Context: Both agricultural exports from and imports into India have scaled new highs in the fiscal year that ended March 31, 2023. Provisional data from the Department of Commerce shows total farm exports at $53.15 billion and imports at $35.69 billion during 2022-23, surpassing their previous year’s records of $50.24 billion and $32.42 billion respectively.
Basic driver: Global prices
- The UN Food and Agriculture Organization’s Food Price Index (FPI) is a weighted average of world prices of a basket of food commodities over a base period value (2014-16=100)
- The FPI had crashed from an average of 119.1 points in 2013-14 to 90 points in 2015-16. As a result, exports sharply fell from $43.25 billion to $32.81 billion between 2013-14 and 2015-16. However, imports continued to rise, bringing down the farm trade surplus from a peak of $27.72 billion in 2013-14 ($21.46 billion net of fertiliser imports) to a low of $8.05 billion by 2016-17.
- The FPI since then had recovered to 102.5 points by 2020-21, and further to 133 points in 2021-22 and 139.5 points in 2022-23, which made India’s agri-commodities more globally price competitive. This has led to a rise in exports to $41.90 billion, $50.24 billion and $53.15 billion during these three years.
Major export contributors
- In recent times, India’s agri exports have been powered by three items, i.e. Marine products, rice and sugar.
- Marine products: Exports have grown steadily from $5.02 billion in 2013-14 to $8.08 billion in 2022-23.
- Rice: Exports have also gone up during this period, from $7.79 billion to $11.14 billion. But it’s been driven by non-basmati rice, with the value of premium-priced basmati shipments actually declining. Basmati exports are mainly to the Persian Gulf countries and, to some extent, the US and UK. Non-basmati shipments are more diversified, with the destinations spread across Asia (Bangladesh, China, Sri Lanka, Malaysia, Vietnam, UAE and Iraq) and Africa (from Senegal, Ivory Coast and Benin to Somalia and Madagascar). It’s non-basmati that has made India the biggest rice exporter, ahead of Thailand.
- Sugar: The boom in sugar exports has been more recent – from a mere $810.90 million in 2017-18 to $5.77 billion in 2022-23. Indian mills have built markets for both raw sugar (among refineries in Bangladesh, Indonesia, Malaysia, Saudi Arabia and Iraq) and regular plantation whites (in African countries, Afghanistan, Sri Lanka and China). In the process, the country has emerged as the world’s No. 2 exporter after Brazil.
Traditional items that are lagging behind
- Spices exports: have stagnated since it last jumped from $2.5 billion in 2013-14 to almost $4 billion in 2020-21. The jump was due to chilli, mint products, cumin, turmeric, ginger, coriander, fennel and other seed spices and not due to traditional plantation spices such as pepper and cardamom.
- Buffalo meat shipments: Never regained their peak of $4.78 billion reached in 2014-15.
- Raw cotton, guar-gum and oil meals: Exports of the three in 2022-23 were a pale shadow of their highs of 2011-12 ($4.33 billion for cotton) and 2012-13 ($3.92 billion for guar-gum and $3.04 billion for oil meals).
- Cotton: Cultivation of genetically-modified Bt cotton and high global prices has enabled India to become the world’s top producer (ahead of China) and No. 2 exporter (after the US) of the natural fibre. But with the yield gains from Bt cotton tapering off and the regulatory regime not permitting new gene technologies, the country has turned from a net exporter to an importer of cotton.
- Guar-gum (a thickening agent used in extraction of shale oil and gas) and oil meal exports rode the global commodity price boom from 2003-04 to 2013-14. They haven’t shown the same buoyancy in the more recent post-Covid boom, partly due to domestic crop shortages – especially in cotton and soybean – not generating adequate surpluses for exports.
Major Import Contributors
- Unlike exports, India’s imports of farm produce are dominated by a handful of items.
- Vegetable Oil: Imports have more than doubled in value terms, from $9.67 billion to $20.84 billion between 2019-20 and 2022-23. In quantity terms, imports have risen from 13.18 million tonnes (mt) in the 2019-20 oil year (November-October) to 14.03 mt in 2021-22. During November-March 2022-23, they have grown further by 23.7% over the same period of the previous oil year. Imports meet roughly 60% of India’s vegetable oil requirements.
- Pulses: Import dependence is hardly 10% now in pulses, with the value of imports also coming down from $4.24 billion (6.7 mt) in 2016-17 to $1.94 billion (2.5 mt) in 2022-23.
- Spices, cashew and cotton: commodities where India has traditionally been a net exporter – have shown a rising imports trend. Spice imports going up are a reflection of reduced price competitiveness (vis-à-vis Vietnam in pepper and Guatemala in pepper), while an outcome of stagnant, if not falling, domestic production in cotton.
What are Risks to Agricultural Trade?
- International prices: The latest FPI reading of 127.2 points for April 2023 is down from the 159.7 points peak of March 2022 and the 2022-23 average of 139.5 points. This reduction in FPI will reduce the competitiveness of Indian agricultural exports.
- Domestic inflation: The government had banned wheat exports last May, which was followed by a ban on broken rice exports and the slapping of a 20% duty on all non-parboiled non-basmati shipments in September. Exports of sugar have also stopped since this month’s start.
- One can expect more curbs on exports – and a further liberalisation of imports – if the ensuing southwest monsoon season delivers subnormal rainfall.