Posted in agriculture, economics

Attaining $100 Billion Agriculture and Food Exports

Dr Debesh Roy, Chairman, InsPIRE

India is among the top ten exporting countries of agriculture and food products in the world. The country’s agri-exports grew by a robust 20.4% in 2021-22, to touch a record $50.2 billion.  The importance of India in the international agri-market is continuously increasing and the country has developed export competitiveness in certain specialised products. There has been a rising demand for Indian Basmati rice, non-Basmati rice, spices, and sugar as evident by their rising share of the total agricultural export.

The country needs to significantly enhance agriculture and food exports, while ensuring that agricultural products are globally competitive. However, global headwinds due to the Russia-Ukraine conflict, disruption in global supply chain, unprecedented inflation, and monetary tightening by central banks of the developed countries, have adversely impacted global trade, and growth prospects across countries, including India.

Unstable agri-trade regime in India, reflected by knee-jerk reactions by the government to control prices in the domestic market, by banning exports of major agri-commodities, viz., rice, wheat, sugar, or onion, has been a major factor affecting agri-exports. Imposition of Minimum Export Price (MEP) is another tool often used by the government to tame inflation. Such moves bring relief to domestic consumers, but create uncertainty among importing countries, and deprive farmers of higher returns from their produce, which also discourages them to increase the area under cultivation of the crop in the subsequent season.

India’s Agriculture Export Policy (AEP), 2018, aims at promoting a stable trade regime, while setting an export target of $60 billion by 2022 and $100 billion within a few years, thereafter. Considering the strong agri-export growth during 2021-22, and the urgency of doubling farmers’ income, a target of $100 billion agri-exports from India could be set for 2026-27. However, this would be a daunting task, considering the present global economic situation.

In order to catch up with Brazil and China in agri-exports, India needs to bring about comprehensive structural reforms in the agriculture sector, with a focus on agriculture and food exports. The prerequisite for achieving the agriculture export target of $100 billion should be a well-calibrated, comprehensive, strategic, and result-oriented agri-export policy and action plan, along with overall reforms in the agriculture and allied sector. Agriculture export reforms, free trade agreements (FTAs)/ comprehensive economic partnership agreements (CEPAs) with major trading partners, agriculture marketing reforms, developing efficient agri-value chains, and building agriculture export infrastructure, are some of the major reform measures that could be expedited.

Primary products constitute about 75 per cent of APEDA products exported from India, in terms of value (USD). Therefore, the agriculture export strategy should prioritise the development of export-oriented value chains in respect of dairy products, processed marine products, processed fruits and vegetables, cereal preparations, and organic food. As India moves towards the exports of semi-processed, processed, and specialised food products, more value addition will happen in the country leading to more employment creation and the growth of the food processing sector.

The agriculture export strategy should include the integration of value-added agriculture produce with global value chains (GVC), by adopting the best agricultural practices involving productivity gains and cost competitiveness, while enhancing farmers’ income. Export-oriented production through the development of clusters, viz., “One District One Product (ODOP)”, and dedicated supply chains will help to enhance the global image of Indian products.  

In recent years, several Indian agricultural products have been facing rejection and export bans in the EU, a key export destination for India’s agricultural exports, due to sanitary and phytosanitary (SPS) and technical barriers to trade (TBT) measures. To counter rejection by a partner country in forums like the WTO’s SPS Committee or TBT Committee, there is a need for data collection and scientific evidence-based reports. Further, it is important to build the capacity of our small, marginal, and medium farmers and processors and educate them about the export market requirements. It is, therefore, eminently important to sensitise and educate farmer producer organisations (FPOs) and other stakeholders in the agri-export value chains, on ways to address SPS/TBT-related issues. If domestic standards are aligned to international standards, there is less likelihood of product rejections, and it is easier to earn a premium price for certified products such as organic food products.

A key concern for both India and the UK, with respect to the agro-foods sector would be the removal of non-tariff barriers (NTBs). For India, for example, removal of NTBs in the form of less stringent Sanitary and Phytosanitary Requirements with respect to limits of pesticide residues, while for the UK, removal of NTBs in the form of easier labelling and registration procedures, customs requirements, etc., would be beneficial. Therefore, the India-UK negotiations for CEPA need to take note of this issue.

Growing protectionism across major economies is a serious threat to raising exports. This would require intense diplomatic efforts with India’s trading partners to finalise trade deals. Efforts to upgrade Economic Cooperation and Trade Agreement (ECTA) to CEPA with Australia, and finalise CEPAs with the UK, the EU, the US and Canada, need to gather momentum.

The strategy for promotion of agri-exports should include investments in agri-export zones (AEZs), dairy export zones (DEZ), agro-processing clusters/zones, marketing infrastructure, cold chains, warehouses, roads, railways, and logistics along the export-oriented agri-value chains, connecting to ports and airports through public, private, and Public Private Partnership (PPP) modes.

Reducing food loss and waste is a solution to reduce food and nutrition insecurity and Greenhouse Gas (GHG) emissions, without impinging on activities related to core economic development. Therefore, GoI should formulate a comprehensive national policy on ‘Achieving SDG 12.3 Targets by Minimising Food Loss’, to focus not only on minimising food loss but also on leveraging the potential to increase agro-based exports, resulting in augmented farm level income.

It has been observed that there is a strong impact of export financing on agricultural exports. Availability and affordability of export credit through lesser-explored mechanisms such as factoring, commodity exchange-facilitated financing, and value chain financing, would be critical for the achievement of the ambitious target for agricultural exports.

Concerted and coordinated efforts by GoI, state governments, APEDA, MPEDA, FIEO, TPCI, NDDB, GCMMF, food and agro-processing industry, RBI, NABARD, EXIM Bank, banks, agri-tech start-ups, FPOs/FPCs, and other stakeholders in the agri-export sector, would address a whole range of issues pertaining to the promotion of agriculture and food exports.

Finally, comprehensive reforms in the agriculture sector could propel India into the top bracket of agricultural exporters in the world, while attaining $100 billion in exports of agriculture and food products by 2026-27.

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(The contents of this blog have been drawn from the book India’s Agriculture and Food Exports: Opportunities and Challenges, edited by Debesh Roy and Bijetri Roy and published by Bloomsbury India.)

Author:

Institute for Pioneering Insightful Research and Edutech Private Limited

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