Achievement of a $5
trillion economy by India could be pushed by a couple of years from the
original deadline of 2024-25, due to a pandemic-induced recession during
2020-21. Only a V-shaped recovery during
2021-22, and a sustainable growth of 9 percent per annum over the next five
years can turbocharge the economy to touch the $5 trillion mark. The agriculture sector which contributes 14.6
percent to the economy, needs to support this objective by focusing on private
investment and exports, while targeting
an annual agri-GVA growth of 5 percent. A focus on reforms in agri-marketing
and agri-exports, along with the promotion of hi-tech, digital and precision
agriculture, would be an appropriate recipe for transforming the agriculture
sector, while doubling farmers’ income, within a reasonable time-frame.
India ranks among the top
ten exporters of agricultural products in the world. According to WTO’s World Trade Statistical
Review 2020, the country’s share in global agricultural exports increased
from 1.1 percent in the year 2000 to 2.2 percent in 2017, valued at $39
billion, but fell to 2.1 percent in 2019, valued at $37 billion. While the US
witnessed a decline in its share of global agricultural exports from 13 percent
in 2000 to 9.3 percent ($165 billion) in 2019, Brazil’s share increased from
2.8 percent to 5.0 percent ($89 billion), and that of China increased from 3
percent to 4.6 percent ($82 billion). In order to catch-up with Brazil and
China, India needs to bring about structural reforms in the agriculture sector,
including a stable trade policy regime.
India’s agricultural
exports experienced huge fluctuations during the ten-year period 2010-11 to
2019-20. The ten-year CAGR was 1.7 percent. During the first five-year period
2010-11 to 2014-15, agri-exports increased significantly from $24.4 billion
(2010-11) to an all-time high of $43.1 billion (2013-14), before declining to
$39.4 billion (2014-15) at a CAGR of 11.5 percent. The second five-year period
(2015-16 to 2019-20) witnessed a slump in agri-exports to $33 billion
(2015-16), before a steady increase to $38.8 billion (2018-19), followed by a
slide to $37 billion (2019-20) (see Figure below). The CAGR during this period slowed
down considerably to 3.7 percent, from the previous period.
According to APEDA, during
the period April-October 2020, India’s exports of top three agri-commodities,
viz. Basmati rice, non-Basmati rice and buffalo meat, in terms of value (USD)
grew by 9 percent, 104.4 percent and 10.5 percent, respectively, compared to
the corresponding period of the previous year. The sharp rise in exports of
non-Basmati rice can be attributed to lower prices compared to that of major
rice exporters, Thailand and Vietnam and also because these countries stopped
exports due to lockdown. Taking advantage of this, Indian non-Basmati rice exporters
have been able to meet the increasing import demands from China, Bangladesh and
African countries.
However, what is
worrisome is the absence of a stable trade policy regime in India. In order to
control prices in the domestic market, the government has at different times
resorted to banning of exports of major agri-commodities, viz. rice, wheat,
sugar and onion. Imposition of minimum export price (MEP) is another tool often
used to tame inflation. These measures create
uncertainty among importing countries, and deprive farmers of higher returns
from their produce.
The Agriculture Export
Policy (AEP), 2018 of GoI, aims at achieving an export target of $60 billion by
2022 and $100 billion within a few years, thereafter. This is indeed a
humongous task, even under normal circumstances, and more so in the aftermath
of the Covid-19 pandemic. Therefore,
there needs to be a realistic resetting of the timeline to achieve the target.
Achieving the target would involve a paradigm shift from a “business-as-usual”
approach to a well-calibrated, comprehensive, strategic and result-oriented agri-export policy and
action plan. This would lead to technology-driven agricultural productivity
gains across sub-sectors, resulting in
higher output and marketable surplus for domestic and foreign markets.
The following strategies are
suggested by this author for India to achieve the target of $100 billion of
agri-exports within a reasonable time-frame, while also resulting in doubling
farmers’ income:
·
Majority of India’s agri-exports are low
value, raw or semi-processed products. Therefore, agri-export strategy should include integration
of value-added agri-produce with global value chains (GVC), by adopting the
best agricultural practices involving productivity gains and cost
competitiveness. It’s also imperative for India to reconsider joining RCEP at
an opportune time, and also to enter into FTAs with the EU, the US and the UK.
·
In order to boost exports of dairy
products and make the dairy sector globally competitive, GoI needs to consider
development of Dairy Export Zones (DEZs) in collaboration with state
governments (see “A White Revolution for Exports” by this author in FE December
07, 2019). This could immensely benefit small dairy farmers, organised as farmer
producer organisations (FPOs)/ farmer producer companies (FPCs)/ cooperatives,
for supplying milk, and also for contract production of dairy products on
behalf of major dairy producing companies,
leading to cost efficiency and higher export revenue to the dairy companies as
well as significantly higher income to farmers.
·
Linking of FPOs through contract farming
arrangements with export-oriented food processing units of food parks created
under Pradhan Mantri Kisan Sampada Yojana, for producing processed cereals,
fruits, vegetables, fish and marine products, would boost exports of processed
food and raise income of small and
marginal landholders and small fish farmers.
·
With global trade in organic products
estimated to be around $90 billion, there is a huge opportunity for exports of
value-added organic products from India, which exported $689 million worth of organic
food in 2019-20. Madhya Pradesh, Rajasthan, Maharashtra, the North Eastern
Region (NER), Uttarakhand and Goa are major producers of organic products in the country. It’s
desirable to create Organic Product Export Zones (OPEZs) in these states and NER, with common infrastructure
for processing, standardisation, storage, logistics, and connectivity to ports
and airports. Branding of products and registration as GI, could further
facilitate exports of value-added organic products. FPOs of organic farmers could
be formed and linked to the OPEZs, to ensure higher income for farmers.
·
Economic diplomacy and promotion of Brand
India can play an effective role in increasing agri-exports.
·
The AEP has recommended the establishment
of Agriculture Export Zones (AEZs), to facilitate value addition of
agri-commodities for increasing exports in a WTO compatible manner. In order to
ensure higher income for farmers, FPOs need to be linked to AEZs to supply SPS-compliant
agri-products.
·
Higher investments in Research and
Development (R&D) and technology, viz. Internet of Things (IoT), artificial
intelligence (AI) and blockchain, for improving agricultural productivity,
resource-use efficiency and export competitiveness.
·
Linking farmers/ FPOs to the export market
and skilling of surplus farmers for their absorption in the agri-export value
chains, could be an important strategy to sustainably raise farmers’ income.
Concerted efforts by GoI,
state governments, Indian embassies, APEDA, EXIM Bank, NABARD, and all other stakeholders
in the agri-export value chains, are needed to address a whole range of issues
pertaining to promotion of agri-exports,
which could potentially propel India into the top bracket of
agricultural exporters, and in the process facilitate doubling of farmers’
income within a reasonable time-frame.
CAGR: 2010-11 to 2019-20 = 1.7%; 2010-11 to 2014-15
= 11.5%; 2015-16 to 2019-20 = 3.7%
Source: Author’s calculations
based on data accessed from Economic Survey, Government of India (various
issues) and World Trade Statistical Review 2020, WTO
