Though government constantly focuses on increasing exports of manufactured goods and services, according to a paper written by the Commission for Agricultural Costs and Prices (CACP) chief Ashok Gulati along with Surbhi Jain and Anwarul Hoda, its off-on policy on agricultural exports is preventing the country for achieving its potential.
“If the government is proactive, FY’12 exports can cross $42– 43 billion”, Gulati says.
In 2011-12, according to Gulati, agricultural exports by India were more than $37 billion against an import of commodities worth around $17 billion.
India has emerged as the world’s largest exporter of rice, replacing Thailand and Vietnam and the country has also the biggest exporter of buffalo meat beating traditionally strong countries such as Brazil, Australia and the US.
CACP discussion paper titled ‘Farm trade: Tapping the hidden potential’ has stated that agricultural exports have increased more than 10 fold from $3.5 billion in 1990-91 to $37.1 billion in 2011-12.
“This share is more than the share that India has in global mechandise exports,” the paper has noted.
As an example of the on-off policy, Gulati points out when the non-Basmati rice exports ban was removed in 2004, India became the second largest exporter of rice. Then India again imposed the ban in 2008 for curbing rising domestic prices. When the ban was removed in September 2011, India once again emerged as the biggest rice exporter in the world.
“Indian agriculture seems to have a greater comparative trade advantage than manufactured goods. This has been possible as the sector has responded by undergoing a structural transformation,” the paper has commented.
The CACP paper also points out the changing composition of India’s agricultural exports basket between 2001-12. In the last fiscal, rice was the leading agriculture exports products, followed by raw cotton, marine products, oil meals and meat.
However, in 2001-12 , marine products were the largest agricultural exports accounting for one-fifth of total exports followed by rice.
Gulati uses a simple barometer of export competitiveness by comparing domestic prices with its export or import parity reference price measured over a period of time. “If domestic price of any commodity is lower than the export or import parity reference price, then the commodity price is export or import competitive,” the paper noted.
Based on these parameters, Gulati points out that wholesale prices and support prices of rice have been lower than international prices especially during the last six years. Thus rice has been export competitive as can be seen from the 10 million tonne of exports in 2011-12 and close to seven million tonne of export during first eight month of 2012-13.