Changing the agri exports basket

Synopsis: India has the potential to become a global leader in the food processing sector, by making changes to Agri export basket.

Introduction

The Indian government has been encouraging agricultural exports to meet an ambitious target of $60bn by 2022.

What is the current scenario of agriculture?

Growing exports: The Ministry of Food Processing Industries shows that the contribution of agricultural and processed food products in India’s total exports is 11%. But the majority share is of primary processed agricultural commodities.

Shift in India agricultural economy: It is shifting from primary to secondary agriculture, where the focus is more on developing various processed foods. The Indian food processing industry promises high economic growth and makes good profits.

How export from agricultural sector has evolved over the years?

Processed foods: India’s agricultural export basket is changing from traditional commodities to non-traditional processed foods.

Shift from traditional exports: for instance, Basmati rice is one of the top export commodities. However, now there is an unusual spike in the export of non-basmati rice. In 2020-21, India exported 13.09 million tonnes of non-basmati rice, up from an average 6.9 million tonnes in the previous five years.

In 2020-21, the export of poultry, sheep and goat meat, cashew kernels, groundnuts, guar gum, and cocoa products went down in terms of value and total quantity.

Indian buffalo meat: it is seeing a strong demand in international markets due to its lean character and near organic nature. The export potential of buffalo meat is tremendous.

Focus on high value exports: The main objective of the Agriculture Export Policy is to diversify and expand the export basket so that instead of primary products, the export of higher value items, including perishables and processed food, be increased.

What are the challenges still existing?

The export of processed food products has not been growing fast: India lacks comparative advantage in many items. The domestic prices of processed food products are much higher compared to the world reference prices.

Trade restrictions: Non-tariff measures imposed by other countries on Indian exports. Such as, mandatory pre-shipment examination by the Export Inspection Agency, compulsory spice board certification for ready-to-eat products which contain spices in small quantities, prohibition of import of meat- and dairy based-products in most of the developed countries and withdrawal of the Generalised System of Preference by the U.S.

Lack of strategic planning of exports by State governments: for example, lack of a predictable and consistent agricultural policy discouraging investments by the private sector.

What is the way forward?

Firstly, the Centre’s policy should be in the direction of nurturing food processing companies, ensuring low cost of production and global food quality standards.

Secondly, creating a supportive environment to promote export of processed food.

Thirdly, Indian companies should focus on cost competitiveness, global food quality standards, technology, and tap the global processed food export market.

Source: This post is based on the article “Changing the agri exports basket” published in The Hindu on 22nd September 2021.