Close

The new agriculture export policy: A gateway to relieve the sector from surplus crops?

Food and agriculture export in India

In India, about 60 per cent of the population depends on agriculture for their livelihood, and the sectors forms an important value chain of the Indian economy. In 2018, fishing, forestry and agriculture together posted a gross value added (GVA) of US$ 271 billion. Between 2010 and 2018, India’s agricultural exports registered a CAGR of more than 16 per cent, reaching around US$ 38 billion in 2018; while agriculture exports from India stood at more than US$ 34 billion from April 2018 to February 2019.

India’s agriculture and horticulture produce accounts for 600 million tons annually, with about 30 per cent going to waste. The government has already looking to explore global markets to export this excess agri-produce by laying down stringent health and quality standards. It has listed winning sectors under the new agri-export policy that includes shrimp; meat; basmati and non-basmati rice; fruits such as grapes, bananas and pomegranate; vegetables including potatoes; processed and value-added products; cashew; plant parts/medicinal herbs in value-added form including herbal medicines; food-based nutraceuticals; spices such as cumin, turmeric and pepper; ethnic and organic food; and aromatics. In addition, the government has also called the entire stakeholders’ community to work in tandem by considering the agriculture sector as an industry, to make this initiative successful.

The food industry in India is projected to register significant growth and this is attributed to its growing contribution in the global trade, especially in the food processing segment. India’s food and grocery market accounts for 70 per cent of the total retail sales and is the sixth-largest market worldwide. The food processing sector alone accounts for 32 per cent of the county’s total food market. This sector also contributes to over eight per cent of GVA in both agriculture and manufacturing sectors, while accounting for six per cent of the overall industrial investment and 13 per cent of the total exports from India.

 

Market size

India’s export of agricultural and processed foods reached about US$ 21 billion between April and October 2018, with marine products topping the list with around US$ 4.2 billion, followed by basmati rice at about US$ 2.5 billion, buffalo meat at US$ 2.2 billion, spices at around US$ 1.80 billion and non-basmati rice at US$ 1.75 billion approximately. The major export markets out of 100 global regions for Indian agricultural/horticultural and processed food products are the US, Southeast Asia, the EU, SAARC countries and the Middle East.

1.1Table: List of top 10 items of food exports from India in 2017

HS Code

Product Description

Value (US$ billion)

Share (in percentage)

1006

Rice

7.08

22.41

0306

Crustaceans; in shell or not, live, fresh, chilled, frozen, dried, salted or in brine; smoked, cooked or not before or during smoking; in shell, steamed or boiled, whether or not chilled, frozen, dried, salted or in brine; edible flours, meals, pellets

4.75

15.05

0202

Meat of bovine animals; frozen

3.94

12.47

0801

Nuts, edible; coconuts, Brazil nuts and cashew nuts, fresh or dried, whether or not shelled or peeled

1.05

3.31

1701

Cane or beet sugar and chemically pure sucrose, in solid form

0.97

3.06

1515

Fixed vegetable fats and oils (including jojoba oil) and their fractions, whether or not refined; but not chemically modified

0.95

3.02

0904

Pepper of the genus piper; dried or crushed or ground fruits of the genus capsicum or of the genus pimento

0.90

2.85

0307

Molluscs; whether in shell or not, live, fresh, chilled, frozen, dried, salted or in brine; smoked molluscs, whether in shell or not, cooked or not before or during the smoking process; flours, meals and pellets of molluscs, fit for human consumption

0.81

2.57

0902

Tea

0.77

2.43

0303

Fish; frozen, excluding fish fillets and other fish meat of heading 0304

0.73

2.33

 

Sub-total (Top 10 products)

21.94

69.46

 

Remaining sub-total

9.63

30.51

 

Total

31.97

100

*Source: https://comtrade.un.org/data/

Production of food grain in India during the crop year 2017-18 is recorded at 284.83 million tons, and the government is expecting this figure to reach 285.2 million tons in the crop year 2018-19. Kharif crop sowing covered a farm area of about 259 million acres (105 million hectares) in 2018, whereas milk and meat production was estimated at about 165 million tons and 7.5 million tons during FY17.

The leading segments in agriculture export from India are:

  • World’s largest producer of milk at 165 million tons per year, along with the largest buffalo population counting at around 108 million.

  • World’s largest producer of pulses at 24.5 million tons per annum

  • Number one producer of mangoes, papayas and bananas with a record crop production at about 21 million tons, 6.2 million tons and 31 million tons, respectively.

  • World’s second largest producer of vegetables with around 182 million tons annual produce.

 

1.2Table: India’s top 10 partners in export of food products in 2017

Rank

Partner Country

Value (US$ billion)

Share (in percentage)

1

Vietnam

4.88

15.28

2

US

3.99

12.47

3

United Arab Emirates

1.97

6.15

4

Saudi Arabia

1.43

4.47

5

Iran

1.14

3.57

6

Malaysia

0.86

2.68

7

United Kingdom

0.78

2.44

8

The Netherlands

0.77

2.40

9

Iraq

0.69

2.16

10

Bangladesh

0.68

2.13

 

Sub-total (10 countries)

17.18

53.75

 

Remaining countries

14.79

46.25

 

Total

31.97

100

*Source: https://comtrade.un.org/data/

 

Major initiatives to boost agri-export

The new Agriculture Export Policy devised by the government’s Ministry of Commerce & Industry is aimed at doubling the country’s agricultural exports by integrating the agri-produce and Indian farmers with the global value chain. The agriculture sector in India has received an FDI inflow of about US$ 250 million in between FY13 and FY17. The Agricultural and Processed Food Products Export Development Authority (APEDA) is a dedicated agency that works towards showcasing India’s potential in agricultural produce to global export destinations.

The government of India has come up with major initiatives in the recent past to boost the agriculture sector and the export of agri-produce as well. Some of the initiatives are:

  • Transport and Marketing Assistance (TMA) launched to provide finance for marketing and transport of agri-produce to encourage its exports.

  • The Agriculture Export Policy 2018 focuses on enhancing the country’s agri-produce exports to US$ 60 billion through 2022.

  • To fuel the entrepreneurship and innovation in agriculture sector, the government is starting the new AGRI-UDAAN initiative to guide start-ups and bring them significant investments.

  • The government also has plans to enhance the food processing capacity by manifold, which is currently at 10 per cent. It has also earmarked around US$ 936 billion investment to develop mega food parks under the Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters (SAMPADA).

  • The government is also planning massive digitisation of the Primary Agricultural Credit Society (PACS) through investments of around US$ 306 million.

 

Major issues

Apart from the domestic agrarian crisis due to surplus crop production, imbalance in Minimum Support Price (MSP) and input cost of crop, inadequate storage facilities and weather distress, the government is trying to fix the loopholes in the current export policy. The current policy initiatives to relives farm stress require a long-term, sustained approach in order to make India an export-ready and friendly agriculture market. This needs mapping and placing of all necessary data related to the agriculture sector. The government has already taken up this initiative and things are expected to improve in coming years.

According to a knowledge report published by YES Bank, titled “Open government Open Data: Re-imagining India”, the agriculture sector data on the government portal offers strong visibility to users with average levels of customer engagement than global leaders. However, clustering of data and lack of well-defined use-cases limits its usage in achieving the targeted goals of this important sector for the country’s economy.

Some of the major hurdles faced by India's agriculture exports are:

  • Non-compliance with the food safety standards of importing countries, rejection due to chemical contamination and inconsistency in product quality across the supply chain.

  • High logistics costs and certain trade facilitation restrictions, such as perishables not being allowed to be carried through express routes or fast-track modes.

  • Lack of a mutual recognition of conformity assessment system with key export markets.

  • Multiple government agencies doing piecemeal regulation and limited use of technology and automation systems for fast-track clearances and risk management.

Commenting upon possible solutions for these challenges faced by India's agriculture exports, Arpita Mukherjee, Professor - Indian Council for Research on International Economic Relations (ICRIER), suggests, “To overcome these challenges, it is important to work closely with farmers in reducing the usage of chemicals and banned fertilisers. Chemicals and fertilisers that are banned in other countries should also be banned in India with increased traceability to the farm using technology.

“In addition, farmers, processors and exporters should be informed and educated about the requirements of the export market. International standards like those set by the Codex Alimentarius Commission have been adopted by FSSAI in India, but more stringent implementation is required. India must have a single agency for food and agriculture trade to ensure uniform implementation with respect to standards, compliances and mutual recognition agreements (MRAs). This will enhance the acceptability of India-certified products by eliminating second inspection/testing by other countries through equivalence.

“Export agencies also need to use technology and automation for fast-track clearances, and perishable items should be allowed to be transported via express route, subject to standard due diligence as is followed by the logistics cargo.”

 

Future prospects

The government of India has set an ambitious target of doubling the agriculture farm income from INR 96,703 in 2015-16 to INR 219,724 by 2022-23. The sector is projected to gain a significant growth rate in the coming years due to improved investments in the sector for better irrigation, storage and warehousing. In addition to this, the introduction of genetically-modified (GM) crops is expected to make India self-sufficient in terms of pulse production in the near future. Besides, a hike in minimum support price (MSP) is also a key factor to fuel the growth of agriculture farm income in India.

Share