India’s agricultural exports
Increase in agri exports but less increase that non-agri exports:
- Agricultural exports stood at $5 billion in 1995 (around the time of liberalisation), and reached $36.8 billion in 2017.
- However, in terms of share in total exports, agricultural exports fell from 18.2% to 11.68% during the same period.
- This shows that the value of agricultural exports has increase, but their representation in the export basket has fallen compared to non-agricultural products.
- It reflects a growing competitiveness of Indian agriculture, but largely in low-value primary produce.
Because of low-value agri exports:
- The lower value of exports can be explained by the fact that India’s export basket consists mainly of low-value and semi-processed commodities such as rice, wheat and marine products.
- 80% primary produce: As much as 80% exports are primary—those that undergo minimal processing such as cleaning, sorting, refrigerating and converting paddy into rice.
- Only 20% processed and value-added: The remaining 20% share is of processed and value-added products, which entail extensive processing of both raw and semi-processed commodities. For example, processing of barley to produce beer or making cheese from milk, or seed to edible oil.
Agriculture Export Policy to boost agri exports:
- In December, 2018, the Union Cabinet has approved the first ever ‘Agriculture Export Policy, 2018’ (AEP).
- Boosting and diversifying exports: To diversify our export basket, destinations and boost high value and value added agricultural exports including focus on perishables. The policy aims to increase India’s agricultural exports to $60 billion by 2022 from the current $37 billion.
- Agri Clusters: To operationalise the policy, the government would focus on creating agri clusters, attract private investment and infrastructure development. The Centre will work with the State governments to create clusters that can focus on particular crops. Rs. 1,400 crore has been assigned to set up specialised clusters in different states for different produce.
- Stable trade regime: The policy also focuses on a stable trade regime, diversify exports by products and destinations, and promote perishables and high value-added products.
High export targets achievable through food processing sector:
- The target of $60 billion agricultural exports by 2022 may seem too high but is achievable in view of India’s rapidly growing food processing industry.
- From 1981-82 to 2014-15, fixed investment in the organised food and beverage industry across 20 major states saw an annual rate of growth at 9.54%, with investment increasing from around Rs. 6,000 crore in 1980-81 to more than 1 lakh crore rupees in 2014-15.
But India needs to be more competitive in processed and value-added agri goods:
- The main value-added products that are competitive in the world markets are sugar in solid form, extracts and essence of tea and coffee, oilcakes, manufactured tobacco, and preserved fruits and vegetables.
- This indicates that the food and beverage industries lack cost-competitiveness and, hence, India may find it difficult in meeting the stated export targets.
Efforts by food processing ministry:
- The ministry of food processing industries has been making concerted effortsto increase private investment through fiscal incentives and other measures.
- Some other initiatives have also been taken up, such as investments in mega food parks with state-of-the-art infrastructure and processing facilities, allowing 100% greenfield investments, and incentivising capital subsidy.
- All the measures are expected to reap benefits and increase India’s processed exports.
Trade barriers Indian agri exports face:
- Among the various non-tariff measures (NTM) that India faces on both primary and processed exports, the topmost are food quality, sanitary and phytosanitary and health-related issues.
- More significantly, India faces these NTMs in the key markets of the US, the EU and the ASEAN.
- The Indian industry has to compete with the major global players, including China, the European Union, Australia, the United States and Canada.
India faces non-transparent and complex barriers to trade:
- The incidence of non-tariff measures has been increasing, and also there is little understanding and transparency of the existing restrictions.
- Many regulations are poorly designed, failing to protect the public while unnecessarily complicating the business.
- These regulations are often enforced in punitive ways, reflecting an anti-business culture of many countries.
AEP will work to reduce these barriers:
- As per the Agriculture Export Policy, there will be an institutional mechanism set up to pursue market access, tackle barriers, and deal with sanitary and phytosanitary issues.
- However, it does not clearly specify the modus operandi for the same.
- Standardisation of non-tariff measures: India must initiate a dialogue regarding the standardisation of non-tariff measures at the WTO platform.
- Capacity building to build cases against countries with high barriers: In case of unreasonably high standards set by the importing countries, the exporters and export promotion agencies can raise concerns at both bilateral and multilateral forums. For this, there is a need to have scientific research and adequate data to establish a case.
- Improving standards of domestic products: The way forward would also require India to undertake several domestic measures to improve the quality of its fresh and processed products, and upgrade standards.
GS Paper III: Economy