India’s Agriculture Exports: Status and Challenges – Explained, pointwise

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Introduction

India’s agriculture exports have grown by 16.5% in April-September 2022 (on a year-on-year basis) compared to April-September in 2021. With the current trend the agriculture exports appear set to surpass the record US$ 50.2 billion achieved in FY2021-22 (April-March). Agriculture exports have witnessed impressive growth in recent times. A focused approach by the Government with favourable policy measures have been hailed as the reason behind the success. However, according to some critics, the current performance is due to rise in global commodity prices because of various climatic and geopolitical factors. The Government agencies mandated with the task of export promotion can achieve much more. Nevertheless, noted agricultural economist like Ashok Gulati have praise Government’s efforts and recommend measures to sustain this growth in exports further.

What is the trend of India’s Agriculture Exports?

India’s agricultural exports crossed US$ 50 billion during the fiscal year ended March 31, 2022.

Status of India's Agriculture Exports UPSC

Source: Indian Express

India’s top export items include marine products (US$ 7.8 billion), Rice (US$ 9.6 billion, Basmati + Non-basmati), Sugar (US$ 4.6 billion), Spices (US$ 3.9 billion) etc. among others. However, some items (including rice and cotton) have witnessed stagnation in the export levels.

Major Items of India's Agriculture Exports UPSC

Source: Indian Express

India’s agriculture exports have witnessed an impressive growth in the last 3 decades. India has been a net exporter of agriculture products (exports greater than imports). Technological advancements, government incentives, and institutional changes have contributed to a massive increase in agricultural output. This has resulted in growth in agriculture exports.

According to NABARD, India’s Agriculture Exports have increased from INR 6,012.76 crore in 1990-91 to INR 305,469 crore in 2020-21. In the corresponding period, imports have increased from INR 1,206 crore to INR 157,788 crore. India’s net agri-export surplus has also increased from INR 4,806.9 crore in 1990-91 to INR 147,680.84 crore.

The share of agricultural exports to agricultural Gross Value Added (GVA) increased from 3.88% in 1990-91 to 13.64% in 2013-14. However, it has slipped to 8.45% in 2020-21.

Share of Agriculture exports in total exports has shown a varying trend. It rose from 18.47% in 1990-91 to 20.33% in 1996-97. It had fallen to 9.64% in 2008-09 and rose back to 14.2% in 2020-21. Share of Agriculture exports in global agriculture exports rising from 0.94% in 1991 to 3.04% in 2013.

What are the opportunities to India’s Agriculture Exports?

India’s large extent of arable land, complemented by diverse agro-ecological conditions provide huge potential for cultivation of agriculture products.

India’s spices and fruits are famous around the world for their high quality.

India leads global production in several commodities. According to the FAO, India is the largest producer of milk, pulses and jute, and ranks as the second largest producer of rice, wheat, sugarcane, groundnut, vegetables, fruit and cotton. India is also one of the leading producers of spices, fish, poultry, livestock and plantation crops.

Globally, India ranks second in total agricultural production at US$ 367 billion, yet India’s share in export market is minuscule. This indicates huge opportunity in scaling up the exports.

As global value chain diversification becomes a priority around the world, India has an excellent opportunity to scale up agri-exports and rapidly transform the agri-economy.

Effective action at multiple levels, from farm inputs, quality assurance, traceability and certification, to building connections to global value chains (GVCs) can help India reach the US$ 100 billion milestone in agri-food exports in the next few years.

What are the benefits of enhancing India’s Agriculture Exports?

Largest sources of livelihood: Agriculture, with its allied sectors, is the largest source of livelihoods in India. It employs 152 million Indians as of 2021. 70% of rural households still depend primarily on agriculture for their livelihood.

Increase Farmers Income: Increase in export of agri-commodities at globally competitive prices will help increase income for farmers. However, there is a need to ensure that farmers, instead of middlemen, benefit from the farm exports.

Rural Development: Improvement in farm incomes will boost rural demand and contribute to growth of rural economy and development.

Trade Balance: Agriculture exports have consistently outperformed agri-imports. Agriculture sector has regularly maintained a trade surplus. This helps in mitigating Current Account Deficit (CAD) and help enhance forex reserves.

What are the challenges to India’s Agriculture Exports?

Inward-looking policies: India’s agriculture policy is focused more on food security and price stabilization, impacting policy approach to agriculture exports. This was evident recently with bans on exports of wheat and rice. Agri-exporters are impacted by frequent flip-flops in the policy. The policy deprives farmers of higher prices in the international market. Import restrictions when international prices are at a peak, reduce incentives for farmers to cultivate exportable crops.

Value Addition: Majority of India’s agriculture exports consist of low-value and semi-processed items which have limited demand in global markets. The proportion of food processed in India (of the total production) is very low.

Lack of uniformity: Lack of uniform quality standards, standardization of commodities and high losses in value chain have limited the potential of export of horticulture produce.

Maximum Residue Limit (MRL): India’s agricultural products are rejected to presence of Pesticide and chemical residues above the Maximum Residue Limit (MRL) of importing nations. In the past, India’s products like basmati rice, grapes and peanuts have been rejected.

The lack of awareness among farmers regarding the appropriate amount and timely use of chemicals is a major obstacle.

(The traces pesticides leave in treated products are called “residues”. According to the FAO, a maximum residue limit (MRL) is the highest level of a pesticide residue that is legally tolerated in or on food when pesticides are applied correctly in accordance with Good Agricultural Practice).

Low Yield: The yield levels of the majority of crops in India remain much lower than the global average. This is compounded by fragmented landholdings. The average farm size in India is only 1.15 hectares. Majority of the Indian farmers belongs to small and marginal category. A large proportion of domestic production is used for self-consumption, reducing availability for exports.

Status of Landholding in India UPSC

What steps have been taken to boost Agriculture Exports?

Agriculture Export Policy 2018 (AEP): The Government of India has introduced a comprehensive Agriculture Export Policy (AEP) to promote exports of agricultural products. The key objectives of the AEP are to: (a) Diversify export basket and destinations; (b) Boost high value-added agricultural exports; (c) Promote indigenous, organic, traditional and non-traditional Agri products exports; (d) Provide an institutional mechanism for pursuing market access; (e) Enable farmers to get benefit of export opportunities in overseas market.

Financial Assistance Scheme (FAS): It is the export promotion scheme by the Agriculture and Processed Food Products Export Development Authority (APEDA). The primary aim of this scheme is to assist businesses in export infrastructure development, quality development and market development. The financial assistance under the scheme will range from INR 5 lakh (US$ 6,500) to INR 5 crore (US$ 650,000).

Ministry of Commerce & Industry Schemes: The Ministry of Commerce & Industry has also initiated several schemes to promote exports, including Trade Infrastructure for Export Scheme (TIES), Market Access Initiatives (MAI) Scheme etc.

In addition, assistance to the exporters of agricultural products is also available under the Export Promotion Schemes of APEDA, Marine Products Export Development Authority (MPEDA), Tobacco Board, Tea Board, Coffee Board, Rubber Board and Spices Board. Further, to boost honey exports, India has made NMR (Nuclear Magnetic Resonance) testing mandatory for honey exported to USA.

The Department has constantly synergized with the Ministry of Food Processing Industries for effective utilization of Operation Green scheme, which has been extended to most of the horticultural crops due to COVID-19.

The Ministry has also collaborated with the Ministry of Civil Aviation and the Railways (and 5 other Ministries) in utilization of Krishi Udan and Krishi Rail respectively, to ease out pressure of high freight rates. The effort resulted in smooth movement of perishables to the important Middle East, EU and South East Asian markets. The Krishi Rail project has decisively helped exporters of fresh fruits and spices from the North Eastern States.

Agriculture and Processed Food Products Export Development Authority (APEDA): It was formed in 1986, under the APEDA Act 1985 for the development of the exports of the agriculture sector in India. The main functions of the authority are the registration of people as exporters, fixing standards and specifications for the scheduled products, carrying out inspections, collecting statistics and providing information, training and advisory services to the exporters.

Virtual Buyer Seller Meets (V-BSM): The Government of India has been organising virtual buyer seller meets (V-BSM) on agricultural and food products with the major importing countries across the world to promote geographical indications (GI) registered with agricultural and processed food products in India. So far 17 V-BSMs have been organised with countries like Canada, Germany, Switzerland, Belgium, UAE and USA etc.

Agri-Cells: The Government has set up 13 Agri-Cells in Indian embassies in Vietnam, USA, Bangladesh, Nepal, UAE, Iran, Saudi Arabia, Malaysia, Indonesia, Singapore, China, Japan and Argentina to provide inputs on real time basis to improve Indian exports at these destinations by promoting trade, tourism, technology and investment goals.

Farmer Connect Portal: A Farmer Connect Portal has been set up on APEDA’s website for providing a platform for FPOs/FPCs, cooperatives to interact with exporters. Around 2360 FPO/FPCs and 2324 exporters have been registered so far.

Cluster Development: As part of the Agriculture Export Policy, 46 unique product-district clusters have been identified for export promotion. 29 Cluster Level Committees have been formed in different clusters like Varanasi (Fresh Vegetables), Ananthpur (Banana), Nagpur (Orange), Lucknow (Mango) etc.

What steps can be taken to further enhance Agriculture Exports?

Empowering the farmer to improve quality: Farmers should be trained about export standards and compliances. Tools that measure quality and residue levels can be provided to farmers to make farm produce export competitive. Krishi Vigyan Kendras can be engaged to take export-oriented technology to farmers and creating awareness among farmers about export opportunities.

Branding Produce from Export Clusters: Export clusters (like Nagpur for Orange) lack organised marketing and branding support for their products. Branding will help ease their entry into international retail chains. Products such as Zespri Kiwi, Washington Apples, and California Almonds have benefitted greatly from marketing and branding, helping the farmer-producers get fair compensation for their produce.

Promoting Niche Indian products: Traditional wisdom and nutritional value of niche Indian food products, such as Indian variants of millets, fruits, rice, and oilseeds make them excellent export choices. Government support in promoting these products (similar to the International Yoga Day initiative), will go a long way in making niche Indian products stand out in international markets.

Connect to GVCs: There is a need to connect Farmer Producer Organisations (FPOs) with global value chains and importers from other markets. It can help them understand quality needs and the importers can be assured of quality standards.

Addressing Logistics glitches: Agricultural commodities are perishable; and so logistics must be robust, containers made available timely, and freight costs stabilised. The Government must engage in dialogue to ensure importing nations of its capabilities and include these issues in the trade negotiations framework.

Bilateral trade and sectoral agreements: The Ministry of Commerce should build bilateral trade and sectoral agreements to ensure favourable tariffs for India’s agriculture exports. Government should also negotiate to address the non-tariff barriers that Indian exports face like the quality and testing protocols, fair trade certifications etc.

Research and Development: It is important to promote R & D activities for new product development for upcoming markets, like fortification of food products.

Conclusion

India’s Agriculture Exports have performed well in recent times. The Government’s policy initiatives have led to many positive outcomes. However, the level of exports is still below the potential level. The Government should continue the efforts to facilitate the agriculture exports further. Enhancing agriculture exports is one of the most potent lever in improving farm incomes and ensuring rural development.

Syllabus: GS III, Indian Agriculture, Marketing of Agriculture Produce.

Source: Indian Express, Indian Express, Indian Express, The Hindu BusinessLine, NABARD

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