The pandemic-driven bonanza will not last
The government’s reported plan to reintroduce transport and marketing support for agricultural exports is a timely move. It will help hard-pressed exporters to cope with high freight costs and other logistical constraints. But this step alone may not suffice to lift farm exports to the desired extent. Other measures, aimed specifically at upgrading the quality and enhancing cost competitiveness of farm products, are equally vital. Though India has traditionally enjoyed a positive trade balance in agriculture — agri-exports being invariably higher than agri-imports — the present level of agri-exports is just around half the achievable mark.
Farm exports in 2020 were around $42 billion whereas the current potential, as assessed by the Agricultural and Processed Food Products Export Development Authority, is around $80 billion. The country’s first dedicated Agricultural Exports Policy, announced in 2018, had set an even more ambitious export target of $100 billion. The annual growth of agri-exports, estimated at around 5 per cent a year over the past decade, would need to be stepped up several-fold to reach anywhere near this goal. India’s share in the international trade of these items has risen from around 2.1 per cent in 2010 to merely 2.5 per cent in 2020. This rate needs to go up substantially to provide an outlet to surplus agricultural produce and increase farmers’ income, which is currently at the core of the farm unrest.
The pandemic-driven supply crunch of farm goods and the resultant price spiral in the global market had given India an opportunity to bolster its agri-exports. Consequently, rice exports almost doubled to an all-time high of 9.5 million tonnes and those of wheat by over 2 million tonnes last year. The increase in non-Basmati rice alone was nearly 160 per cent. But such bonanzas cannot be expected to endure for long even though international trade in farm products, especially those of the processed and value-enhanced ones, is likely to keep growing due to rise in population and income and changes in food habits. India would need to diversify the range of products as well as export destinations to capitalise on this opening.
At present, only limited categories of agricultural products are shipped abroad. The chief ones among them are rice (chiefly Basmati rice), meat (mainly buffalo meat), marine products (primarily shrimp), sugar, spices, certain types of cotton, and select vegetables and fruit. This range would need to be expanded to tap additional markets. A prerequisite for consolidating the country’s foothold in the agri-export market is to shore up the infrastructure for post-harvest management, storage, and the transportation of export-bound farm produce. Some of the areas needing urgent attention have been clearly demarcated in a recent report entitled “Enhancing Competitiveness of Indian Agri-Exports”, which has been compiled jointly by the Federation of Indian Chambers of Commerce and Industry (FICCI) and YES Bank. It suggests measures like an export-friendly policy environment, world standard quality assurance facilities, a system to facilitate traceability, and greater private investment in the export-oriented agri-processing industry. Greater attention is also called for to enhance the export-worthiness of small farmers’ produce through value-addition. These farmers need to be linked directly with processing units and exporters. The most important factor is to build Indian brands and project India as a reliable supplier.