Q. Increase in agri-exports out of India despite the Pandemic shows that India has the potential to become the world leader. What factors are necessary to boost Indian exports in this regard? (150 Words)
Introduction: According to the Quick Estimates released by the Directorate General of Commercial Intelligence and Statistics (DGCI&S), there have been a steady rise in agri-exports despite Covid-19 restrictions. According to WTO’s trade map, with the total agri-exports of USD 37 billion in the year 2019, India is ranked at 9th position in the world ranking with more than 3% of Global export.
Potential of India's agri-Export:
- Value Addition increasing: The Indian agricultural economy is shifting from primary to secondary agriculture where the focus is more on developing various processed foods. The Indian food processing industry promises high economic growth and makes good profits. Currently only 10% of the agri-products are being processed.
- Reputed Indian brands: There are a number of reputed Indian and foreign brands such as Haldiram, Nestle and Cadbury. These can be encouraged to export processed foods globally as they can comply with the global standard of codex.
- Quantity of raw material available: India has 52% cultivable land, compared to 11% world average. It is the Largest arable land in the world, Largest livestock population, 17% of Global milk share(largest) and 2nd largest producer of Fisheries, Fruits & Vegetables, Cereals respectively.
- Variety of raw material available: 20 Agro-Climatic zones, 46 of the 60 soil types exist in India. 15 of 26 major world climates in the world. India has a great diversity in culture, customs and cuisine.
- Expansion potential: Only 10% food processing happens in India where as US has 65% China has 23%), and Thailand has 30%. Therefore there is a long way to go.
- Stable inflation level and large domestic consumption: There is a large Consumer base which ensures that there is a constant demand and supply.
- Cheap workforce: potential for cheap production and export.
- Cultural diversity: India has a good Traditional knowledge in good conservation. This developed a variety of taste for the world market.
- Large vegetarian population: This allows India an export of greater proportion of non-vegetarian food items to the world.
- Global agri-product inflation: The world economy is facing an inflation in the food and agri-product market due to excess liquidity. India can utilize to boost its export. This has been the reason for rise in the export of Non-Basmati rice.
- New areas of utilization: There have been increasing demand by the industry of the products such as sugarcane, oilseeds and certain plants like Jatropha for bio-fuel, lubricants and other industrial products. This can boost exports too.
- Indian buffalo meat is seeing a strong demand in international markets due to its lean character and near organic nature. The export potential of buffalo meat is tremendous, especially in countries like Vietnam, Hong Kong and Indonesia.
- IPR protection: protections in terms of Geographical Indication tag helps products like Basmati rise, silk/textile products, finished goods like Mysore Pak etc.
Challenges: India lacks comparative advantage in many items.
- Low Value addition: Still Primary processed agricultural commodities form the majority share. The Ministry of Food Processing Industries shows that the contribution of agricultural and processed food products in India’s total exports is 11%.
- Domestic prices of processed food products are much higher compared to the world reference prices. The logistics cost adds 30% of the cost which is much higher than 6% in China.
- Mandatory pre-shipment examination by the Export Inspection Agency being lengthy and costly;
- Compulsory spice board certification being needed even for ready-to-eat products which contain spices in small quantities;
- Lack of strategic planning of exports by most State governments;
- Lack of a predictable and consistent agricultural policy discouraging investments by the private sector;
- Prohibition of import of meat- and dairy based-products in most of the developed countries;
- Withdrawal of the Generalised System of Preference by the U.S. for import of processed food from India;
- Export shipments to the U.S. requiring an additional health certificate; and
- Quality & Certification Issues: The Absence of an equivalency agreement with developed countries for organic produce.
Conclusion: The Indian government has been encouraging agricultural exports to meet an ambitious target of $60bn by 2022. The government has introduced the Agriculture Export Policy, 2018 to diversify and expand the export basket so that instead of primary products, the export of higher value items, including perishables and processed food in this regard. This has propelled India in the direction of Increasing agricultural exports.