Exports of most commodities have taken a hit from global headwinds this year, barring sugar and spice.
- By- Harish Damodaran
After showing some revival in the last couple of years, India’s agricultural exports are faltering again. Total farm exports during April-September, at $ 17.29 billion, stood 9.1% lower than the $ 19.02 billion for the same period of 2018-19.
The worst hit has been raw cotton, with shipments in the first half of 2019-20 nearly 76% down over the levels of April-September 2018-19. Moreover, the value of exports, at $ 226.6 million, is below the imports of $ 990.6 million, which are up 136%. This is the first time since 2004-05 that the country has turned net importer of the natural fibre.
Cotton exports from India had peaked at $ 4.33 billion in 2011-12 and fell to $ 1.62 billion by 2016-17, before recovering a tad to $ 2.1 billion in 2018-19 and now crashing again. The bleak prospects for trade – global benchmark Cotlook ‘A’ Index prices are ruling at about 75.5 cents per pound, as against 86.5 cents at this time last year and the all-time-high of 244 cents reached in March 2011 — comes even farmers have started bringing their harvested kapas (raw un-ginned cotton) to the markets. Kapas in Rajasthan’s Sriganganagar mandi traded at an average of Rs 5,100 per quintal on Wednesday, below the government’s minimum support price of Rs 5,450 for medium-long staple length varieties.
The other major product to post a sharp decline is rice. In 2017-18, India shipped out a record 128.75 lakh tonnes (lt) of rice. That included 88.18 lt of non-basmati (worth $ 3.64 billion) and 40.57 lt of basmati ($ 4.17 billion, below the 2013-14 high of $ 4.86 billion). However, the current fiscal has seen a dip in both basmati and non-basmati earnings, with the slide more pronounced for the latter (see table 1).
India’s basmati rice goes mostly to West Asia (Iran, Saudi Arabia, United Arab Emirates, Iraq, Kuwait and Yemen), United Kingdom and the US. The destinations for non-basmati are the relatively poorer African nations (Nigeria, Benin, Togo, Ivory Coast, Liberia, Guinea, Senegal, Somalia and Djibouti), Bangladesh, Nepal and Sri Lanka. In basmati, the present slowdown has primarily to do with payment problems arising from the US trade sanctions on Iran, which accounted for $ 1.56 billion out of India’s $ 4.71 billion exports during 2018-19. In non-basmati, too, China is flooding the African markets through release of its massive excess public stocks — besides increased price competition from Pakistan and Vietnam (in white rice) and Thailand (for parboiled) — is posing challenges. The non-renewal of a 5% MEIS (Merchandise Exports from India Scheme) benefit after March 25 hasn’t helped either.
India, in 2011-12, emerged as the world’s largest rice exporter and also came close to being the No. 1 in cotton (after the US). In 2014, the country even became the biggest bovine meat exporter. But now, it has dropped to No. 3 in cotton (behind US and Brazil) and bovine meat (behind Brazil and Australia). Buffalo meat exports, which surged from a mere $ 341.43 million to $ 4.78 billion between 2003-04 and 2014-15, have since slipped to $ 3.59 billion in 2018-19 and continued their slide this fiscal. Even marine products, which had a good ride and touched $ 7.40 billion in 2017-18, have lost momentum.
A similar story holds for guar-gum (a thickening agent used in shale oil/gas extraction) and oilmeals, whose exports today are a pale shadow of their 2012-13 peaks of $ 3.92 billion and $ 3.04 billion, respectively. The effects of it are also reflected in realisations for growers. On March 21, 2012, at the height of the shale boom, spot prices of guar-seed in Jodhpur scaled Rs 30,432 per quintal, compared to the current Rs 4,050 or so! Soyabean rates in Indore, at Rs 3,500 per quintal, are also nowhere close to their May 2014 average of 4,584.
The only two agri-commodities to have registered significant growth in 2018-19 as well as the current fiscal are sugar and spices. Sugar exports in 2019-20 are on course to match their previous 2011-12 record of $ 1.84 billion — thanks largely to a subsidy (“lump sum assistance for expenses”) of up to Rs 10,448 per tonne (it was approximately Rs 11,500 in the 2018-19 season).
Spices are an interesting case. The period after 2013-14 has witnessed an increase in both their exports and imports. The top export items within spices in 2018-19 were chilli (Rs 4,058.72 crore), mint products (Rs 3,471.09 crore) and cumin (Rs 2,924.73 crore). On the other hand, exports of pepper and cardamom (including their oils and oleoresins) were only Rs 1,017.70 crore and Rs 482.31 crore, even as imports of these traditional plantation spices amounted to Rs 875.36 crore and Rs 291.92 crore, respectively. Import of cheaper pepper from Vietnam, Sri Lanka and Indonesia has also led to prices in the Kochi market plunging below Rs 300 per kg for the first time. They are also much lower than the landed minimum import price of Rs 500/kg for black pepper fixed by the Narendra Modi government in December 2017. In cardamom, too, Guatemala has displaced India as the world’s preeminent exporter.
During 2003-04 to 2013-14, a period coinciding with the previous United Progressive Alliance regime’s tenure, India’s agricultural exports had soared from $ 7.53 billion to $ 43.25 billion, basically on the back of a global commodity price boom. The collapse of that boom, just about when the Modi government had taken over, resulted in the country’s farm exports nose-diving to $ 39.08 billion in 2014-15, $ 32.81 billion in 2015-16 and $ 33.70 billion in 2016-17, even as imports rose from $ 15.53 billion in 2013-14 to $ 21.15 billion, $ 22.58 billion and $ 25.64 billion in the following three fiscals. In the process, an agricultural trade surplus of $ 27.72 billion in 2013-14 was reduced to $ 8.05 billion by 2016-17.
Subsequently, exports did recover to $ 32.90 billion in 2018-19, alongside a fall in imports to $ 20.92 billion, led mainly by pulses and edible oils, while also helped by a part reversal of the Modi government’s earlier hard anti-inflationary and strong-rupee policy stance. That recovery has suffered a renewed setback, though, amidst strong global trade headwinds.