Why Indian agriculture may need a new export-import policy

Subject: Economy

Sec: External sector

Context:

India’s agricultural exports fell 8.2% in the fiscal year ended March 31, 2024 on the back of shipment curbs on a host of commodities, from cereals and sugar to onions.

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The value of farm exports totaled $48.82 billion in 2023-24, down from the record $53.15 billion of 2022-23 and $50.24 billion for the previous fiscal.
Exports declined from $43.25 billion in 2013-14 to $35.60 billion in 2019-20, while accompanied by an increase in imports (from $15.53 billion to $21.86 billion).
A crash in global agri-commodity prices is witnessed with the UN Food and Agriculture Organization’s (FAO) food price index (base: 2014-16=100) dipping from an average of 119.1 to 96.5 points between 2013-14 and 2019-20.
Global price recovery following the Covid-19 pandemic and Russia’s invasion of Ukraine (the FAO index soared to 140.8 in 2022-23) resulted in India’s farm exports as well as imports zooming to all-time-highs in 2022-23, before dropping in the fiscal year.

Drivers of exports

Table 1 shows the fall in exports to have been led primarily by sugar and non-basmati rice.

The government hasn’t allowed any sugar to go out of the country during the current production year from October 2023.
Exports of the sweetener were valued at only $2.82 billion in 2023-24, after peaking at $5.77 billion and $4.60 billion in the preceding fiscals.
Concerns over domestic availability and food inflation have similarly triggered a ban on exports of all white non-basmati rice since July 2023.
Currently, only parboiled grain shipments are being permitted within the non-basmati segment, while also attracting a 20% duty.
Two other items that have borne the brunt of export restrictions ,triggered by domestic shortages and rising prices are wheat and onion.
Wheat exports were altogether stopped in May 2022, following which their value plunged to $56.74 million in 2023-24, after reaching an all-time-high of $2.12 billion in 2021-22.
Most of the other major agri export items — barring marine products, castor oil and other cereals (mainly maize) — have posted growth.
Basmati rice exports fetched $5.84 billion in 2023-24, surpassing the previous high of $4.86 billion achieved back in 2013-14.
Spices exports too crossed the $4 billion mark for the first time.
Exports of buffalo meat, oil meals and raw cotton, even while up over 2022-23, were far from their corresponding records of $4.78 billion, $3.04 billion and $4.33 billion touched in 2014-15, 2012-13 and 2011-12 respectively.

Drivers of imports

India’s imports of vegetable fats topped $20 billion in 2022-23.
2023-24 saw the average FAO index ease to 121.6 points and the vegetable oil sub-index to 123.4 points.
Foreign exchange outflow on account of cooking oil has reduced, imports of pulses almost doubled to $3.75 billion in 2023-24, the highest since the $3.90 billion and $4.24 billion levels of 2015-16 and 2016-17 respectively.

Policy takeaways

The Modi government has done away with import duties on most pulses — arhar (pigeon pea), urad (black gram), masoor (red lentils), yellow/white peas and, earlier this month, chana (chickpea) — and kept it at 5.5% for crude palm, soybean and sunflower oil.