Agricultural Exports- India’s potential, initiatives, challenges and solutions

Agricultural Exports- India’s potential, initiatives, challenges and solutions

Agricultural exports form a major part of India’s total exports which indicates the potential of the sector. Considering the latest forecasts, India is at an advantageous position to capture this growing market. However, despite numerous initiatives by the Indian government, there are certain challenges that need to be addressed to improve agricultural exports in the country.

India’s agricultural exports

Agriculture is often the first and primary source of income for a lot of rural households in India. A lot of agricultural workers and farmers work to earn a living, while others, who have some extra money to spare, also invest heavily in agriculture.

The 2019-20 Economic survey mentions a few important figures of India’s agricultural exports. Indian agricultural/horticultural and processed foods are exported to more than 100 countries/regions in the world.

India is one of the 15 leading exporters of agricultural products in the world. India’s major export destination for agricultural products are the USA, Saudi Arabia, Iran, Nepal, and Bangladesh.  

India’s major agricultural export basket includes rice (both Basmati and non-basmati), spices, cotton, and wheat apart from this India also exports marine products and buffalo meat.  

As per APEDA (Agricultural and Processed Food Products Export Development Authority), India exported pulses worth US$ 163.90 million and dairy products worth US$ 89.50 million from April–September 2020. 

Agricultural exports are increasing in India at a rate faster than the pace of GDP growth. This is a positive trend for our country as it will not only help in generating foreign exchange and employment opportunities but also help in reducing the effect of consumer demand on imports.

India’s agricultural export and various other agro-commodities are an important input to the global supply chains dealing with a vast array of commodities from bulk commodities like edible oils, food grains (mainly rice, wheat and maize) to horticultural goods like onions, potatoes etc.

Initiatives to encourage Agricultural exports in India

India's efforts to promote agricultural exports are not new. Such initiatives were first introduced in 1985, when the government of India set up a dedicated body called APEDA (Agricultural and Processed Food Products Export Development Authority). The aim of setting up APEDA was to promote and facilitate the export-oriented production and marketing of agro-based products in the country.

In 2018, the Ministry of Commerce and Industry introduced a new agriculture export policy to encourage farmers across the country to cultivate produce by offering them direct benefits and insurance cover. The government aims to double farmers’ income by 2022. This significant step comes after Prime Minister Narendra Modi’s call to double farmer incomes from the soil. Through this revised policy, the government aims to integrate 2 billion people directly or indirectly dependent on farming into the global value chains of agriculture.

The Government has also brought out a Central Sector Scheme – ‘Transport and Marketing Assistance for Specified Agriculture Products’. Through this Scheme, financial assistance is provided for facilitating the handling and marketing of export-specific agriculture products (matters related to exports). The assistance is provided on the basis of benefits derived from the utilization of infrastructure/terminals, both existing and proposed.

FDI Policy promotes Agricultural activities in India, which leads to farming development. As per the present FDI Policy, 100% FDI is allowed in the following activities of agriculture through the automatic route.

Challenges associated with Agricultural exports of India

Agriculture is the mother source of food subsistence. But, due to that India’s agriculture sector has failed to keep pace with the economic growth of India. India’s agricultural exports have remained in deficit. Some of the Challenges associated with Agricultural exports of India are-

It is an undeniable fact that India is one of the world's largest agricultural producers. However, what is often discussed less is that a major part of India's agricultural produce cannot be regarded as a significant contributor in the process of global food supply. The average yield levels of most crops in India remain much lower than the world average. This is further compounded by the fragmented landholdings and relatively smaller size of most farms in India.

Agricultural exports have been a major foreign exchange earner for the Indian economy. But in India, no study has been conducted to assess the long term impact of exports on the agricultural and horticultural sector by the Department of Commerce.

Exporters of agro-commodities are not successful in due to uncertainty in the foreign trading regime, lack of sufficient protection from the Government during the export and the unpredictable and unfettered private trading houses that resort to unfair trade practices such as price manipulation that may result in losses for exporting firms.

Indian government’s pro-consumer bias in exporting agricultural products is unfair. Indian government putting export restrictions on imported food items to prevent inflationary pressures in the domestic economy. This hurts Agricultural exports.

There is an International demand & supply situation, international prices and quality concerns also restrict India’s agricultural exports. Agricultural sector in India has been facing critical issues mainly because of the unbridled import of cheaper agricultural products from other countries.

How to improve agricultural exports?  

Agricultural exports are concentrated in select commodities and the value-added products constitute a relatively small proportion of total agricultural exports. The qualitative and quantitative limitations in export-oriented agriculture are largely due to the unavailability of infrastructure facilities, such as cold storage, pack houses, ripening chambers, and food processing units.

The NITI Aayog proposed a model for doubling farm income of rural farmers. The model aims at improving agricultural exports, establishing cross-border marketing and distribution channels for agri-produce, increasing competition in the agricultural input sector and reducing cost of crop production through mechanisation and advanced farming practices.  In order to implement this proposal, the Government can set up village level procurement centres for cotton, coffee and other cash crops. Farmers can sell their produce directly to these procurement centers.

Agricultural research and education is a complex and multi-tiered sector that includes the national universities, state agricultural agencies, commodity groups, crop consultants, and private enterprise. It is in desperate need of a shake-up. Below are three ways that the government can re-invigorate agricultural research and education to ultimately improve agricultural exports.

Diversification of agro-products is the key to improve agriculture exports. Government should focus on import substitution of agro-products: fruit and vegetables, where the country has market potential. The private sector can also be given full encouragement for the preservation and processing of fruits and vegetables in collaboration with private labs.

To Improve Agricultural Exports we have to first understand what kind of products are in demand across the globe. Grant Assistance for Grass root level institutions must be given to properly organize the product and sell it to foreign buyers. The Government can establish regional production belts. This can be achieved by linking the Mission for Integrated Development of Horticulture and Self Help Groups.