Export policy

India’s export of agriculture and processed food products — which accounts for 12-14 per cent of the country’s total merchandise exports — had been enjoying brawny[bro-nee(strong,मजबूत)] growth for the last five fiscals. However, it declined by 9.8 per cent to $38.6 billion in FY 2015 from $42.8 billion in FY 2014, with export to the US declining to $ 2 billion.

What are the other factors behind the poor performance of farm exports?

Export data compiled by Agricultural Products Exports Development Authority shows that export of basmati rice declined in both volume (1.6 per cent) and value terms (7.15 per cent) in FY 2015 mainly because of reduced demand from Iran and the US.

Increased shale gas production in the US has led to lower demand for crude oil. Low priced crude in turn has reduced the demand for bio-fuel, especially ethanol, thereby reducing the demand for soya, corn, mustard, sunflower, palm, sugarcane and sugar beet.

China has cut its cotton import quota to 894,000 tonnes, just nuff[núf(enough,पर्याप्त)] to meet WTO obligations. It is reported to have imported 30 per cent less cotton in the first half of 2015. China also imposes an import duty of 40 per cent, and deprives India access to a gargantuan[gaa'gan-choo-un(large,बड़ा)] cotton consuming market.

Recent de-stocking and curbs[kurb(control,नियंत्रण)] on imports of agricultural commodities in China will keep international prices depressed. That will translate into lower demand for cotton exporters like India.

India’s farm exports also face prohibitive import duties in overseas markets. For example, dairy products attract peak import duties of 511 per cent in the EU, 93 per cent in the US, and 692 per cent in Japan. Fruit and vegetables, and oilseeds attract equally high import duties in the EU, Japan and the US, with Japan being the most protective. Though there is a free trade agreement between India and Japan, most farm products have escaped any duty reduction commitments.

India’s farm exports also have to compete with highly subsidised farm products supplied by other countries. Although India has been accused of being overly[excessively,बहुत ज्यादा)] protectionist about agricultural and food products, it is China, Japan and the US which are the top farm subsidisers. According to the OECD, China spent over $165 billion in direct and indirect farm subsidies, followed by Japan at $65 billion (50 per cent of its agriculture GDP compared to less than 10 per cent in India) and the US at $ 30 billion. Besides, nearly 70 per cent of Chinese subsidies are trade distorting.

India’s farm exports also have to face a series of non-tariff barriers in top consuming markets – for example, a ban on import of mangoes by EU that was lifted in January 2015.

Instead of global demand and supply factors, India’s farmers are guided by minimum support and procurement prices fixed arbitrarily[aa-bi-tru-lee(randomly,मनमाने ढंग से)] by government. Keeping domestic prices of farm goods artificially high disincentivises export. This affects India’s ability to capture export markets.

Even Bangladesh and Pakistan are now sourcing oil-meals from Latin America rather than India.

Exports of many agriculture commodities, sugar for instance, are regulated by arbitrary quota fixation in India. Such executive actions make India an erratic[i'ra-tik(unreliable,गैरभरोसेमंद)] supplier.

The cultivation of genetically modified (GM) crops is quite common in the US.

China annually imports over 70 million tonnes of GM soybeans, but India can't supply any of it. Strangely, India does allow import of GM soyaoil and cottonseed oil.

Given the numerous[nyoo-mu-rus(many,बहुत से)] tariff and non-tariff barriers that its farm exports face in overseas markets, India needs to devise an effective strategy to counter them. India will have to take up the issues of farm subsidies, market denials and high import duties at all bilateral (FTAs), regional (e.g. RCEP) and multilateral (WTO) trade forums if it is serious about pushing its farm exports.

Among internal actions needed are long term measures to tackle the issues of low productivity, over dependency on monsoon, and lack of post harvest infrastructure that lower the net supply of agriculture commodities and leads to knee jerk[nee-jurk(natural,स्वाभाविक)] reactions in the form of export bans. It’s time India stopped over- promotion of cereals, and let demand and supply forces guide production and trade decisions.

It’s time to consider cultivation of GM crops for capturing a bigger share in global farm trade.