Food for thought

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: the hammer of such barriers and is likely to do so again and again in the future. The government has tried to tackle such barriers by promoting agricultural exporting zones in select crops. These zones try to encourage organic cultivation of cash crops, fruits and vegetables as such cultivation does not involve the use of chemical fertilizers and pesticides and therefore minimises the chances of rejection of exports because of SPS and TBT regulations.

It must be remembered though that organic cultivation is not only more labour intensive than conventional cultivation, but also involves un-remunerative crop rotation which diminishes income of the farmer. Moreover, organic yields are often lower then conventional yields. Further, the price premium provided for organic produce in international markets often is not high enough to compensate for the various increases in cost that a switch to organic farming entails and justify such cultivation for exports. The silver lining is that niche markets for organic products are projected to grow in the immediate future and price premiums being offered for them are also likely to widen.

The implication of the above discussion is that a country cannot rush headlong into specialisation in crops for export. Given the various cost increases that a switch from conventional to organic farming involves, the decision to produce organic crops has to involve a careful comparison of underlying costs and benefits. The decision to farm organically for export should be taken only if the benefits over-compensate the attendant costs. Thus, the above considerations dictate that crops can be cultivated for agricultural export only to a limited extent. In cases where the price premium being offered for organic produce in the international market does not compensate for the decrease in yields caused by a switch to organic farming or the attendant increases in costs, such a switch is not justified.

Thus, the traditional argument about focusing on areas of comparative advantage does not go through in the changed scenario as this very comparative advantage has been distorted by the mentioned non-tariff barriers. Therefore, a large-scale switch from food grain cultivation to export-oriented production which would then pay for resulting food grain deficits is no longer feasible. Indeed such a strategy could be dangerous and result in a massive net drain of foreign exchange reserves with the inflows from agricultural exports nowhere matching the outflows due to food grain imports.