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.
________________________________
(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.)
The Union Budget 2022-23 is refreshingly growth oriented, futuristic and at the same time it aims to promote all-inclusive welfare. India’s economic growth which was already on a decelerating mode from 7.2% in 2017-18 to 6.1% in 2018-19 and further down to 4% in 2019-20, due to structural issues, and loss of momentum in economic reforms, fell sharply to -7.3% in 2020-21, as a result of the pandemic (Figure 1). However, the year 2021-22 is poised to reverse the trend to touch 9.2%, and India is set to regain its status as the fastest growing large economy.
Source: MoSPI, GoI
There are, however, looming headwinds like retail inflation breaching RBI’s upper tolerance limit of 6% (6.01% in January 2022) on account of rising food prices, international crude oil prices, with the Brent crude oil price hovering around $96 per barrel, and inching towards $100 per barrel, due to strong demand and supply disruptions as a result of the Ukraine crisis. The imminent speeding up of hikes in the Fed rate, and the consequent flight of capital from emerging market economies like India, could depreciate the Indian rupee further and could worsen the inflationary situation. Further, loss of lives and livelihoods, and consequently slow growth in consumption demand, along with weak growth in contact intensive sectors due to the pandemic, could prove to be a drag on the economy, if they persist for some more time.
Investment in Infrastructure for Turbo-charging the Indian Economy
The Budget has done well to focus on the achievement of high, sustainable and inclusive growth. It has proposed a significantly higher allocation of 35.4% to capital expenditure to INR 7.5 trillion compared to INR 5.54 trillion in the previous year’s Budget, which is a continuance of strong growth in capital expenditure during 2020-21(actual) and 2021-22 (budget estimate) (Figure 2).
Source: Expenditure Profile (various issues), Ministry of Finance, Budget Division, GoI
The basic philosophy behind the Budget is to spend more in the core sector and accelerate growth. A massive release of funds for infrastructure projects will stimulate a large number of core sector suppliers such as steel and cement, which will create more jobs and increase economic demand and boosting growth in the economy. Investments in infrastructure is said to have a multiplier effect of four times of the money spent. As asserted by the Union Finance Minister Ms. Nirmala Sitharaman: “ Even if private investment is taking a while to come into this whole scene, the government will have to spend and pull the economy forward and gradually as we do this, we expect the private investment to come out in full force.”
The present Budget has carried forward the focus on investment in infrastructure for boosting economic growth, along with a focus on health and wellbeing of the people in the Union Budget 2021-22. The pillars on which the previous Budget rested were: health and wellbeing; physical and financial capital and infrastructure; inclusive development for an aspirational India; reinvigorating human capital; innovation and R&D; and minimum government and maximum governance. The Budget 2022-23 carries forward the pillars of the previous Budget, but adopts certain goals for the next quarter century – the Amrit Kaal – setting a blueprint for the vision of India@100, viz. complementing the macro-economic level growth focus with a micro-economic level all-inclusive welfare focus; promoting digital economy & fintech, technology enabled development, energy transition, and climate action; and relying on virtuous cycle starting from private investment with public capital investment helping to crowd-in private investment.
The four priorities for achieving the vision for India@100 articulated in the Budget are: PM Gati Shakti; Inclusive Development; Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition, and Climate Action; and Financing of Investments. PM Gati Shakti is driven by seven engines, viz. roads, railways, airports, ports, mass Transport, waterways, and logistics infrastructure. The aim is to bring about seamless multimodal movement of goods and people, which would lead to overall improvement of efficiency in the economy and ease of living. The PM Gati Shakti National Master Plan aims to bring about world class modern infrastructure and logistics synergy. This would lead to improvement in productivity and acceleration in economic growth and development on a sustainable basis.
Ecologically sustainable connectivity in hilly areas, through National Ropeways Development Programme, proposed to be taken up on PPP mode, would not only provide a convenient mode of transport, but would also promote tourism. The programme will also cover congested urban areas.
The Prime Minister’s Development Initiative for North- East (PM-DevINE), a new scheme for the development of the North Eastern States, with an initial allocation of INR15 billion, will fund infrastructure, in the spirit of PM Gati Shakti, and social development projects based on felt needs of the region The scheme will enable livelihood activities for youth and women,
The strengthening of health infrastructure, speedy implementation of the vaccination programme, and the nation-wide resilient response to the current wave of the pandemic, have been at the top of GoI’s agenda, for dealing with the present pandemic scenario, and making the country future ready to effectively address and manage pandemic situations.
Inclusive Growth and Welfare
Apart from the massive investment proposed for infrastructure, the Budget also prioritizes inclusive welfare and growth, while giving a short shrift to politically convenient sops and subsidies. Some of the prominent announcements for attaining inclusive growth are as follows:
Modernizing the agriculture sector
Delivery of digital and hi-tech services to farmers with involvement of public sector research and extension institutions along with private agri-tech players and stakeholders of agri-value chain, a scheme in PPP mode; promoting ‘Kisan Drones’ for crop assessment, digitization of land records, spraying of insecticides, and nutrients; promoting zero-budget and organic farming, modern-day agriculture, value addition and management; raising fund with blended capital, under the co-investment model, facilitated through NABARD, to finance startups for agriculture & rural enterprise, which will support FPOs, machinery for farmers on rental basis at farm level, and technology including IT-based support; implementing the Ken-Betwa Link Project, at an estimated cost of INR 446.05 billion, aimed at providing irrigation benefits to 0.91 million hectare of farmers’ lands, drinking water supply for 6.2 million people, 103 MW of Hydro, and 27 MW of solar power; support to concerned states for implementing the linking of five rivers, viz. Damanganga-Pinjal, Par-Tapi-Narmada, Godavari-Krishna, Krishna-Pennar and Pennar-Cauvery; a comprehensive package for promoting food processing with participation of state governments, which would facilitate farmers to adopt suitable varieties of fruits and vegetables, and to use appropriate production and harvesting techniques.
Revamping the MSME Sector
Interlinking Udyam, e-Shram, NCS and ASEEM portals, to provide services related to credit facilitation, skilling, and recruitment with an aim to further formalise the economy and enhance entrepreneurial opportunities for all; extending Emergency Credit Line Guarantee Scheme (ECLGS) up to March 2023 and expanding its guarantee cover by INR 500 billion to total cover of INR 5 trillion, with the additional amount being earmarked exclusively for the hospitality and related enterprises; revamping the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme to facilitate additional credit of INR 2 trillion for Micro and Small Enterprises and expand employment opportunities; and rolling out the Raising and Accelerating MSME Performance (RAMP) programme with outlay of INR 60 billion over 5 years to help the MSME sector become more resilient, competitive and efficient.
Creating a Strong Digital Ecosystem
Aligning the National Skill Qualification Framework (NSQF) with dynamic industry needs; launching Digital Ecosystem for Skilling and Livelihood – the DESH-Stack e-portal; promoting startups to facilitate ‘Drone Shakti’ through varied applications and for Drone-As-A-Service (DrAAS); Establishing Digital University to provide access to students across the country for world-class quality universal education with personalised learning experience at their doorsteps; rolling out an open platform, for the National Digital Health Ecosystem; and launching a ‘National Tele Mental Health Programme’ to improve the access to quality mental health counselling and care services.
Women Empowerment and Child Development
Mission Shakti, Mission Vatsalya, Saksham Anganwadi and Poshan 2.0 were launched recently to provide integrated benefits to women and children. The new generation The Budget has proposed to upgrade 0.2 million anganwadis to Saksham Anganwadis, with improved infrastructure.
Housing and Drinking Water for All
Universal coverage of low-cost housing and access of every household to tapped drinking water, aim at ease of living for all.Therefore, under the PM Awas Yojana, 8 million houses are expected to be completed during 2022-23. Currently, 87 million households have access to drinking water under Har Ghar, Nal Se Jal. The scheme aims to cover 38 million households in 2022-23.
Addressing Rural-Urban Divide
Aspirational Districts Programme
Under the Aspirational Districts Programme improvement in the quality of life of citizens in the most backward districts of the country has been observed, 95% of those 112 districts having made significant progress in key sectors such as health, nutrition, financial inclusion and basic infrastructure, surpassing the state average values. However, some blocks in those districts, continue to lag. Therefore, in 2022-23, the programme will focus on such blocks in those districts, under the Aspirational Blocks Programme.
Vibrant Villages Programme
A new Vibrant Villages Programme will be implemented in villages on the northern border, with sparse population, limited connectivity and infrastructure. The activities under the programme will include construction of village infrastructure, housing, tourist centres, road connectivity, provisioning of decentralized renewable energy, direct to home access for Doordarshan and educational channels, and support for livelihood generation. Existing schemes will be converged with this programme.
Digital Financial Inclusion
Post Offices under core banking system
100% of 1.5 lakh post offices will come on the core banking system enabling financial inclusion and access to accounts through net banking, mobile banking, ATMs, and also provide online transfer of funds between post office accounts and bank accounts.
Digital Banking Units
75 Digital Banking Units (DBUs) are proposed to be set up in 75 districts of the country by Scheduled Commercial Banks.
Financial support for digital payment
Financial support for digital payment ecosystem announced in the previous Budget will continue in 2022-23.
Productivity Enhancement
Major sectors of the Indian economy need to become globally competitive, if India is to grow rapidly and sustainably over the next quarter of a century to transform itself into a global economic powerhouse. Some of the major announcements in this regard are as under:
Ease of Doing Business 2.0 & Ease of Living
The next phase of EODB and Ease of Living would aim to improve productive efficiency of capital and human resources, with the government following the idea of ‘trust-based governance’. Active involvement of the states, digitization of manual processes and interventions, integration of the central and state-level systems through IT bridges, a single point access for all citizen-centric services, and a standardization and removal of overlapping compliances, are expected.
Energy Transition, Climate Action and Circular Economy
The Hon’ble Prime Minister of India, at the COP26 summit in Glasgow had said, “what is needed today is mindful and deliberate utilization, instead of mindless and destructive consumption.” The low carbon development strategy indicates the government’s strong commitment towards sustainable development. The Budget has announced the following short-term and long-term actions:
Additional allocation for PLI
An additional allocation of INR195 billion for PLI for manufacture of high efficiency modules, in order to facilitate domestic manufacturing for achieving the ambitious goal of 280 GW of installed solar capacity by 2030.
Transition to circular economy
The transition to circular economy is expected to help in productivity enhancement as well as creating large opportunities for new businesses and jobs. While the action plans for ten sectors such as electronic waste, end-of-life vehicles, used oil waste, and toxic & hazardous industrial waste are ready, the Budget identifies policy focus on addressing important cross cutting issues of infrastructure, reverse logistics, technology upgradation and integration with informal sector.
Transition to carbon neutral economy
While five to seven per cent biomass pellets will be co-fired in thermal power plants resulting in CO2 savings of 38 MMT annually, it will also provide extra income to farmers and create job opportunities, while helping avoid stubble burning in agriculture fields.
Urban Development
India @100 will have nearly half its population living in urban areas. The government plans to nurture the megacities and their hinterlands to become current centres of economic growth and also to facilitate tier 2 and 3 cities to take on the mantle in the future to realise the country’s economic potential, including livelihood opportunities for the demographic dividend. States would be involved as partners in the process of urban planning and development, with financial support from the Central Government. The government also plans to promote a shift to use of public transport in urban areas, which will be complemented by clean tech and governance solutions, special mobility zones with zero fossil-fuel policy, and EV vehicles.
Telecom Sector
The Budget highlights the importance of telecommunication in general, and 5G technology in particular, as an enabler of growth and creation of employment opportunities. Spectrum auctions will, therefore, be conducted in 2022 to facilitate rollout of 5G mobile services within 2022-23 by private telecom providers. Further, a scheme for design-led manufacturing will be launched to build a strong ecosystem for 5G as part of the PLI Scheme.
Export Promotion
India needs to develop into an export-led economy if it is to grow into a $40 trillion economy by India@100. The Budget has announced that the Special Economic Zones Act will be replaced with a new legislation that will enable the states to become partners in ‘Development of Enterprise and Service Hubs’. This will cover all large existing and new industrial enclaves to optimally utilize available infrastructure and enhance competitiveness of exports.
Development of Sunrise Sectors
The Budget underscores the immense potential of Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems, in achieving sustainable development at scale, modernizing the country, and also in creating employment opportunities for the youth, while making Indian industry more efficient and competitive.
Mission $40 trillion by India@100
The Union Budget 2022-23 is futuristic and has presented a blueprint to transform India into a leading global economic power by the year 2047. India’s nominal GDP in 2021-22 is estimated at INR 232.1 trillion, which is just over $3.1trillion, well short of $5 trillion by 2024-25.
Can India become a $40 trillion economy by India@100?
While the target may seem humongous, the basic ingredients for achieving the vision have been presented in the Budget, with a focus on investment in infrastructure and other capital investments, raising overall productivity in major sectors of the economy, export promotion, development of sunrise sectors, modernizing the agriculture and food processing sectors, comprehensive development of the North Eastern Region and aspirational blocks, and climate action for sustainable and inclusive development.
The estimated production of oilseeds is set to decline by -1.4% to 233.9 lakh tonnes (LT) in Kharif 2021-22, from 240.3 LT in 2020-21, due to a decline in acreage by -1.3% (Table 1 and Chart 1). The five-year CAGR of oilseeds production is estimated to be 3.7%. India’s demand for oilseeds is mostly met through imports. Therefore, Government of India’s decision to launch the National Mission on Edible Oils – Oil Palm (NMEO-OP), a Centrally Sponsored Scheme, is expected to significantly increase acreage and output of oilseeds in the country.
Among major oilseeds, groundnut and soyabean are expected to experience decline in output in kharif 2021-22. Groundnut output is estimated to decline by -3.5% to 82.5 LT, due to -3.6% decline in area under cultivation (Table 1 and Chart 1). The five-year CAGR of groundnut production is estimated to be 6.5%. It is estimated that soyabean production would decline by -1.4% to 127.2 LT, although there has been a marginal increase of 0.5% in acreage. Soyabean output would grow at a five-year CAGR of 2.8%.
Commercial crops like sugarcane and cotton are expected to perform better than the previous year. Sugarcane production is estimated to grow at 5% over the previous year to set a record of 4192.5 LT, on account of 1.6% increase in acreage. The output of cotton is expected to increase by 4.4% to 362.2 lakh bales, although there has been a significant decline of -5.8% in the area under cultivation, signifying an improvement in productivity. Finally, the output of Jute and Mesta is expected to decline by -1.1% to 96.1 lakh bales, although there has been an increase of 1% in acreage (Table 1 and Chart 1).
Source: First Advance Estimates of Production of Foodgrains for 2021-22, Ministry of Agriculture and Farmers’ Welfare, GoI, and calculations by InsPIRE.
Source: Prepared by InsPIRE, based on data accessed from First Advance Estimates of Production of Foodgrains for 2021-22, and Progress Report of Kharif Area Coverage as on 17/09/2021, Ministry of Agriculture and Farmers’ Welfare, GoI.
Institute for Pioneering Insightful Research & Edutech Private Limited 