Agriculture Economics Editorial✍ Hindu Edi Prelims cum Mains

Spotlight on clusters a welcome step for agri-exports

Indian agriculture successes:

  • India produces about 280 million tonnes of foodgrain every year.
  • India (with China, US, Brazil) is among the four largest foodgrain producers in the world.
  • India leads the world in the production of basmati rice, millets, pulses, chickpea, ginger, chilli, okra, banana, mango and papaya.
  • For dairy, marine, poultry and meat products, India is a significant player in the global market.

Major agri exports:

  • Today, about half of India’s exports comprise rice, wheat and marine products.
  • Basmati rice, non-basmati rice, wheat, vegetables, fruits, peanuts and shrimps top the exports basket.

But agriculture exports much below potential:

  • India does not make it to the top ten countries in terms of agricultural exports.
  • Much of India’s production is retained for domestic use.
  • India’s agricultural export market has grown meaningfully only in the last two decades.
  • Agricultural trade policy has been used in an ad-hoc manner to curb domestic food inflation.

 

Agriculture Export Policy to promote exports:

  • In December, 2018, the Union Cabinet has approved the first ever ‘Agriculture Export Policy, 2018’.
  • The policy aims to increase India’s agricultural exports to $60 billion by 2022 from the current $37 billion.
  • Diversifying exports: To diversify our export basket, destinations and boost high value and value added agricultural exports including focus on perishables.
  • Agri Clusters: To operationalise the policy, the government would focus on creating agri clusters, promote value added shipments, attract private investment and infrastructure development. The Centre will work with the State governments to create clusters that can focus on particular crops.

 

The AEP is a welcome development for several reasons:

  • Takes into account diversity of India: The policy has been developed in close consultation with states recognizing the geographic diversity of production and states’ constitutional role in nurturing agricultural development.
  • Well planned approach: It takes a nuanced approach by geography and products rather than the previous approach of simply increasing inputs.
  • Focus on Clusters: It tackles the entire ecosystem related to enabling market access and acceptability based on the introduction of agricultural clusters.

 

Clustering

  • A cluster may be defined as “geographic concentrations of inter-connected companies and institutions in a particular field”.
  • The idea of clustering is well-known in industry, and to some extent, in agricultural products.
  • FAO’s apporach to clustering in agriculture include following components:
    • Vertical relationships among suppliers (of raw materials and other production inputs), agricultural producers, processors and exporters
    • Horizontal relationships among producers such as through cooperatives or producer companies
    • Supporting relationships between producers and facilitating organizations like government export promotion agencies, research institutes and business service providers
  • The entire value network works to reinforce efficiency, quality, market acceptance and sustainability.
  • For the small farmer, clustering is a very good idea and can bring great benefits.

World famous examples of clustering:

  • Clustering is at the root of branding agricultural commodities (like coffee and beef) and value-added products (like wine).
  • Famous examples of clustering, branding and promoting include French wine, Kobe beef of Japan, Juan Valdez coffee of Colombia and Manuka honey of New Zealand.

Examples of clustering successes in India:

  • Amul:
    • The most famous example of a successful cluster in India is that of the Gujarat Cooperative Milk Marketing Federation (branded Amul).
  • Mahagrapes:
    • The grape cluster in Maharashtra situated in the Pune area, known as Mahagrapes, is another example.
    • Lower transaction costs: It is a co-operative partnership, formed specifically to reduce the transaction costs of marginal farmers and to increase their incomes. It succeeded in doing so by providing common facilities for pre-cooling, cooling and storage of grapes, and by reducing the cost of market linkage for all members of the cooperative.
    • Risk mitigation: By using transparent standards of quality, a mutually-owned insurance system provides risk mitigation to all members.

 

Conclusion:

  • The AEP proposes to nurture and build many such clusters for products like bananas, pomegranates, mangoes, tea, coffee and marine products.
  • It also promises a stable export regime that will refrain from interference.
  • The policy brings a comprehensive yet nuanced approach to agricultural product development by involving the states.
  • The policy will bear fruit only if it is properly implemented.

 

Importance:

GS Paper III: Economy

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