Agri exports from India rise, but can this last?

While favourable conditions continue to exist, persistent discordant voices against India’s exports that have been heard in the WTO in the past seem to be getting louder

Published: 13th August 2021 12:15 AM  |   Last Updated: 12th August 2021 11:19 PM   |  A+A-

Illustrations By Amit Bandre

Agricultural marketing reforms introduced through the three farm legislations have one important objective, namely to transform India into an agri export hub. This was a major departure from the key driver of agricultural policy for more than half a century, which was the attainment of domestic food security. Almost coinciding with this changed policy stance, India’s agriculture exports registered a significant increase of nearly 25% in 2020-21 compared to last year. In a year when India’s overall exports had dropped by over 7%, the increase in agricultural exports was a welcome development.

India’s agricultural exports expanded to $32.5 billion in 2020-21, within touching distance of the record level of $32.7 billion seen in 2012-13. The share of agriculture in the total exports exceeded 11%, the highest in this millennium. This surge was due to three product groups: cereals, vegetable oils, and sugar and molasses.

At $10 billion, cereal exports were just below the record level of $10.5 billion achieved in 2013-14. As always, rice was the principal export commodity, but there was an important change in the exported variety. Rice exports have traditionally been dominated by basmati, but in 2020-21, non-basmati rice exports gained ascendency. Basmati exports declined due to lower exports, in value terms, to the major markets in West Asia.

Increase in non-basmati rice exports during 2020-21 was contributed by growth of both parboiled and non-parboiled rice. Exports of the former variety had nearly doubled to $2.4 billion, while the latter had increased almost threefold. India’s parboiled rice market is largely in Africa, which continued to expand during the pandemic. In case of the non-parboiled variety, Malaysia emerged as the second largest market after Nepal. Bangladesh not only increased its rice imports from India but also imported wheat, which helped India’s second largest cereal to increase its presence in the global markets.

Vegetable oil exports were buoyed by exports to China, which increased more than tenfold during 2020-21.This was almost entirely on account of groundnut oil exports. Over 97% of groundnut oil exports, valued at nearly $400 million, were shipped to China.

India’s agricultural exports benefited from several fortuitous factors. Restrictions on rice exports imposed by Vietnam and political uncertainties in Myanmar offered opportunities to Indian exporters, which they exploited to the fullest. Besides, India was at hand to meet the shortfall of edible oil in China after more than a third of its groundnut crop was damaged by floods.

While favourable conditions continue to exist for stimulating agricultural exports, persistent discordant voices against India’s exports that have been heard in the World Trade Organization (WTO) in the past seem to be getting louder. In the discussions in the WTO’s Committee on Agriculture, several members, including Australia, the European Union and the US, have argued that India’s exports of major agricultural commodities were contingent upon the subsidies. The major contention of these members has been that India would not have been able to increase its presence in the global markets but for the government support to the agricultural producers.

Currently, India is facing a dispute against its sugar subsidies that was initiated by Brazil, Australia and Guatemala. These countries have argued that subsidies granted to sugarcane and sugar producers as well as export subsidies for the same are inconsistent with several provisions of the WTO’s Agreement on Agriculture (AoA) and the Agreement on Subsidies and Countervailing Measures. Besides the three countries that have initiated the dispute, 14 other nations, including China, the EU, Indonesia, Japan and the US are participating as third parties.

Recently, an unexpected proposal from G-33, a group of WTO members seeking to protect the interests of developing countries in the area of agriculture, could stymie India’s agricultural exports’ drive. The G-33 has been supporting the developing countries that maintain public stockholding for food security purposes. The group has argued that the limits on subsidies imposed by the AoA should not constrain countries from providing subsidised food to the poor. Currently, a temporary truce prevails under which even if a member breaches the subsidy limit, i.e. 10% of the value of agricultural production, no dispute would be initiated against the member. India is the biggest beneficiary of this truce, as food subsidies granted to implement the National Food Security Act are threatening to breach the subsidies threshold.

The G-33, in which India has been an active member since its inception, has submitted a proposal for finding a permanent solution to this issue of public stock holding, which militates against India’s interests. The submission, from which India has distanced itself, argues that the permanent solution must ensure that a member “shall endeavour not to export from the procured stocks … unless requested by an importing member”. This, in other words, implies that India would be able to export from its food stocks only if a country explicitly seeks to import from our nation. Due to this proposal, India is now confronted with an impossible choice: maintain either its food subsidy programme or its agricultural exports.

Biswajit Dhar
Professor, Centre for Economic Studies and Planning, School of Social Sciences, JNU



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