Export potential

The agricultural sector needs policy intervention

The Union government expects agricultural exports to almost double to around $100 billion by 2030. In 2022-23, the value of India’s agricultural exports was $52.50 billion, while in 2021-22 it was $50.21 billion. The growth will need to accelerate significantly to be able to attain $100 billion, which will also help push agricultural growth in the country and raise farmers’ incomes. Notably, contrary to expectations that India’s agricultural exports may remain flat in the current financial year owing to export curbs on various food items, the government expects it to exceed last year’s level. It will indeed be an achievement, particularly given the unprecedented logistical challenges in the form of high freight rates and container shortages due to the Red Sea crisis and an export restriction-induced decline.
 

Nonetheless, from a medium-term perspective, India will need to take various measures to push exports. According to a recent report by the Global Trade Research Initiative, for instance, India’s agri-export basket is fairly concentrated. Basmati rice, non-basmati rice, sugar, spices, and oil meals constitute around 51.5 per cent of India’s agricultural exports. Other agri products include coffee, tea, tobacco, fresh and processed fruit and juices, groundnuts, fresh vegetables, dairy products, and live animals. India is also a large exporter of buffalo meat and marine products. There are two important issues worth highlighting here. First, India ended up banning exports of those products in which it has held a leadership position in the world market for several years. India, for instance, accounts for more than 40 per cent of global rice exports. Such restrictions not only have implications for global food security, especially for poorer countries in the Global South but also dent India’s credibility as a reliable source of food supply. India should avoid such steps. It has been argued that instead of opting for a protectionist trade policy, the government should calibrate trade policy efficiently to control food inflation. Second, India should aim to increase diversification in its food export basket to be able to contain the risk to overall exports because of a decline in the production of one item or the other. In this context, for instance, India hopes to give a boost to exports of value-added millet products. Higher diversification will help India insulate itself to an extent from fluctuations in global prices and demand.
 

The government, to be fair, has taken initiatives to boost exports. India’s agri-export policy, for example, calls for overhauling infrastructure and logistics, a greater involvement of state governments, and developing export-centric clusters to ensure surplus produce that meets standard quality parameters. Agri-cells in Indian embassies across 13 countries have also been set up. However, challenges abound for India’s agri-trade sector, and those have forced the country to remain at the lower end of the global agri-export value chain, given that the majority of its exports are low-value, semi-processed, and marketed in bulk. The sector is hindered by inadequate cold chain infrastructure and inefficient logistics, leading to spoilage and export competitiveness issues, including problems related to the quality of products. Small and marginal landholdings, coupled with a lack of access to credit, often deter farmers from transitioning to commercial production. Addressing some of these internal issues and attracting private investment in processing and related activities will help boost exports over time.