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Why India’s farm exports may face headwinds

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Why India’s farm exports may face headwinds


Context- Both agricultural exports from and imports into India have scaled new highs in the fiscal year that ended March 31, 2023.

Provisional data from the Department of Commerce shows total farm exports at $53.15 billion and imports at $35.69 billion during 2022-23, surpassing their previous year’s records of $50.24 billion and $32.42 billion respectively.

The drivers – global prices

The chart shows the country’s farm trade over the last decade.

(Credits- Indian Express)

  • Between 2013-14 and 2015-16, exports sharply fell from $43.25 billion to $32.81 billion. The basic driver was global prices.
  • The UN Food and Agriculture Organization’s Food Price Index (FPI) – a weighted average of world prices of a basket of food commodities over a base period value (2014-16=100) – recovered to 102.5 points by 2020-21, and further to 133 points in 2021-22 and 139.5 points in 2022-23.
  • And as that made India’s agri-commodities more globally price competitive, exports also soared to $41.90 billion, $50.24 billion and $53.15 billion during these three years.

Major export contributors

India’s agri exports have, in recent times, been powered by three items: Marine products, rice and sugar (table 1).

(Credits- Indian Express)

  • Marine product exports have grown steadily from $5.02 billion in 2013-14 to $8.08 billion in 2022-23. Rice exports have also gone up during this period, from $7.79 billion to $11.14 billion.
  • But it’s been driven by non-basmati rice (more than doubling, from $2.93 billion to $6.36 billion), with the value of premium-priced basmati shipments actually declining (from $4.86 billion to $4.79 billion).
  • Basmati exports are mainly to the Persian Gulf countries and, to some extent, the US and UK. Non-basmati shipments are more diversified, with the destinations spread across Asia (Bangladesh, China, Sri Lanka, Malaysia, Vietnam, UAE and Iraq) and Africa
  • The boom in sugar exports has been more recent – from a mere $810.90 million in 2017-18 to $1.97 billion in 2019-20, $2.79 billion in 2020-21, $4.60 billion in 2021-22 and $5.77 billion in 2022-23.

Laggards and losers

  • Two items whose exports had registered substantial increases, only to falter in the last few years, are spices and buffalo meat.
  • Spices exports jumped from $2.5 billion in 2013-14 to almost $4 billion in 2020-21. It was led not by traditional plantation spices such as pepper and cardamom, but by chilli, mint products, cumin, turmeric, ginger, coriander, fennel and other seed spices. However, exports have since stagnated.
  • Buffalo meat shipments, too, have never regained their peak of $4.78 billion reached in 2014-15.
  • The drop has been even more for raw cotton, guar-gum and oil meals.

Imports profile

Unlike exports, India’s imports of farm produce are dominated by a handful of items (table 2).

(Credits- Indian Express)

  • The most significant is vegetable oils, whose imports have more than doubled in value terms, from $9.67 billion to $20.84 billion between 2019-20 and 2022-23.
  • Imports meet roughly 60% of India’s vegetable oil requirements. That dependence is hardly 10% now in pulses.
  • On the other hand, imports of spices, cashew and cotton – commodities where India has traditionally been a net exporter – have shown a rising trend. Spice imports going up are a reflection of reduced price competitiveness (vis-à-vis Vietnam in pepper and Guatemala in pepper), while an outcome of stagnant, if not falling, domestic production in cotton.

Risks to trade

Agri-exports in the current fiscal could face headwinds from two sources.

  • The first is international prices: The latest FPI reading of 127.2 points for April 2023 is down from the 159.7 points peak of March 2022 and the 2022-23 average of 139.5 points.
  • The second source is domestic, more specifically food inflation fears ahead of the 2024 national elections. The central government banned wheat exports last May. This was followed by a ban on broken rice exports and the slapping of a 20% duty on all non-parboiled non-basmati shipments in September. Exports of sugar have also stopped since this month’s start.

Conclusion- India’s farm trade surplus was lower in 2022-23 than in the previous year.  Agri exports are powered by marine products, sugar, and rice. Global prices and domestic food inflation could be key factors this fiscal, affecting agri trade.

Syllabus- GS-3; Agriculture

Source- Indian Express

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