By Ishita Misra
India is currently the seventh largest exporter of farm products in the world. The net export of agricultural products was $33.8 billion in 2016-17 which was 12 percent of the country’s total merchandise exports. Export of Indian agricultural products has been declining despite the growing demand worldwide. Exports declined by 9.8 percent to $38.6 billion in FY 2015 from $42.8 billion in FY 2014 and further by 12.4 percent in 2016-17. In light of the situation, Commerce Secretary, Rita Teaotia, asked exporters of agricultural products to improve value addition and traceability. This, she said, would boost exports and enable India to remain a strong competitor in the market.
Are we losing ground?
India’s major destinations for food exports have been Vietnam, the UAE, Saudi Arabia, the United States, Iran, Iraq and Nepal. India has already seen a tremendous decline in exports to the US due to a lower demand for crude oil. Low priced crude oil has also reduced the demand for bio-fuel. This, in turn, has resulted in reduced demand for soya, corn, mustard, sunflower, palm, sugarcane and sugar beet. This reduction in demand has already caused a loss of $2 billion worth of exports. The decline in the export of commodities like wheat, sugar and vegetable oils can also be attributed to the fall in the demand for crude oil.
India has also lost its ground in many traditional markets to competing economies such as Brazil, Argentina, France, Russia, and Ukraine. Currency depreciation in many of these countries and the poor yield of Indian agriculture have been some of the major factors for this. An example of the poor yield in India can be seen in the production of maize. While India’s maize production has been stagnant at 23-24 million tonnes, Brazil’s output has jumped from 50 million tonnes to 80 million tonnes in the last five years. This stagnated growth can be credited to the lack of Genetically Modified (GM) crops that are widely grown in the US and South America.
What lies ahead?
With the demand for Indian agricultural products decreasing, value addition seems to be an alternative that could boost exports. This is also due to the continual rejection of GM crops to increase yield. Value-added agriculture entails changing a raw agricultural product into something new. This can be done through packaging, processing, cooling, drying, extracting or any other process that differentiates the product from the original raw commodity. Adding value to agricultural products would fetch higher returns on investment. It would also provide the opportunity to open new markets and extend the producer’s marketing season.
According to the Commerce Secretary, India’s focus on value addition has been negligible. Agricultural products produced in India are exported for even primary processing or value addition. This indicates that there is a lot of scope for exporting value added products. Agriculture engages 52 percent of the country’s total labour force but contributes to only 14.5 percent of India’s GDP. This shows that there is a lot of potential for development of value added products to boost exports.
Is value addition sufficient?
Focus on value addition cannot revive agriculture on its own. It needs to be accompanied by an exploration of new markets and an upgradation of technology. Special focus is required in the area of technological development in the light of minimal investment in R&D and traceability. The Commerce Secretary also added that traceability and the origin of commodities are becoming important for exporting products to markets like Europe and the US.
She also mentioned the need to invite global buyers to India. This is necessary to show to the world how technological development and improvement in traceability will help in entering new markets. Furthermore, inviting foreign buyers will also expose domestic exporters to new export destinations. India has enormous potential to increase its exports and grow in the global market. However, this can be realised only if there is a change in the way agricultural products are exported.
Featured Image Credit: Visual Hunt