1. Importing an export problem: India is becoming a high cost economy in agro-related items

Importing an export problem: India is becoming a high cost economy in agro-related items

There is a rise of 30% in value of imports of three essential agro items, namely wheat, pulses, vegetable/edible oils—indicative of substantive demand pull in the country.

By: | Published: July 5, 2017 6:21 AM
import in india, export in india, problem in import, problem in export, export in indian economy Data analysis of India’s seven select but vital agro-related items of exports reveals that there is a sharp slump—40% in their overall value—during last four years.

There is a rise of 30% in value of imports of three essential agro items, namely wheat, pulses, vegetable/edible oils—indicative of substantive demand pull in the country (see accompanying graph). Data analysis of India’s seven select but vital agro-related items of exports reveals that there is a sharp slump—40% in their overall value—during last four years. Commodities are wheat, rice, sugar, cotton, soy meal, guar gum and beef+fish.

Exports falter when goods are not competitive or if there is a lack of local production and/or poor demand overseas. Edible items are of daily use. Thus, with rising population, the probability of lower demand abroad is not logical. Two successive draughts in 2014-15 and 2015-16 may justify the drop in production, but the lack of adoption of new technologies and efficient farm practices is the root cause.

Imports

Import of pulses jumped from $2.3 billion in 2013-14 to $4 billion—an increase of 74%. Out of 5.4 million tonnes (mt) of pulses shipped to India, 50% or about 2.7 mt are peas/yellow peas from Canada/USA. Kharif acreage of pulses is down by 33% which points to lower output, compelling higher imports of Tur, Urad Moong. News of possible decline in production will make imports costlier.

The government has been fronting state agencies for import through bulk tendering. PSUs tenders escalate world prices, thereby pushing up values for private import as well. When state agencies dispose pulses in the domestic market at subsidised prices—that is at a loss—it disturbs the parity of private imports because they cannot discount their costs. This may discourage import, thereby creating more scarcity in the country.

Wheat

From exporter of wheat of about 14 million tonnes (approx $4 billion in 2012-13 to 2014-15), India has turned into a structural importer of $1.5 billion of grain in the last three years. Spike in wheat import in 2016-17 over the previous year is 840% by value.

In 2014-15 and 2015-16, market estimates of production each year varied 84-87 million tonnes (though Government claimed 93-95 mt). FCI stocks depleted to 8 mt (buffer norm is 7.5mt) on April 1, 2017, and imports ballooned to about 4 mt in 2016-17, thus validating the market’s view.

Wheat procurement pf 30 mt this year vs targets of 33 mt implies that OMSS supply to flour millers will be restricted. This necessitates private imports of 5-6 mt in 2017-18.Already importers are looking for cargos from September 2017 onwards from Australia and Black sea at landed values of $240 and $205 respectively which will be cheaper than domestic wheat after 10% duty paid

The government has rightly stayed away from importing wheat directly for FCI and let privates fill the gap. This prudence has kept world wheat prices range bound and non-inflationary, because traders import in economical lots with the spread of time, instead of bulk tendering by the public sector undertakings (PSUs), which often results in inflated import values.

Vegetable oils

Import of palm/soy/sunflower oils has remained steady—value wise between $8-9 billion per annum. There are strong pressures from oilseed crushing industry to raise import tariff to create a disparity by having high landed cost of overseas products so that locally produced oil could be cheaper. The government has done well in levying moderate duties on oil to protect consumers—60% of which are based in rural areas including farmers and not to promote inefficient production and processing.

Unless high yielding oilseed varieties are available in the country—the value and volume of vegetable oils import are bound to ascend.

Exports

In 2014-15, basmati/ non-basmati rice exports were $7.8 billion, this has slipped to $5.8 billion in 2016-17, but still, India remains world’s largest exporter of rice at 10 mt. Poor demand in Africa, especially in Nigeria, of non-basmati rice, and slow down of basmati shipments to Iran and Saudi Arabia could be possible reasons. Iran shipments declined over 50% from 1.44 million tonnes in 2013-14 to 0.7 million tonnes in 2016-17.

The outlook for non-basmati rice for 2017-18 appears positive as strong demand from Nigeria via neighbouring Benin is supportive; Bangladesh requires more than one million tonnes of rice desperately and trade is focused on this demand. Indian non-Basmati rice prices are lower than the competition from Thailand, Vietnam, Pakistan.

The success of rice export business is attributed to minimal interference by the government, diversity of paddy varieties, superior capability for par-boiled rice, logistical advantages for Africa, botched-up past policies of the Thai government in paddy pricing and poor performance of Pakistan. Indian rice export is negligible to South-east Asia and China.

Cotton

Cotton exports tapered down from $3.8 billion to $1.4 billion during 2013-14 and 2016-17—lower by 63%. Exports to China and Pakistan suffered, while Bangladesh remained a consistent market. India’s share of exports to China has dropped from almost 80% in 2011 to 10% in 2015. Indian trade is diversifying to newer markets of Indonesia, Taiwan, Turkey and Thailand to gain the momentum.

Soymeal/Guar gum/Beef and fish

There has been a drastic fall (86%) in soy meal exports from $2.8 billion to $0.38 billion; likewise, guargum exports have been 75% lower and beef and fish have witnessed a 48% decline in 2016-17 from their peak performance of $10 billion in 2014-15. Beef exports are not likely to pick up because of current confusion. GST complexities is another factor that is bound to affect trade.

We are becoming a high-cost economy in agro-related items. If we continue to dither in our export earnings by the lack of quality/procedures/poor yields/price parities, resultant suffering will be transmitted via trade to the farmers and another undesirable cycle of joblessness and loan waivers will commence.

  1. T
    tatai
    Jul 5, 2017 at 10:56 am
    Great!!!!! Gov must consider on it.economy can't grow without the improvement of root level economy ie, cultivation.
    Reply

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