How India Can Tap Agriculture to Boost Trade Surplus

Posted by Matt Hopkins|6 November 2017

The new minister for commerce and industry, Suresh Prabhu, expressed his resolve to expand exports at the occasion of his anointment as the minister. He highlighted agri-exports’ potential for not only for promoting overall exports, but also in augmenting farmers’ incomes and ameliorating farm distress, writes Ashok Gulati on FinancialExpress.com.

His objective is laudable and achievable, provided there is a paradigm shift in policymaking — from being obsessively consumer-oriented to according farmer interests a higher priority. But before elaborating on this, let us take a look at the trends in agri-trade, both exports and imports, during the Manmohan Singh (MMS) period (2004-05 to 2013-14) and the Narendra Modi (NaMo) period (2013-14 to 2016-17). A close look at these trends and their drivers can help Suresh Prabhu and his team identify agri-commodities that can help boost agri-trade surplus.

In general, both agri-exports and imports have increased substantially since 2004-05. Agri-trade increased from $14 billion to $59.2 billion between 2004-05 and 2016-17. As a share of agri-GDP, it increased from 11.1% in 2004-05 to 16.7% in 2016-17, after peaking at 19.6% in 2012-13, reflecting the increasing integration of Indian agriculture with global markets.

It is interesting to observe that the MMS period saw agri-trade surplus surging seven-folds, from $3.6 billion in 2004-05 to $25.4 billion in 2013-14, but then fell dramatically by two-thirds during the NaMo period, touching $8.2 billion by 2016-17. The tumbling agri-trade surplus was the result of falling exports and rising imports. Agri-exports, after peaking at $42.9 billion in 2013-14 fell to $33.7 billion in 2016-17, while imports kept rising from $17.5 billion in 2013-14 to $25.5 billion by 2016-17.

Agri-exports suffered primarily from significant fall in exports of cereals (especially wheat and maize), cotton, oilseeds complex and, to some extent, bovine meat. This, in turn, was largely due to a steep fall in global prices on one hand and restrictive export policies on the other. The global prices of wheat, maize, soybean, and cotton, e.g., fell by 47%, 39%, 25% and 18%, respectively, during 2013-16. The FAO food price index fell from 209.8 in 2013 to 161.5 in 2016. Export policies for pulses, oilseeds/edible oils, several vegetables, etc, was restrictive. Nevertheless, exports of fish-seafood, and fruits-nuts-vegetables (mainly guavas/mangoes, grapes, cashew nuts, onions) have been growing steadily touching $5.8 billion and $3 billion, respectively, in 2016-17.