Doubling farmers’ income: Increasing agricultural exports is key

Promotion of agri-exports could potentially propel India into the top bracket of agricultural exporters, and in the process facilitate doubling of farmers’ income within a reasonable time-frame

Economic diplomacy and promotion of Brand India can play an effective role in increasing agri-exports.
Economic diplomacy and promotion of Brand India can play an effective role in increasing agri-exports.

By Debesh Roy

Achievement of the $5-trillion economy goal by India could be pushed by a couple of years from the original deadline of 2024-25, due to the pandemic-induced recession during 2020-21. Only a V-shaped recovery during 2021-22, and a sustainable growth of 9% per annum over the next five years, can turbocharge the economy to touch the $5-trillion mark. The agricultural sector, which contributes 14.6% to the economy, needs to support this objective by focusing on private investment and exports, while targeting an annual agri-GVA growth of 5%. A focus on reforms in agri-marketing and agri-exports, along with the promotion of high-tech, digital and precision agriculture, is an appropriate recipe for transforming the agricultural sector, while doubling farmers’ income, within a reasonable time-frame.

India ranks amongst the top 10 exporters of agricultural products in the world. According to the WTO’s World Trade Statistical Review 2020, the country’s share in global agricultural exports increased from 1.1% in 2000 to 2.2% in 2017, valued at $39 billion, but fell to 2.1% in 2019, valued at $37 billion. While the US witnessed a decline in its share of global agricultural exports from 13% in 2000 to 9.3% ($165 billion) in 2019, Brazil’s share increased from 2.8% to 5% ($89 billion), and that of China increased from 3% to 4.6% ($82 billion). In order to catch up with Brazil and China, India needs to bring about structural reforms in the agricultural sector, including a stable trade policy regime.

India’s agricultural exports experienced huge fluctuations during the 10-year period 2010-11 to 2019-20. The 10-year CAGR was 1.7%. During the first five years, 2010-11 to 2014-15, agri-exports increased significantly from $24.4 billion (2010-11) to an all-time high of $43.1 billion (2013-14), before declining to $39.4 billion (2014-15), at a CAGR of 11.5%. The second five-year period (2015-16 to 2019-20) witnessed a slump in agri-exports to $33 billion (2015-16), before a steady increase to $38.8 billion (2018-19), followed by a slide to $37 billion (2019-20). The CAGR during this period slowed down considerably to 3.7%, from the previous period (see graphics).

According to the Agricultural and Processed Food Products Export Development Authority (APEDA), during April-October 2020, India’s exports of top three agri-commodities, viz. basmati rice, non-basmati rice and buffalo meat, in terms of value (in dollars) grew by 9%, 104.4% and 10.5%, respectively, compared to the corresponding period of the previous year. The sharp rise in exports of non-basmati rice can be attributed to lower prices compared to that of major rice exporters, Thailand and Vietnam, and also because these countries stopped exports due to the lockdown. Taking advantage of this, Indian non-basmati rice exporters have been able to meet the increasing import demands from China, Bangladesh and African countries.

However, what is worrisome is the absence of a stable trade policy regime in India. In order to control prices in the domestic market, the government has, at different times, resorted to banning of exports of major agri-commodities, viz. rice, wheat, sugar and onion. Imposition of minimum export price (MEP) is another tool often used to tame inflation. These measures create uncertainty amongst importing countries, and deprive farmers of higher returns from their produce.

The Agriculture Export Policy (AEP), 2018, aims at achieving export target of $60 billion by 2022 and $100 billion within a few years, thereafter. This is indeed a humongous task, even under normal circumstances, and more so in the aftermath of Covid-19. Therefore, there needs to be a realistic resetting of the timeline to achieve the target. This would involve a paradigm shift from a business-as-usual approach to a well-calibrated, comprehensive, strategic and result-oriented agri-export policy and action plan. This would lead to tech-driven agricultural productivity gains across sub-sectors, resulting in higher output and marketable surplus for domestic and foreign markets.

The following strategies are suggested by this author, for India to achieve the target of $100 billion of agri-exports within a reasonable time-frame, while also resulting in doubling farmers’ income:

—Majority of India’s agri-exports are low value, raw or semi-processed products. Therefore, the agri-export strategy should include integration of value-added agri-produce with global value chains (GVC), by adopting best agricultural practices involving productivity gains and cost competitiveness. It’s also imperative for India to reconsider joining the RCEP at an opportune time, and to enter into FTAs with the EU, the US and the UK.

—In order to boost exports of dairy products and make the dairy sector globally competitive, the central government needs to consider development of dairy export zones (DEZs) in collaboration with state governments (see ‘RCEP: A White Revolution for Exports’, FE, December 7, 2019; This could immensely benefit small dairy farmers, organised as farmer producer organisations (FPOs)/farmer producer companies (FPCs)/cooperatives, for supplying milk, and also for contract production of dairy products on behalf of major dairy producing companies, leading to cost efficiency and higher export revenue to dairy companies as well as significantly higher income to farmers.

—Linking of FPOs through contract farming arrangements with export-oriented food processing units of food parks created under the Pradhan Mantri Kisan Sampada Yojana, for producing processed cereals, fruits, vegetables, fish and marine products, would boost exports of processed food and raise income of small and marginal landholders and small fish farmers.

—With global trade in organic products estimated to be around $90 billion, there is a huge opportunity for exports of value-added organic products from India, which exported $689 million worth of organic food in 2019-20. Madhya Pradesh, Rajasthan, Maharashtra, the North Eastern Region (NER), Uttarakhand and Goa are major producers of organic products. It’s desirable to create Organic Product Export Zones (OPEZs) in these states and the NER, with common infrastructure for processing, standardisation, storage, logistics, and connectivity to ports and airports. Branding of products and registration as GI could further facilitate exports of value-added organic products. FPOs of organic farmers could be formed and linked to the OPEZs, to ensure higher income for farmers.

—Economic diplomacy and promotion of Brand India can play an effective role in increasing agri-exports.

—The AEP has recommended the establishment of Agriculture Export Zones (AEZs), to facilitate value addition of agri-commodities for increasing exports in a WTO-compatible manner. In order to ensure higher income for farmers, FPOs need to be linked to AEZs to supply SPS-compliant agri-products.

—Higher investments in R&D and technology, viz. the Internet of Things, artificial intelligence and blockchain, for improving agricultural productivity, resource-use efficiency and export competitiveness.

—Linking farmers/FPOs to the export market and skilling of surplus farmers for their absorption in agri-export value chains could be an important strategy to sustainably raise farmers’ income.

Concerted efforts by the central and state governments, Indian embassies, APEDA, EXIM Bank, NABARD, and all other stakeholders in the agri-export value chains are needed to address a whole range of issues pertaining to promotion of agri-exports, which could potentially propel India into the top bracket of agricultural exporters, and in the process facilitate doubling of farmers’ income within a reasonable time-frame.

The author is an economist

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