a one-time affair but reflects the buoyancy of agricultural exports that have become a shining light on the export front.

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The pandemic led to a dip in export growth since March with an overall decline of about 18 per cent from April to November. Export of agricultural products alone, however, has grown by 4.3 per cent in dollar terms in the first half of the current fiscal. The remarkable aspect of this growth is that it continued even during the disastrous first quarter of the year which recorded a contraction of 23.9 per cent.

The positive trend of agro-exports has been in line with the overall performance of agriculture which grew by 3.4 per cent even during the first quarter. The potential for a big leap in agricultural exports has been recognised over the years but much more financial and infrastructural support is needed for consistent and sustained growth.

The case of sugar is illustrative. The second biggest foreign exchange earner after rice, it badly needs a consistent long-term policy to ensure that India can remain a significant player in world markets. Successive governments have failed to resolve the persistent problem of cane arrears plaguing this commodity. Decisions on subsidies to help sugar exporters compete effectively are also delayed inordinately. The sugar year begins in October, but last year’s subsidy payments are still awaited. At the same time, the entire question of subsidy is under threat as the Cairns group of countries has raised a dispute on the issue at the World Trade Organisation (WTO).

In this context, Canadian Prime Minister Justin Trudeau’s comments supporting the Indian farmers’ agitation for an assured minimum support price seem ironic, at the very least. Canada has been one of the leading lights of the Cairns group of countries which has opposed the concept of public stockholding through minimum procurement prices. In fact, India has been battling this group for years at the WTO during negotiations on the Agreement on Agriculture. The latest dispute on India’s sugar subsidy is in line with the Cairns group’s opposition to such support for farm goods in this country. The Canadian leader’s comments may have been meant for the Indian diaspora that is a key domestic constituency for him, but Canada would be advised to alter its external trade strategies to endorse this country’s stance at the WTO in support of farmers’ livelihoods.

As far as most agricultural exports are concerned, however, India remains a minnow in global markets despite being one of the biggest foodgrain and horticulture producers. It is only in rice that India is the top exporter in the world and looks set to retain that position even during the pandemic. It is also the fourth largest cotton exporter and here too prospects remain bright this year. As for the other commodities, it may be the second largest wheat producer but is only 34th in terms of exports. Similarly, it is the second largest fruits producer but only 23rd in terms of exports. In vegetables, it is the third largest producer but ranks only 14th in exports.

An allied sector of agriculture, marine exports, on the other hand, presents a much better picture. India is already the fourth largest seafood exporter and is currently the biggest shrimp supplier to the US. Recently, efforts have been made to promote inland fisheries development to capitalise on the success story of marine exports, but there is still a huge gap to be filled in terms of value addition for fisheries and seafood. Besides, stringent testing and checking requirements of developed countries have remained a hurdle and these have become non-tariff barriers for such exports.

The buoyancy witnessed in agriculture and allied goods exports is critical for India at this stage as trade looks to be a catalyst for global economic revival. The initial fear that supply chains will collapse during the pandemic has not actually happened and, instead, there is greater resilience. Several China-based companies have swiftly moved to other countries, notably South-East Asia and some even to India, to ensure that the US-China trade war does not engulf them.

It was originally expected that the pandemic would lead to countries putting up protectionist trade barriers, just as the movement of persons was curtailed in most parts of the world for a while. International trade did fall in the initial months of the virus spread, but this was followed by a sharp rebound. The result is that the WTO has revised its projections for the fall of merchandise trade flows from 32 per cent to 9.2 per cent during 2020. While India’s exports are still in the contraction mode, countries like South Korea have rebounded and manufacturing output is rising in China, Japan and Taiwan.

It is thus time for India also to make a bigger push to exports in terms of policy and incentives. One area that was always a big part of the country’s export basket has been pharmaceuticals and this has emerged in an even greater way due to the pandemic. In the initial months, enterprises shifted focus to producing safety equipment like PPE kits which were then exported all over the world. Similarly, it may have been a hub of vaccine production earlier but is now becoming the world’s pharmacy with Covid vaccines being rolled out rapidly.

The same kind of flexibility and adaptability are needed to drive exports of agricultural goods. The biggest potential lies in the horticulture arena where processing of fruits and vegetables can lead to this sector becoming a game-changer on the export front. The farmers’ agitation has certainly put the focus on agriculture but to make a mark in world trade, infrastructure and policies need to be revised not just for crops covered by the minimum support price system but also for the whole gamut of agricultural commodities.