Context:

• Amid global economic uncertainties and domestic policy challenges, there is the need to examine India’s trade performance in the fiscal year 2024-25 (FY25).
• The article highlights the growth in overall exports, rising trade deficit, and the complex dynamics of agricultural trade, stressing the need for sustainable strategies and consistent trade policies.

Overview of India’s Trade Performance in FY25:

• Recent developments:
  • The Donald Trump administration’s shifting tariffs and global geopolitical tensions.
  • The India-UK Free Trade Agreement has been successfully concluded.
  • The government is negotiating a bilateral trade agreement with the US.
• Export-import performance:
  • Total exports: $820.93 billion (marking an increase of 6.5% over FY24)
    • Merchandise: $437.42 billion (53%).
    • Services: $383.51 billion (47%) – led by IT, finance, and business services.
  • Total Imports: $915.19 billion (marking an increase of 6.85%)
    • Merchandise: $720.24 billion (79%)
    • Services: $194.95 billion (21%)
  • Trade deficit: $94.26 billion (increased from $78.39 billion in FY24)
  • Trade-to-GDP ratio: With the IMF estimating India’s nominal GDP at $4.19 trillion in FY25, the trade-to-GDP ratio stands at a robust 41.4% — this reflects a deeper link with global markets.

Agricultural Trade - A Mixed Picture:

• Agri-export trends:
  • FY25 agri-exports: $52 billion (marking an increase of 6.3% from $48.9 billion in FY24).
  • 2030 target: $100 billion - this means that current growth is inadequate.
  • Comparative growth:
    • FY05–FY14: 20% annual growth.
    • FY15–FY25: Slowed to 2.3% per annum.
    • Agri-trade surplus: Shrunk from $27.7 billion (FY14) to $13.8 billion (FY25).
• Constraints on growth:
  • External factors: Global price fluctuations.
  • Domestic policy issues: Frequent bans or curbs on key items like rice, wheat, sugar, and onions.

Case Study - Rice Exports in FY25:

• Performance:
  • Volume exported: 20.2 MMT
  • Value: $12.5 billion (~25% of agri-exports)
• Lessons from past:
  • The government’s rice export controls in 2022-23 offer useful lessons.
  • As India restricted broken rice exports, slapped duties on parboiled rice, and introduced a minimum export price (MEP) for Basmati, global rice prices spiked.
• Impact:
  • Although the volume of exports fell by 27% (from 22.3 MMT in FY23 to 16.3 MMT in FY24), the export value dropped by only 6%.
  • Once most restrictions on rice exports were lifted in late 2024 (except for broken rice), rice exports bounced back to 20.2 MMT, bringing in $12.5 billion in FY25.
• Critical insight: India’s dominance in global rice trade — about one-third of the 61.4 MMT market in FY25 — gives it the power to influence global prices.
• Policy suggestion: As over-exporting depresses these prices (yielding lower marginal revenue), India should impose an export duty of ~10 to 15% to ensure that marginal revenue from exports does not decline.

Sustainability Challenge in Rice Production:

• Resource intensity:
  • Water use: 3,000–5,000 litres/kg.
  • Water export estimate: ~40 billion cubic metres via rice exports.
• Subsidy concerns: Much of India’s global competitiveness stems from heavy subsidies on water, electricity, and fertilisers used in its production.
• Strategic shift required:
  • India’s agri-export strategy must focus on improving productivity across the board.
  • This means greater investment in R&D, better seed technology, expanded irrigation, judicious use of fertilisers, and wider adoption of resource-efficient farming practices such as precision agriculture and fertigation.
  • By doing so, India can lower its per-unit cost of production, enhance its global competitiveness, increase export earnings, boost farmer incomes, and promote environmental sustainability.

Agri-Imports - Rising Concerns:

• FY25 data:
  • Total agri-imports: $38.2 billion (an increase of 16.5% from $32.8 billion in FY24).
  • Edible oils: $17.3 billion (16.4 MMT) primarily palm oil, followed by soybean and sunflower, constituting 45.4% of agri-imports, which is excessive and unsustainable.
• Edible oil strategy and challenges:
  • India must pursue a targeted, pragmatic policy focused on domestic oil palm
  • Oil palm yields up to four tonnes of oil per hectare, 10 times more than mustard.
  • However, it takes four to six years to mature, during which smallholders face income loss.
• Policy recommendations:
  • Government support, equivalent to the opportunity cost of their land (that forgone income from crops), is essential during this gestation phase.
  • Incentives should also promote higher oil recovery rates through improved processing.
  • A regulated plantation model involving corporate leasing under oversight and collaboration with farmer producer organisations (FPO) could unlock private investment while safeguarding farmer interests.

Conclusion - Strategic Roadmap Ahead:

• Agriculture trade policy must be consistent and transparent, balanced between domestic needs and export goals.
• Long-term focus areas should be productivity enhancement, sustainability, and global competitiveness.
• Broader vision should be to harness trade as a lever for rural growth, farmer welfare, and global leadership in sustainable agriculture.