Issues associated with India’s agricultural imports

Source: The post issues are associated with India’s agricultural imports has been created, based on the article “Import policy must be well-integrated with minimum support policy” published in “Indian express” on 27th May 2024.

UPSC Syllabus Topic: GS Paper 3-agriculture-Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System objectives, functioning, limitations, revamping; issues of buffer stocks and food security

Context: The article discusses the Reserve Bank of India’s efforts to manage inflation and support economic growth. It highlights changes in India’s agricultural imports, particularly the significant decrease in edible oil costs and the challenges related to pulse imports.

For detailed information on Challenges facing agriculture exports from India read this article here

What change has been observed in India’s agricultural imports?

Overall Decline in Agricultural Imports: India’s agricultural imports witnessed a notable decrease of 8%, falling from $35.7 billion in the fiscal year 2022-23 to $32.8 billion in 2023-24.

Significant Reduction in Edible Oil Imports: The value of edible oil imports plummeted by 28.5%, dropping from $20.8 billion to $14.9 billion in one year. This decline was primarily driven by a decrease in global palm oil prices.

Stable Volume of Edible Oil Imports: Despite the drop in value, the quantity of edible oil imports remained stable at around 15-16 million metric tonnes.

Increase in Pulse Imports: Contrary to the overall trend, the import of pulses doubled from $1.9 billion in 2022-23 to $3.7 billion in 2023-24, reflecting an increased domestic demand and insufficient production.

Slower Growth in Agricultural Imports: The Average Annual Growth Rate (AAGR) of agricultural imports during the 10 years of the present government (2014-15 to 2023-24) was 9%, which is a slowdown compared to the 14% AAGR during the GR during the previous government (2004-05 to 2013-14).

What issues are associated with India’s agricultural imports?

Impact on Farmers: Import policies that favor consumers, such as the zero import duty on pulses to lower prices, can adversely affect local farmers by undermining their profitability and incentive to produce.

Inflation Concerns: Despite efforts to manage import costs, certain commodities like pulses have seen significant inflation. In April 2024, the inflation rate for pulses was 17%, and for tur, it was 31%.

Dependency on Imports for Key Commodities: India imports a large portion of its edible oil consumption, roughly 55 to 60%, highlighting a dependency that could be problematic if global supply chains are disrupted.

Fluctuating Import Volumes and Prices: The volume of edible oil imports remained stable even as their value decreased significantly by 28.5%, demonstrating how international market prices directly influence India’s import costs.

How can India achieve self-reliance in edible oils?

National Edible Oil Mission-Oil Palm (NEOM-OP): The Indian government is promoting the domestic cultivation of palm oil through this mission. It aims to expand palm oil production on approximately 2 million hectares identified as suitable for this crop.

Increase Area Under Oilseed Cultivation: Achieving self-sufficiency in traditional oilseeds like mustard, groundnuts, and soybeans would require expanding the cultivation area by 35 to 40 million hectares, which presents a significant challenge.

Import Policy Alignment with MSP: Ensuring that the landed price of imported edible oils does not fall below the minimum support prices (MSP) of domestic oilseeds can protect local farmers and encourage domestic production.

What should be the focus of trade policies?

Calibrated Import Duty Changes: Trade policies should avoid sudden shifts, such as the abrupt reduction to zero import duty on pulses. A more gradual approach would help stabilize market prices and farmer incomes.

Protecting Domestic Producers: Ensuring that the landed prices of imports, such as pulses and edible oils, do not fall below the minimum support prices (MSP) is crucial. This protects local farmers from being undercut by cheaper imports.

Large-Scale Procurement at MSP: If domestic prices fall below MSP, organizations like NAFED should undertake large-scale procurement to support domestic producers and build buffer stocks, preventing farmer losses and encouraging continued production.

For detailed information on NAFED read this article here

Question for practice:

Examine the factors contributing to the significant decrease in India’s agricultural imports, particularly in the context of edible oils, and discuss the challenges associated with achieving self-reliance in this sector.