Editorial 1: Trade deals will bring opportunities for Indian agriculture. But there will also be challenges
Introduction
India’s trade performance in FY25 showed resilience amid global uncertainties like shifting US tariffs and geopolitical tensions. Total exports goods and services combined rose to 6.5% .
Agricultural Exports: Slow Growth Amid High Potential
- Agriculture employs over 46% of India’s workforce, yet its export growth remains sluggish.
- In FY25, agricultural exports rose modestly to $52 billion from $48.9 billion in FY24 — a 6.3% increase. This is far below the $100 billion target set for 2030.
- Historically, between FY05 and FY14, agri-exports grew at 20% annually.
- But between FY15 and FY25, growth slowed to just 2.3% per year. As a result, India’s agri-trade surplus fell sharply from $27.7 billion in FY14 to $13.8 billion in FY25.
Export Controls: A Double-Edged Sword
- India’s frequent export restrictions, especially on essentials like rice, wheat, sugar, and onions, have disrupted trade momentum. These are often used to control domestic inflation but hurt export consistency.
- Rice is India’s top agricultural export. In FY25, India exported 20.2 million metric tonnes (MMT) of rice worth $12.5 billion nearly 25% of total agri-exports.
- Despite export bans and duties in FY23 and FY24, rice exports rebounded once restrictions were lifted in late 2024.
- India commands one-third of the global rice trade and can influence global prices. Experts suggest applying a moderate export tax (10–15%) to balance export volumes and maintain profitable prices.
Sustainability Concerns
- Rice cultivation is highly water-intensive.
- Producing 1 kg of rice consumes 3,000–5,000 litres of water.
- Based on FY25 export volumes, India effectively exported around 40 billion cubic metres of water a major concern given the country’s water stress.
- Heavy subsidies on water, electricity, and fertilisers also distort true production costs and environmental impacts.
Need for Investment in Sustainable Productivity
- To enhance competitiveness and boost agricultural exports, India must invest in improving farm productivity through sustainable methods.
- This includes increasing research and development in agriculture, adopting advanced seed technologies, expanding irrigation networks, and ensuring the efficient use of fertilisers.
- Additionally, promoting modern practices like precision farming and fertigation,which involves applying fertilisers through micro-irrigation can significantly reduce input costs, enhance crop yields, and ensure long-term environmental sustainability.
Reducing Dependence on Edible Oil Imports
- India’s agri-imports rose to $38.2 billion in FY25, with edible oils making up nearly half ($17.3 billion).
- With 55–60% of oil consumption met by imports, India must focus on domestic oil palm cultivation, which offers high yields but has a 4–6 year maturity period.
- During this time, small farmers need financial support. A regulated plantation model involving private investment and Farmer Producer Organisations (FPOs) can ensure sustainable development.
Conclusion
Export growth is hampered by inconsistent policies and sustainability issues. With a consistent trade strategy and long-term investments in sustainable farming practices, India can boost agri-exports, support farmers, and become a leading force in global agricultural trade.