Leverage trade

Export-oriented policies can relieve farm distress

Agricultural exports have traditionally outstripped imports by handsome margins. But a sharp 21 per cent decline in exports and a much sharper 65 per cent rise in imports of farm goods in the past four years have virtually eroded the positive trade balance. Going by the latest official data, farm exports have dwindled from $43 billion in 2013-14 to below $34 billion in 2016-17, while imports have surged from $15 billion to over $25 billion during the same period. The blame for this unwarranted trend lies largely with ill-advised agricultural pricing and trade policies, though the softening of the global commodities prices, too, seems to have contributed to it. The government’s policies often favour imports of even those products whose indigenous production can easily be raised to meet the growing demand; pulses and oilseeds are two such examples. The fear is that such imprudent policies may perpetuate agri-trade deficit.

The negative trade balance has wide-ranging ramifications for agriculture. While excessive imports depress domestic prices to the detriment of Indian farmers, the shrinkage of the export window deprives growers of an additional outlet for the disposal of their surplus produce that cannot be absorbed in the local market. Frequent bans on exports or changes in the minimum export prices — in a bid to restrain food inflation — coupled with curbs such as stock limits and movement restrictions ultimately hurt the interests of the growers, exacerbating their economic hardships. In fact, the anti-exports bias in the agricultural trade policy goes back to the early 2000s. A study by the Indian Council for Research on International Economic Relations and the World Bank showed that the domestic prices of key farm products generally ruled below the export-parity levels during most part of the 2004-14 decade. However, this opportunity could not be gainfully exploited to the advantage of local farmers due to restrictive trade policies. Even the export opportunities offered by the global food crisis of 2007-08, when the international prices shot up substantially above the Indian prices to make exports highly lucrative, were frittered away for want of favourable policies.

Several recent studies, including one by the Centre for Environment and Agriculture in association with the Tata Strategic Management Group, have pointed to the need for raising agri-exports four-fold to $100 billion in the next five years in order to boost farmers’ earnings. Better marketing facilities and prices for commodities in which India excels in production, such as milk, fruit, vegetables, fish, and eggs, would benefit small and marginal farmers involved in producing them. However, such an export boost by 2022 would necessarily require policies that leverage trade. Knee-jerk reactions to prices should be avoided. The Commission for Agricultural Costs and Prices (CACP), too, has emphasised stable external trade policies for farm goods in many of its reports. There is a need also to create necessary supportive infrastructure and a quality assurance mechanism for agri-exports. These aspects need to be addressed without further delay if the government is serious about relieving farm distress and doubling farmers’ incomes by 2022.