Will India become the next Agro-exporter?
It is a question that has been doing the rounds lately.
The world population could grow to almost 10 billion by 2050, increasing agricultural demand if you consider a modest economic growth of 50% compared to 2013. Any income growth in low- and middle-income countries would accelerate the dietary shift to a higher intake of fruits, vegetables, and meat than cereals. It would mean a corresponding change in the agricultural output adding pressure on natural resources.
2022 saw several countries facing food issues reversing decades of improvements. Conflict, socio-economic factors, increased natural disasters, climate change, and modified pests are a few reasons for today’s food crisis.
Additionally, the war in Ukraine increased the risk to global food security, as food prices rose and could likely remain high in the future, pushing millions into severe food insecurity. Though global food supplies remain positive, the sharp increase in food prices due to high input costs, logistics costs, and war-led trade disruptions have added to the import bills. Such increases affect the poor and developing countries as they hinge on food imports to fulfil domestic demand.
Per World Bank’s Commodities Price Data for May 2022, the Agricultural Price Index rose 42 per cent compared to January 2021. Maize and wheat prices surged 55 per cent and 91 per cent, respectively, compared to January 2021, while rice prices fell 12 per cent.
Despite COVID disruptions, India’s exports rose 20% to $50.21bn. This rise was the highest ever for India. This is because the commodity prices in the world are booming, and we are in a unique place to capitalize on this opportunity caused due to supply chain issues and the Russia-Ukraine war.
India now has a chance to become the next agro-exporter in the world. It exports onions, fruits, pulses, dairy products, rice, meat, grains, wheat, nuts, alcoholic beverages, cereals, cashews, vegetables, etc. Rice contributed over 17% to agricultural exports in 2021-22.
Rice exports grew 9.35 per cent to $9.65bn. Though we did not export wheat till two years ago, our wheat export in 2021-22 jumped to $2.2bn from $567mn in 2020-21. We shipped seven mn tons of wheat last year compared to 2 min tons two years
Can This Surge Mean India Will Become The Next Agro-exporter?
India is self-sufficient, unlike China, which depends on imports to fulfil its food demands. Except for importing edible oils and a few pulses, we grow enough to meet the domestic market. It was evident when the Government could give free food to people during the pandemic without supply issues.
Countries dependent on Russia and Ukraine for food imports are suddenly facing shortages. So they looked for countries with surplus agricultural production that can become the next agro-exporter and found India had a surplus of wheat, maize, sugar, and other products.
For instance, Indonesia and Ecuador are the largest exporters of bananas. However, their exports suffered due to supply chain issues. So, India exported bananas, which increased 100 per cent y-o-y, to become one of the most prominent players in the Middle East markets. We forayed into a commodity that we did not export earlier.
Another opportunity that India can enter is the export of eggs and poultry. The Middle East imports eggs but has not imported them from India. Exports of our poultry products rose to $71mn in 2021-22 from $58 mn in 2020-21
India does have the opportunity to export products that it has not shipped before. But, what must India do to make the most of this opportunity in the face of the food crisis?
Make India a brand: One of the first steps to becoming the exporter of the world is to create a brand for India. We export several commodities; however, none indicate they are Indian. For instance, we’ve heard of California almonds and Washington apples. In the same way, Indian products like basmati rice to turmeric must have a global identity. Therefore, the Government and private producers must create and promote brands for each category.
Improve infrastructure and supply efficiencies: The war may have opened doors for exports barred earlier. However, to ensure that we continue to export the products even after the end of the issue, we must improve our port structure, have better storage facilities, and manage overheads. In addition, we must ensure the changes happen and the brand India is marketed globally.
How Is The Government Supporting Such An Initiative?
The Government is focusing on improving agricultural productivity. It has introduced several initiatives to help agriculture. As a result, in the last few years, the share of agriculture in the GDP has declined. However, the changes and the focus have helped as the agricultural contribution to GDP rose over 20 per cent.
The Government has several initiatives like
- Crop diversification where the Government is looking to encourage the production of crops beyond rice, wheat, and maize.
- 100% FDI under government approval route for trading, including e-commerce, for food products manufactured or produced in India.
- Pradhan Mantri Kisan Sampada Yojna to create modern infrastructure with efficient supply chain management from the farms to the retail outlet. This scheme includes other sub-schemes like Integrated Cold chain and value addition infrastructure, Creation or Expansion of Food Processing Preservation capacities, Infrastructure of Agro-Processing clusters, and Operation Greens.
- Nivesh Bandhu is a dedicated investors’ platform that will facilitate ease of business and offer information on incentives and policies on a single platform.
- Infrastructure support through 41 mega food parks, 350 cold chain projects, and 62 agro-processing clusters.
- Animal Husbandry Infrastructure Development Fund will facilitate dairy and meat processing investments and establish animal feed plants. In addition, the Government offers the borrowers a 3 per cent interest subvention and a credit guarantee of 25 per cent of the total borrowing.
- The investor Targeting and facilitation desk for the food processing ministry will help investors frame policies or strategies and keep them informed of various initiatives, opportunities, and schemes.
Does this mean there are no hurdles to India becoming an agro-exporter?
No, there could be several issues. One of the hurdles to India becoming an agro-exporter could be increasing domestic demand for food. So India before becoming an agro-exporter will have to check the surplus available after it meets domestic food demands. Another obstacle to becoming an agro-exporter could be inconsistent supply —countries import from Ukraine and Russia because of their consistent supply.
Can India fulfil their food demands consistently by becoming an agro-exporter? That is something we will have to see how the Government takes advantage of the opportunity in the crisis.