INFOCUS Agriculture: Farm exports

Prioritise high-value produce to turn the tide

Agricultural exports, if properly supported by infrastructure, institutional backup, packaging, freight transport and connected to the internal production system, can boost agricultural growth as well as farmers’ income. Some export bottlenecks such as problems in market access, non-tariff barriers and sanitary as well as phytosanitary issues need to be resolved proactively by the government. It’s imperative to have huge investments and a stable export promotion policy.

Prioritise high-value produce to turn the tide

India became a food-surplus economy long ago with mounting food stocks, but it failed to export the surpluses and increase farmers’ income; as a result, farmers’ distress is visible across India. Photo for representation only. File photo

A Amarender Reddy

India became a food-surplus economy long ago with mounting food stocks, but it failed to export the surpluses and increase farmers’ income; as a result, farmers’ distress is visible across India. India has to work hard on this missed opportunity to not only increase export-led agricultural growth but also to double farmers’ income. India has to set a target to export at least 30% of its agricultural production, which is only 7.5% currently, in the medium term.

Until now, India’s agricultural policy focused on food security and price stabilisation with neglect of export-led growth. India’s foodgrain production touched a record 305.43 million tonnes in the 2020-21 crop year. The government is spending huge money on procuring and maintaining food stocks in excess of the strategic requirements without any takers, with warehouses overflowing. If the focus is shifted towards increasing export potential, India may catch up with China, which is the fourth largest agricultural exporter after the EU, the US and Brazil, despite less acreage than that of India.

In 2020-21, exports of agriculture and allied products grew by 17.34 per cent to $41.25 billion, but the growth is not consistent. In 2017-18 and 2018-19, exports hovered around $38 billion, thereafter declining to $35.16 billion in 2019-20. In order to meet the 2022 target of $60 billion, exports have to increase 45% this year.

On the positive side, there is a significant structural shift in favour of developing countries during the past decade. Most of the developing countries are increasing their share of agricultural exports by displacing developed countries due to their cheap labour. For the first time in 2019, India figured among the top 10 exporting countries by displacing New Zealand. India’s share of the global agricultural exports increased from 0.8% in 1990 to 1% in 1995 and has now reached 3.1%. Other developing countries are also picking up: Brazil (7.8% share of global exports), China (5.4%) and Mexico (3.4%) in 2019. However, the EU (16.1% share) and the US (13.8%) are dominating agricultural exports.

India is now the world’s top exporter of rice with a share of 33%, surpassing Thailand. It became the third largest cotton exporter (with 7.6% share). India is also a significant player in spices, fish, fruits and vegetables. These export shares of India are tiny compared to the second rank it holds in terms of arable land area just after the US.

The potential is much higher with the changing geopolitical realities — the trade war between China and the US, and expanding trade opportunities with central and east Asian countries. Now, Europe is also looking for better trade ties with India in spite of its stringent food safety standards.

The largest markets for India’s agricultural products are the US, China, Bangladesh, the UAE, Vietnam, Saudi Arabia, Indonesia, Nepal, Iran, and Malaysia. India is traditionally a dominant exporter of rice, marine products, sugar and spices. India is also a leading bovine meat exporter due to a large bovine population, with negligible domestic demand for religious and cultural reasons.

There is a huge demand for processed foodstuffs such as ready-to-eat snacks, cooked meat, smoked fish, desserts, sandwiches, cheese and millet preparations. These labour-intensive export segments can be an opportunity for the growth of the food processing industry in labour-surplus India.

Growth in production of high-value segments such as horticulture, dairy, poultry and fisheries has picked up since the 1990s, but their export potential is yet to be realised. There is a need for huge investment in these sectors to meet export standards.

Rising food prices worldwide are an opportunity for India’s export growth, given its cheap labour costs. The Food and Agriculture Organisation’s food price index, which tracks a basket of grains, vegetable oils, meat, dairy and sugar, has risen to its highest level in a decade now. This trend is likely to continue for 2-3 years on the back of a pent-up demand after the subsiding Covid pandemic. India can target a few commodities where it has comparative advantage to mark its footprint in export markets.

Thanks to the government initiative of One District-One Product (ODOP), each district can specialise in one export-oriented produce based on local agro-ecologies. For example, mangos from Varanasi and black rice from Chandauli (Uttar Pradesh) are in high demand in international markets. Again, niche markets can be identified and an ecosystem developed around these products for exports. There are already existing markets for exporting jackfruit and jamun to the UK, Banganapalli and Suvarnareka mangoes to South Korea, red rice and flavoured jaggery powder to the US and millets to Denmark.

Food safety standards

To become an export leader in agriculture and food products, India has to follow international food safety standards. India has faced problems dealing with EU, Japan, the US etc. Last year, stringent norms imposed on residues of agro-chemicals such as tricyclazole and buprofezin hindered exports of basmati rice. Although Punjab, which contributes more than 90% of basmati exports, banned the sale of these chemicals, there was a delay in dissemination of information among basmati-growing farmers and also communicating the decision to the importing countries, which hit basmati exports.

Agricultural exports, if properly supported by infrastructure, institutional backup, packaging, freight transport and connected to the internal production system, can boost agricultural growth as well as farmers’ income. Some export bottlenecks such as problems in market access, non-tariff barriers and sanitary and phytosanitary issues need to be resolved proactively by the government.

Overall, India has vast agricultural export potential if it prioritises high-value exports. The share of India’s high-value and value-added agricultural produce in its agricultural export basket is less than 15% compared to 49% in China’s case. The potential can be realised through huge investments and a stable export promotion policy.

The author is Principal Scientist (Agri Economics), ICAR Central Research Institute for Dryland Agriculture, Hyderabad

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