Agriculture Export Policy of India: Status, Objectives and Challenges

Context:

This article is based on the news “Export potential” which was published in the Business Standard. The Indian government targets to double agricultural exports to around $100 billion by 2030.

Agriculture Export of India: Latest Data

• Current Agriculture Export Value: The value of India’s agriculture exports was $52.50 billion in 2022-23, while in 2021-22 it was $50.21 billion. 
• Need for Accelerated Growth: Thus, the growth will need to be accelerated significantly in order to attain the target of $100 billion, which will help push agricultural growth in the country and raise farmers’ incomes.

Status of Agriculture Export and Import from India

• Share in Global Production and Exports: India ranks second in global agriculture production, but its share in global agricultural exports is only 2.4 percent, placing it eighth in the world (WTO’s Trade Statistical Review, 2022). 
  • In 2023, India exported 44 MMT and imported 25 MMT of agriculture products.
• Share in GDP:  In terms of domestic contributions, agricultural exports make up less than 2 percent of India’s GDP, which is lower compared to other developing agrarian countries.
• Top Agriculture Imports: Vegetable oil, pulses, and fresh and dry fruits account for 72.1% of agriculture imports of India in 2023. 

• • Vegetable oil is the largest import constituent, accounting for 51.9% of the total agriculture imports of India.
• Top Agricultural Exports from India: Basmati rice, non-basmati rice, sugar, spices, and oil meals – account for 51.5 percent of India’s total agriculture exports.

Agriculture Export Policy in India:

• It  is framed with a focus on agriculture export-oriented production, export promotion, better farmer realization, and synchronization within policies and programmes of the Government of India.

Agriculture Export Policy, 2018:

• It is the most recent agricultural policy of India aimed at doubling agricultural exports and integrating Indian farmers and agricultural products with the global value chains. 
• Objectives of the Agriculture Export Policy:
  • To double agriculture exports by 2022 and reach US$ 100 Billion in the next few years with a stable trade policy regime.
  • To diversify the export basket, and destinations and boost high-value and value-added agricultural exports including a focus on perishables.
  • To promote novel, indigenous, organic, ethnic, Traditional, and Non-traditional Agri products exports.
  • To provide an institutional mechanism for pursuing market access, tackling barriers and dealing with sanitary and phyto-sanitary issues.
  • To strive to double India’s share in world agri exports by integrating with the global value chain at the earliest.
  • Enable farmers to benefit from export opportunities in overseas markets.

What Are the Factors Affecting Indian Exports?

• Expiry of Nairobi Package: The 10th Ministerial Conference (MC) at the World Trade Organisation (WTO) in 2015 in Nairobi provided India a sunset clause for developing countries and LDCs to phase out export subsidies provided by them for their agriculture exports. 
  • Thus, India is bound to put an end to its export subsidies by the end of 2023. 

• • India’s large public stockholding for food security is a contentious issue and the US dragged India to the WTO, challenging Indian export subsidy programs as trade distorting and WTO non-compliant.
• Limited Agri-Export Basket: According to the Global Trade Research Initiative (GTRI), India’s agri-export basket is dependent on just five commodities making the sector vulnerable to fluctuations in global prices and demand.
  • These five products – Basmati Rice, Non-basmati Rice, Sugar, Spices, and Oil Meals– account for 51.5 percent of India’s total agriculture exports.

• India’s Uncertain Trade Policies: India has banned exports of those products in which it has held a leadership position in the world market for several years. 
  • For example, India imposed a ban on the export of rice which contributes to over 40 percent of worldwide rice exports. 
  • Imposing restrictions not only affects global food security, particularly for less affluent nations in the Global South but also undermines India’s reputation as a dependable food supplier. 
• Infrastructural Issues: The sector is hindered by inadequate cold chain infrastructure (CCI) and inefficient logistics and there is little awareness of the need for farmgate packhouses (pre-cooling units with cold rooms) or other CCI components.
• • This leads to spoilage and export competitiveness issues, including problems related to the quality of products. 
  • According to the APEDA, approximately 40% of the country’s food is spoiled due to this impacts the farmer’s income.
• Small and Fragmented Landholdings: Small and marginal landholdings, coupled with a lack of access to credit present challenges in transitioning to commercial production. 
  • Small and marginal farmers with less than two hectares of land account for 86.2% of all farmers in India.
• Geopolitical Conflicts: India’s agricultural exports have faced the logistical challenges arising from the Red Sea crisis which resulted in high freight rates and container shortages. 
  • About 15 percent of global shipping traffic transits through the Suez Canal, the shortest shipping route between Europe and Asia, connecting the Red Sea and the Mediterranean.
  • Iran-aligned Yemen Houthi militant group recently launched a drone attack on a cargo vessel in response to Israel’s assault on the Gaza Strip.
  • India’s exports to Europe through the Suez Canal (in the Red Sea) include food products, apparel, and electronics, among others, and its imports include crude oil. 

Must Read: State Of Food And Agriculture Report 202

Government Initiatives to Boost Agriculture Exports

• India’s Agriculture Export Policy: It calls for overhauling infrastructure and logistics, greater involvement of state governments, and developing export-centric clusters to ensure surplus produce that meets standard quality parameters. 
• Agri-Cells: Agri-cells in Indian embassies across 13 countries have also been set up to provide inputs on a real time basis to improve Indian exports at these destinations. 
  • Ex- Vietnam, USA, Bangladesh, Nepal, UAE, Iran, Saudi Arabia, Malaysia, Indonesia, Singapore, China, Japan and Argentina.
• Free Trade Agreements (FTAs): India has signed FTAs with various countries in an effort to remove trade barriers.
• Export-oriented agricultural produce processing and storage facility: State-owned Jawaharlal Nehru Port Authority (JNPA) plans to build it in Maharashtra.
  • The proposed facility aims to enhance processing efficiency, reduce multiple handling, and address infrastructure deficiencies, thereby curbing avoidable wastage in export and import.
• GI Tag to Agri-Food Items: 158 food and agri Geographical Indications (GIs) and the identification of 708 unique food items across districts under the One District One Product (ODOP) initiative.
• Sea Protocols for Agricultural Exports: India is developing sea protocols for various fresh fruits and vegetables like bananas, mangoes, pomegranates and jackfruit to promote their exports through ocean routes.
  • The protocol includes understanding voyage time, scientifically understanding the ripening of these commodities, their harvest time, and the training of farmers.
• Other Schemes include: 
  • The Remission of Duties and Taxes on Exported Products (RoDTEP scheme), 
  • The Advance Authorisation Scheme
  • The Duty Drawback Scheme (DBK scheme)

Also Refer: Centre Approves Minimum Support Prices for Rabi Crops 2024-25

Reforms Needed to Push Indian Exports

• Diversification of Food Export Basket: India needs to increase diversification in its food export basket to contain the risk to overall exports with a decline in the production of one item or the other. 
  • For this, India should give a boost to exports of value-added millet products. Higher diversification will help India insulate itself from fluctuations in global prices and demand.
• Focusing on Increasing Productivity: Competitiveness results primarily from increasing productivity requires massive investments in agriculture R&D, seeds, irrigation, fertilizers, better farming practices including precision agriculture. 
  • India’s overall investment in agriculture R&D is around 0.5% of the agri-GDP which is meagre and needs to be immediately doubled.
  • Despite having the highest area under rice cultivation, significantly more than China, India is the second-largest producer due to its lower yield rates, standing at 2,809 kg/hectare in contrast to 6710 kg per hectare of China.
• Developing Robust Export Infrastructure:  To increase agricultural exports, there is an urgent need for the development of high-quality infrastructure at seaports and airports, which serve as the main exit points for imports and exports.
  • Attracting private investment in processing and related activities will help boost exports. 
• Focusing on ready-to-eat foods: India’s focus should be on the export of large-scale food processing rather than exporting only raw materials.
  • This includes segments like “ready-to-eat” foods.
• Brand India through Strong Marketing and Promotion: In this regard, the government should allocate separate funds for campaigns, exhibitions, digital campaigning, and promotion strategies for Indian products both at the domestic and international levels. 
  • Trade and industry associations and Indian missions abroad can also play a prominent role in this.
• Balancing Export Earnings with Environmental Costs: Rethinking on the agricultural export policy is needed as India’s export basket is based on water-intensive crops and export earnings do not justify environmental costs in most cases.
  • Ex-China, which has higher rice productivity than India  does not encourage the export of rice as every kg of rice product can consume up to 80 litres of water.
• Removing Trade Barriers: A task force needs to be established within the Commerce Ministry to identify and eliminate trade barriers.