Why in news?

India's agricultural exports decreased by 8.2% in the fiscal year ending March 31, 2024, due to restrictions on shipments of various commodities (from cereals and sugar to onions).

What’s in today’s article?

• Overall agricultural scenario
• Analysis of Agricultural export
• Agri exports: key trends
• Agri imports – key trends
• Key takeaways

Overall agricultural scenario in India

• Growth rate and contribution
  • According to the second advance estimates, agriculture and allied sector is projected to grow 0.7% in FY24.
  • The agricultural sector is estimated to constitute 18 percent of India's GVA in FY24.
• Production
  • The total food grains production for FY23 was 329.7 million tonnes, marking a rise of 14.1 million tonnes compared to the previous year.
    • The horticulture production was 355.25 million tonnes which is the highest ever for Indian Horticulture (as per third advance estimates).
  • India's global dominance extends across agricultural commodities, making it the largest producer of milk, pulses, and spices worldwide.
  • Additionally, India ranks second-largest producer of fruits, vegetables, tea, farmed fish, sugarcane, wheat, rice, cotton, and sugar.

Analysis of Agricultural export

• Statistics
  • The total value of farm exports was $48.82 billion in 2023-24, according to Department of Commerce data.
  • It has shown a decline from the record $53.15 billion in 2022-23 and $50.24 billion in the previous fiscal year.
• Trends Over Years
  • During the initial years of the present govt, agricultural exports dropped from $43.25 billion in 2013-14 to $35.60 billion in 2019-20, accompanied by an increase in imports from $15.53 billion to $21.86 billion (during the same period).
  • During this period, global agri-commodity prices fell significantly, leading to a decline in India's agricultural exports.
    • The UN Food and Agriculture Organization’s (FAO) food price index dropped from an average of 119.1 to 96.5 points between 2013-14 and 2019-20.
  • Low international prices made India's exports less competitive and increased its vulnerability to imports.
• Impact of Global Events
  • The global price recovery after the Covid-19 pandemic and Russia’s invasion of Ukraine caused India's farm exports and imports to reach all-time highs in 2022-23, with the FAO index soaring to 140.8.
  • However, exports decreased in the fiscal year that just ended.

Agri exports: key trends

• Impact of ban on export of sugar and non-basmati rice
  • The fall in exports to have been led primarily by sugar and non-basmati rice.
  • The government hasn’t allowed any sugar to go out of the country during the current production year from October 2023.
    • Exports of the sweetener were valued at only $2.82 billion in 2023-24, after peaking at $5.77 billion and $4.60 billion in the preceding fiscals.
  • Concerns over domestic availability and food inflation have similarly triggered a ban on exports of all white non-basmati rice since July 2023.
    • Currently, only parboiled grain shipments are being permitted within the non-basmati segment, while also attracting a 20% duty.
    • These restrictions have pulled down overall non-basmati exports from a record $6.36 billion in 2023-23 to $4.57 billion in 2023-24.
• Impact of export restrictions on wheat and onion
  • Wheat exports were altogether stopped in May 2022, following which their value plunged to $56.74 million in 2023-24, after reaching an all-time-high of $2.12 billion in 2021-22.
  • Similarly, the onion export was also banned.
    • On May 4, 2024, the Centre lifted a ban on exports of the bulb. Simultaneously, a floor price of $550 per tonne, along with a 40% duty, was imposed.
• Trend of other major agri export items
  • Most of the other major agri export items — barring marine products, castor oil and other cereals (mainly maize) — have posted growth.
  • Basmati rice exports fetched $5.84 billion in 2023-24, surpassing the previous high of $4.86 billion achieved back in 2013-14.
  • Spices exports, too, crossed the $4 billion mark for the first time.

Agri imports – key trends

• Dip in imports of edible oils
  • Analysis of data shows that the 7.9% dip in overall agri imports during 2023-24 was largely due to a single commodity - edible oils.
  • India’s imports of vegetable fats topped $20 billion in 2022-23.
    • That was the year immediately after the Russia-Ukraine war when the global price of vegetable oils increased.
  • However, 2023-24 saw lowering of global prices of the vegetable oil. This, in turn, reduced the import bill to below $15 billion during last fiscal.
• Increase in import of pulses
  • The import of pulses almost doubled to $3.75 billion in 2023-24, the highest since the $3.90 billion and $4.24 billion levels of 2015-16 and 2016-17 respectively.

Key takeaways

• Policy stability and predictability is the key
  • Farmers and agri-traders, like all businessmen, want policy stability and predictability.
  • When governments resort to banning/restricting agri exports, they usually privilege the interests of consumers over producers.
    • These actions hurt more when taken overnight, like with wheat exports.
  • Building export markets takes time and effort.
  • A more predictable and rules-based policy — say, introducing temporary tariffs instead of outright bans or quantitative restrictions — is what is recommend.
• Zero/low import duties are not suitable for crop diversification
  • The govt has done away with import duties on most pulses — arhar (pigeon pea), urad (black gram), masoor (red lentils), etc.
    • The rate has been kept at 5.5% for crude palm, soyabean and sunflower oil.
  • The above zero/low tariffs are at variance with the government’s own objective to promote crop diversification.
    • The govt is taking steps to wean away farmers from rice, wheat and sugarcane to growing pulses and oilseeds, which are less water-guzzling and also significantly imported.