While highlighting the key problems in India's farm exports, outline contours of agricultural export promotion policy for India.
Post economic liberalization, India’s export of agricultural products increased at a rapid pace. Between 1991-92 and 2013-14 India’s agricultural trade surplus recorded a more than ten-fold increase. However, between 2013-14 and 2016-17, agricultural trade surplus has fallen by 70% because of decline in agricultural exports by 22%, on the other hand, imports increased by 62%. There are various reasons behind the downfall.
- One of the prominent reason is the declining trend for primary commodity prices in international market, specifically in case of cotton, sugar, and rice, which constitute a substantial portion of India’s agricultural export basket.
- However global issues alone are not behind the export crisis. Domestically there is a pro-consumer bias in India’s farm policy. In order to prevent price rise, the government put export restrictions on imported food items. Due to this policy farmers can’t receive higher prices in the international market, leading to the element of income uncertainty. When there are export restrictions during international prices peak, farmers lose the incentive to cultivate such exportable crops, as they will not be able to get international prices.
- Another issue is lack of storage facility, because of lack of cold storage chains, the huge potential for exports of processed agricultural products is untapped. The government should invest in storage infrastructure in order to boost exports of agricultural products. Adequate warehouse infrastructure will also help in the management of inflation.
- Another problem with storage capacity is that India’s warehouse capacity for perishables items is concentrated disproportionately in limited zones, for example around 50% of cold-storage capacity is concentrated in Uttar Pradesh and Punjab.
- There are some policy-lacunae as well. For example, if the imports of pulses and edible oils are reduced, India’s agricultural trade surplus can increase significantly. Because of imports, the prices in the domestic market remain low, so farmers do not prefer such crops.
- Also, there is a cobweb effect of higher production leads to lower prices, which in turn leads to lower cultivation in the next cycle. The issue of price crash due to the bumper crop can be taken handled through policies such as minimum support prices.
India’s agricultural export policy should focus on reducing export restrictions, and improve warehouse storage capacities. Also, there should be proper import management so that it does not adversely impact the farmers’ income. With proper policy and better infrastructure, India’s can unleash untapped agricultural products export potential.