De­cod­ing agri ex­ports pol­icy

Hindustan Times ST (Jaipur) - - Nation - Roshan Kishore [email protected]

HT ANAL­Y­SIS Blan­ket ban on cat­tle slaugh­ter, at­tack­ing cat­tle traders can dis­rupt meat ex­ports in a big way NEW DELHI:

The Union Cab­i­net ap­provedtheA­gri­cul­tur­alEx­port Pol­icy,2018,Thurs­day.The­p­ol­icy is aimed at dou­bling agri­cul­tural ex­ports from the cur­rent level of $30 bil­lion by 2022 and in­creas­ing themto$100bil­lion­inthe“nextfew years there­after.” This, the pol­icy says, is to be achieved through a di­ver­si­fi­ca­tionofthe­ex­port­bas­ket in­cludingindige­nous,or­gan­i­cand eth­nic ex­ports. The ex­port push will­beaid­ed­byin­sti­tu­tion­almech­a­nisms to ease mar­ket as­sess and non-tar­iff bar­ri­ers. In­ter­est­ingly, the el­e­ments of the pol­icy have been spelt out in more generic terms than the ob­jec­tives. Prob­a­bly more de­tails will be re­leased later.

HThas­anal­ysedIn­dia’sagri­cul­tural ex­ports statis­tics to put in con­text the $100 bil­lion tar­get the pol­icy has set for it­self. Three im­por­tant points can be made on the ba­sis of this anal­y­sis.

1. Agri­cul­tural ex­port earn­ings are sen­si­tive to global prices: Ac­cord­ing to data from the Cen­tre for Mon­i­tor­ing In­dian Econ­omy (CMIE), In­dia’s ex­ports of agri­cul­ture and al­lied ac­tiv­i­ties were val­ued at $38 bil­lion in 2017-18. These val­ues were much larger in the ear­lier years.

Agri­cul­tural ex­ports had crossed $40 bil­lion in 2012-13 and 2013-14. Fall in prices has played a big­ger role in a de­cline in ex­ports there­after. This can be seen from the value and quan­tity in­dices of ex­ports of agri­cul­tural prod­ucts re­leased by the Food and Agri­cul­tural Or­gan­i­sa­tion (FAO). To be sure, the sharp spike in agri­cul­tural ex­ports in the sec­ond half of the pre­vi­ous decade was also a re­sult of higher prices.

See Chart 1

2. Max­imis­ing unit value of ex­ports rather than to­tal ex­port earn­ings is a bet­ter strat­egy: It is be­com­ing clearer by the day that re­mu­ner­a­tive prices are a big­ger chal­lenge for In­dian farm­ers than raising pro­duc­tion. Sim­i­larly, it is the unit value of ex­ports rather than to­tal value or quan­tity of ex­ports that is more rel­e­vant to their well-be­ing.

The global mar­ket in agri­cul­tural com­modi­ties is di­vided among ad­vanced cap­i­tal­ist coun­tries such as the US and nu­mer­ous de­vel­op­ing coun­tries. Agri­cul­tural is heav­ily sub­sidised in the for­mer group, al­low­ing farm­ers to sell their prod­ucts at lower rates, which makes their out­put more com­pet­i­tive in in­ter­na­tional mar­kets.

These coun­tries also have more re­sources to cush­ion their farm­ers against price crashes in in­ter­na­tional agri­cul­tural mar­kets. De­vel­op­ing coun­tries like In­dia do not have the where­withal to do ei­ther.

A long-term com­par­i­son of the unit value of agri­cul­tural ex­ports shows that In­dia used to have a sig­nif­i­cant ad­van­tage over the US in terms of unit value in the pre­re­forms pe­riod. This has ceased to be the case in the lat­ter phase. See Chart 2

The post-1990 pe­riod wit­nessed sig­nif­i­cant trade lib­er­al­i­sa­tion in agri­cul­ture, es­pe­cially af­ter the for­ma­tion of the World Trade Or­gan­i­sa­tion (WTO) in 1995. 199192 Ma­rine prod­ucts, meat, dairy and poul­try prod­ucts (Fig­ures in %) 2009-10 2010-11 Rice 2011-12 Agri­cul­tural is­sues have been at the cen­tre of the North-South dis­pute in the WTO. The mul­ti­lat­eral trad­ing sys­tem un­der the WTO is in a deep cri­sis to­day with an im­passe around the Doha Round agree­ment and sim­mer­ing trade ten­sions be­tween the US and China, the two big­gest economies of the world.

If In­dia is look­ing at sig­nif­i­cantly in­creas­ing its agri­cul­tural ex­port earn­ings on a sus­tained ba­sis, it will have to deal with the cur­rent problems in the global trade or­der.

3. How will In­dia’s cur­rent agri­cul­tural ex­port bas­ket Oil seeds and oil meals 2012-13 Tea, cof­fee and tobacco 2013-14 Spices and cashew 2014-15 change un­der the new pol­icy: The pol­icy rightly talks about the need to di­ver­sify In­dia’s agri­cul­tural ex­port bas­ket.

The Re­serve Bank of In­dia (RBI) statis­tics show that rice and an­i­mal prod­ucts (ma­rine prod­ucts, meat, dairy and poul­try) had an al­most two-thirds share in In­dia’s to­tal agri­cul­tural ex­port earn­ings in 2017-18.

This share has con­tin­u­ously in­crea- sed in the last decade. Rice alone had a share of 25% in 2017-18. See Chart 3

There are two problems with the dom­i­nance of rice in In­dia’s agri­cul­tural ex­ports. Over­all Fruits and veg­eta­bles 2015-16 Oth­ers 2016-17 2017-18 ex­port earn­ings are ex­tremely sen­si­tive to in­ter­na­tional rice prices. Also, rice be­ing a wa­ter-in­ten­sive crop en­tails a large longterm eco­log­i­cal cost. This au­thor had pointed out in a Mint ar­ti­cle that In­dia is the largest vir­tual ex­porter of wa­ter in the world.

Sim­i­larly, In­dia’s meat ex­port in­dus­try has been fac­ing un­cer­tainty be­cause of dis­rup­tions from the cow-pro­tec­tion lobby. A blan­ket ban on cat­tle slaugh­ter and at­tacks on cat­tle traders have the po­ten­tial to dis­rupt meat ex­ports in a big way. A holis­tic agri­cul­tural ex­port pol­icy will have to look at such is­sue as well.

DATA FROM THE CEN­TRE FOR MON­I­TOR­ING IN­DIAN ECON­OMY SHOWS IN­DIA’S EX­PORTS OF AGRI­CUL­TURE AND AL­LIED AC­TIV­I­TIES WERE VAL­UED AT $38 BIL­LION IN 2017-18

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