What should an agricultural export promotion policy focus on?:  

What should an agricultural export promotion policy focus on?:  

Context:

• The government will soon announce a policy aimed at boosting farm exports said newly appointed commerce minister Suresh Prabhu.

Introduction:

• India’s agricultural trade surplus recorded a more than ten-fold increase between 1991-92 and 2013-14.
• Mr Prabhu, also underlined the need to eliminate restrictions in agriculture trade.

What will the Benefits of this policy?

• This would provide a boost to Indian farmers’ incomes.
• Farm exports will also earn valuable foreign exchange.

What are the challenges that India’s farm exports is facing?

• India’s agricultural exports increased at a brisk pace for more than two decades after the globalization in 1991.
• Although imports also increased, they were more than compensated for by exports.
• India’s agricultural trade surplus recorded a more than ten-fold increase between 1991-92 and 2013-14.

Between 2013-14 and 2016-17, agricultural exports fell by 22% while imports increased by 62%. As a result, the trade surplus has fallen by 70%.

What are the reasons?

• Fall in international prices and loss of competitiveness due to currency movements for India’s plummeting farm export earnings.
• A report by the Organisation for Economic Co-operation and Development (OECD) and the Food and Agriculture Organisation on the agricultural outlook, released in July this year, expects a flat to declining trend for primary commodity prices.
• The situation is dismal for cotton, sugar and rice, which are major components of India’s agriculture export basket.
• Government’s restrictions on important food items to prevent inflationary pressures in the domestic economy.
• India’s warehousing capacity for perishables is disproportionately concentrated in a few regions.
• Almost 50% of cold-storage capacity is concentrated in the states of Uttar Pradesh

What  are the Solutions?

• Improvement in warehousing infrastructure would also counter inflation concerns due to seasonal factors such as poor monsoon rains.
• India’s agricultural trade surplus could increase significantly if it cuts down on imports of pulses and edible oils.
• Pulses alone made up for close to 17% of the value of India’s total imports of agriculture and allied products in 2016-17.
• The problem of bumper crops leading to a price crash can be resolved by policies such as minimum support prices.
• India pursued the cause of legitimizing its procurement based PDS at the WTO in the past two WTO ministerial conference.