AGRICULTURAL
EXPORTS – ECONOMY
News: The double-whammy from India’s
falling farm exports
What's
in the news?
●
India’s agricultural exports are poised to
scale a new peak in the financial year ending March 2023, as per the latest
government data.
●
However, easing world prices are also
expected to dampen prospects. In the context of the high agricultural diversity
present in India, there is huge potential to boost the exports of agri-produce
from India.
Key
takeaways:
●
The effects of bans/restrictions on rice,
wheat and sugar shipments are showing in declining agri exports from India,
even as imports are continuing unhindered and hurting farmers.
Importance
of Agricultural Exports:
●
Agricultural exports, which comprise 10%
of India's GDP, have a substantial positive economic impact, as per the
Government of India's Ministry of Commerce and Industry site.
●
India's
agricultural exports climbed by 17.34% in 2021, breaking the previous record of
$41.25 billion.
●
Agricultural exports help farmers and
agricultural businesses become more financially stable because they bring in
more money. As an example, the income of Indian mango farmers who send their
fruit to the US and Europe has doubled.
1.
Export diversification:
●
When agricultural exports go up, trade
risks go down and farmers' incomes go up, like in India, where mango farmers'
incomes have gone up.
2.
Employment-producing:
●
According to the Federation of Indian
Export Organizations, agricultural exports open up employment prospects,
particularly in rural areas where there are few employment options.
3.
Improves global visibility:
●
Successful agricultural exports can
increase India's global reputation, draw international investment, and
encourage tourism.
4.
Promotes sustainability:
●
Exporting organic and ecologically
friendly goods increases public knowledge of green living. In recent years,
there has been more demand for organic spices and herbs from India. This has
led to an increase in the use of sustainable farming methods.
5.
Increases the use of technology:
●
To meet export regulations, farmers and
agricultural businesses use better technology and processes, which makes them
more efficient.
6.
Export promotion:
●
NITI Aayog says that exporting products
that go bad quickly cuts down on waste and encourages good supply chain
management. They also estimate that post-harvest food waste costs the country
about 90,000 crore rupees.
Government
Measures:
1.
Agriculture Export Policy 2018 (AEP):
●
Diversify export basket and destinations.
●
Boost high value-added agricultural
exports.
●
Promote indigenous, organic, traditional
and non-traditional Agri products exports.
●
Provide an institutional mechanism for
pursuing market access.
●
Enable farmers to benefit from export
opportunities in overseas market.
2.
Cluster Development:
●
As part of the Agriculture Export Policy,
46 unique product-district clusters have been identified for export promotion.
●
29 Cluster Level Committees have been
formed in different clusters like Varanasi (Fresh Vegetables), Ananthpur
(Banana), Nagpur (Orange), Lucknow (Mango).
3.
Financial Assistance Scheme (FAS):
●
It is the export promotion scheme by the
Agriculture and Processed Food Products Export Development Authority (APEDA).
●
The primary aim of this scheme is to
assist businesses in export infrastructure development, quality development and
market development.
●
The financial assistance under the scheme
will range from INR 5 lakh (US$ 6,500) to INR 5 crore (US$ 650,000).
4.
Ministry of Commerce & Industry Schemes:
●
The Ministry of Commerce & Industry
has also initiated several schemes to promote exports, including Trade
Infrastructure for Export Scheme (TIES), Market Access Initiatives (MAI)
Scheme.
●
The Ministry has also collaborated with
the Ministry of Civil Aviation and the Railways (and 5 other Ministries) in
utilization of Krishi Udan and Krishi Rail respectively, to ease out pressure
of high freight rates.
●
The effort resulted in smooth movement of
perishables to the important Middle East, EU and South East Asian markets.
5.
Agriculture and Processed Food Products Export Development Authority (APEDA):
●
It was formed in 1986, under the APEDA Act
1985 for the development of the exports of the agriculture sector in India.
●
The main functions of the authority are
the registration of people as exporters, fixing standards and specifications
for the scheduled products, carrying out inspections, collecting statistics and
providing information, training and advisory services to the exporters.
Challenges
faced by Agricultural Exports:
●
Lack
of adequate storage, transportation, and cold chain infrastructure
leads to exports of poor quality. In 2021, Indian exporters had trouble sending
mangoes to the US because they didn't have enough cold storage space.
●
Non-tariff
barriers: According to the World Bank, India's exports are less
competitive due to strict import laws and non-tariff obstacles in target
countries. For example, in 2017, exports of seafood from India to the EU were
hampered by import restrictions on antibiotic residues.
●
Quality
problems Indian exports are turned down because the quality of
the products is low and they don't follow safety and quality rules. For
example, excessive pesticide residues led to the 2015 prohibition on shipments
of Indian grapes to Europe.
●
Lack
of market intelligence: mismatched products are produced as
a result of an inadequate understanding of market demand and trends, which
reduces export potential. For example, the global market's preference for
non-basmati rice varieties caused a decline in Indian basmati rice exports.
●
Price
volatility: As noted by the Federation of Indian
Export Organizations, fluctuations in commodity prices and currency exchange
rates have an impact on the competitiveness of Indian exports.
●
Ineffective
supply chain: Delays and losses are caused by a lack of
integration and coordination amongst supply chain players. Shipment delays are
experienced by Indian exporters as a result of poor coordination between
exporters, port authorities, and shipping firms.
●
Limited
access to export credit and high-interest rates
put Indian exports at a competitive disadvantage. Due to the need for
collateral and high-interest rates, banks are reluctant to lend money to small
and medium-sized exporters.
●
Research
and development funding is insufficient, which has a negative
impact on the competitiveness and innovation of Indian exports. Horticulture
needs more R & D to generate high-value exports like exotic fruits and
vegetables.
●
Climate
change: crop yields and quality are affected by an increase
in weather variability and extreme occurrences, which lowers the
competitiveness of Indian exports. For instance, dry spells between 2015 and
2017 and unseasonal severe rains, floods, and landslides between 2018 and 2022
led to a fall in Indian coffee exports.
WAY
FORWARD:
1.
Empowering the farmer to improve quality:
●
Farmers should be trained about export
standards and compliances. Krishi Vigyan
Kendras can be engaged to take export-oriented technology to farmers and
creating awareness among farmers about export opportunities.
2.
Infrastructure status:
●
Providing Infrastructure status to
agricultural value chains, such as warehousing, pack-houses, ripening chambers,
and cold storage.
3.
Branding produce from Export Clusters:
●
Export clusters (like Nagpur for Orange)
lack organised marketing and branding support for their products. Branding will
help ease their entry into international retail chains.
4.
Promoting Niche Indian products:
●
Traditional wisdom and nutritional value
of niche Indian food products, such as Indian variants of millets, fruits,
rice, and oilseeds make them excellent export choices.
5.
Connect to GVCs:
●
There is a need to connect Farmer Producer
Organisations (FPOs) with global value chains and importers from other markets.
It can help them understand quality needs and the importers can be assured of
quality standards.
6.
Addressing logistics glitches:
●
Agricultural commodities are perishable;
and so logistics must be robust, containers made available timely, and freight
costs stabilised.
7.
Bilateral trade and sectoral agreements:
●
To ensure favourable tariffs for India’s
agriculture exports and to address the non-tariff barriers that Indian exports
face like the quality and testing protocols, fair trade certifications etc.
8.
Research and Development:
●
It is important to promote R & D
activities for new product development for upcoming markets, like fortification
of food products.
Enhancing agriculture
exports is one of the most potent levers in improving farm incomes and ensuring rural development.