CACP outlines potential for $42-bn agri exports

Written by Sandip Das | New Delhi | Updated: Feb 2 2013, 05:03am hrs
Though the government constantly focuses on increasing exports of manufacturing 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 from achieving its potential. If the government is proactive, FY12 exports can cross $42-43 billion, Gulati says.

In 2011-12, according to Gulati, the countrys agricultural exports were more than $37 billion against an import of commodities worth around $17 billion. India has emerged as the worlds largest exporter of rice, replacing Thailand and Vietnam, and the country is also the biggest exporter of buffalo meat, beating traditionally strong countries such as Brazil, Australia and the United States.

The CACP discussion paper titled Farm trade: tapping the hidden potential has stated that agricultural exports have increased more than 10 times from $3.5 billion in 1990-91 to $37.1 billion in 2011-12 a healthy annual growth rate of 13.6%.

Indias share in total global exports of agricultural products mainly consisting of rice, wheat, sugar, guar gum, meat, oil meals and marine products has increased from 0.8% in 1990 to 2.1% in 2011. This share is more than the share that India has in global merchandise exports, the paper has noted.

As an example of the on-off policy, Gulati points out that after the non-Basmati rice exports ban was lifted in 2004, India became the second-largest exporter of rice. Then India again imposed a ban on non-Basmati rice exports in 2008 to curb rising domestic prices. When the rice shipment ban was removed in September 2011, India once again emerged as the worlds biggest rice exporter.

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.

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 the 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 tonnes of exports in 2011-12 and close to seven million tonnes of exports during the first eight months of 2012-13.

In the case of wheat, although India does not have a large competitive advantage despite being the second biggest producer of foodgrain, because international prices flared up after mid-2012 primarily due to adverse weather in US and Russia, India has exported 2.4 million tonne during the first half of 2012-13.