Importance of Agri Exports

In News

• India’s agriculture exports have grown 16.5% year-on-year in April-September, and look set to surpass the record $50.2 billion achieved in 2021-22 (April-March).

Key Points

• Growing exports:
  • India’s agriculture exports are growing, and could hit a new high this fiscal. 
• Major export item:
  • But imports are growing faster, driven in large part by vegetable oils. 
  • Even commodities whose exports have been subjected to curbs — wheat, rice and sugar — have shown impressive jumps in shipments.
    • The government had recently banned the export of wheat. 
  • According to Commerce Ministry data, wheat exports, at 45.90 lakh tonnes (lt) during the April-September period, were nearly twice the 23.76 lt for the same period last year.
  • In May, sugar exports were moved from the “free” to “restricted” list.
  • Exports of broken rice were prohibited, and a 20% duty slapped on all other non-parboiled non-basmati shipments.
• Surpasses 2021 Record:
  • India’s agriculture exports have grown 16.5% year-on-year in April-September.
  • India’s deficit in its overall merchandise trade account (exports minus imports of goods) widened from $76.25 billion in April-September 2021 to $146.55 billion in April-September this year. 
  • During the same period, the surplus in agriculture trade reduced only a tad, from $7.86 billion to $7.46 billion.

Image Courtesy: IE

• Importance of Surplus:
  • The surplus in agricultural trade matters because this is one sector, apart from software services, where India has some comparative advantage.
• India’s top agriculture export items:
  • As many as 15 of them individually grossed more than $1 billion in revenue during 2021-22. 
  • All barring two (cotton and spices) have posted positive growth in the first half of the current fiscal too.
  • In spices, India’s exports in recent times have been powered mainly by chilli, mint products, oils & oleoresins, cumin, turmeric, and ginger. 
  • In traditional plantation spices such as pepper and cardamom, the country has become as much an importer as an exporter. 
  • India has largely turned an importer into cashew.
• Competition:
  • India has been out-priced by Vietnam, Sri Lanka, Indonesia, and Brazil in pepper, while it has lost market share to Guatemala in cardamom.
• Import:
  • Vegetable oils
    • Almost 60% of India’s total agri imports is accounted for by vegetable oils. 
    • Vegetable oils are today the country’s fifth biggest import item after petroleum, electronics, gold, and ccoal.

Challenges in Agri Sector Exports

• Scrutiny of WTO: 
  • India’s agricultural exports are under intense scrutiny in the World Trade Organization (WTO). 
  • In 2019, Australia, Brazil, and Guatemala complained to WTO’s dispute settlement body that the Central government was implementing several subsidy schemes for promoting sugar exports. 
  • The complainants argued that by implementing these subsidy schemes, the government had violated the rules of WTO’s Agreement on Agriculture (AoA), which prohibit the use of export subsidies. 
• Subsidies Breaching Threshold:
  • According to the WTO’s Agreement on Agriculture (AoA), subsidies that developing countries like India provide cannot exceed 10% of their value of agricultural production. 
  • This implies if India’s food subsidies provided through the PDS are taken together with those granted to farmers in the form of MSP and input assistance, its subsidies bill will surely exceed the 10% threshold. 
• Clarifications Regarding Schemes: 
  • During the deliberations in the WTO’s Committee on Agriculture, several countries, including Japan, Russia and the US, have sought clarifications from India as to whether its exports of food grains are in any way linked to the Open Market Sales Scheme of the Food Corporation of India.

Way Ahead

• A focus on domestic production and new technologies can help boost the farm trade surplus.
• A similar approach, aimed at boosting domestic output and yields, may be required in cotton.
• As India’s food grains exports have increased, so has the scrutiny by other WTO members. The government needs a well-considered strategy to meet this challenge.

Source: IE