India’s agricultural exports are poised to scale a new peak in the financial year ending March 31, 2023. But so are imports, bringing down the overall farm trade surplus. Government data show the value of farm exports in April-December 2022, at $39 billion, was 7.9% higher than the $36.2 bn for the corresponding period of the previous year. At the present rate, the record $50.2 bn exports achieved in 2021-22 look set to be surpassed. However, equally significant are the imports of agri produce, that at $27.8 bn in Apr-Dec 2022, have grown 15.4% over the $24.1 bn for Apr-Dec 2021. As a result, there has been a further shrinking of the surplus on the farm trade account. The accompanying table shows that the surpluses even in 2020-21 ($20.2 bn) and 2021-22 ($17.8 bn) were lower than the $22.7 bn and $27.7 bn of 2012-13 and 2013-14 respectively. The drivers of exports… The two big contributors to India’s agri-export growth have been rice and sugar. India in 2021-22 shipped out an all-time-high 21.21 million tonnes (mt) of rice valued at $9.66 billion. That included 17.26 mt of non-basmati (worth $6.12 billion) and 3.95 mt ($3.54 billion) of basmati rice. In the current fiscal, the growth has been primarily led by basmati rice. Its exports have gone up by 40.3% in value (from $2.38 billion in April-December 2021 to $3.34 billion in April-December 2022) and 16.6% in quantity (2.74 mt to 3.20 mt) terms. The corresponding increases have been less for non-basmati exports: 3.3% in value ($4.51 billion to $4.66 billion) and 4.6% in quantity (12.60 mt to 13.17 mt). More spectacular perhaps is sugar. Sugar exports hit a record value of $4.60 billion in 2021-22, as against $2.79 billion, $1.97 billion, $1.36 billion, and $810.90 million in the preceding four fiscals. This fiscal has seen a further surge of 43.6%, from $2.78 billion in April-December 2021 to $3.99 billion in April-December 2022. India exports of rice and sugar are well on course to touch, if not top, $11 billion and $6 billion respectively in 2022-23. Marine products exports, too, are likely to exceed last year’s peak of $7.77 billion, having registered a marginal 2.7% jump from $6.12 billion in April-December 2021 to $6.29 billion in April-December 2022. However, exports of some big-ticket items have faltered or slowed. The value of buffalo meat shipments fell 5.1% from $2.51 billion in April-December 2021 to $2.39 billion in April-December 2022. So did spices: down 6.7% from $2.95 billion to $2.75 billion. While wheat exports have grown by 3.9% from $1.45 billion to $1.51 billion, they are unlikely to sustain or even reach the 2021-22 full-fiscal level of 7.23 mt ($2.12 billion), thanks to a poor crop and the ban on shipments imposed in May 2022. .And that of imports More than a general export slowdown, it’s the growth in imports that should be cause for concern. This has come mainly from three commodities. The first is vegetable oils, whose imports shot up from $11.09 bn in 2020-21 to $18.99 bn in 2021-22, and even more during the first nine months of 2022-23 over the same period of last fiscal — from $14.04 bn to $16.10 bn or 14.7%. According to the Solvent Extractors’ Association of India, India’s total edible oil imports rose from 13.13 mt in 2020-21 to 14.03 mt in the 2021-22 oil year (Nov-Oct), and increased further by 30.9% from 2.36 mt in Nov-Dec 2021 to 3.08 mt in Nov-Dec 2022. Imports now account for over 60% of the country’s estimated 22.5-23 mt annual oil consumption. The second is cotton. India’s cotton exports reached an all-time-high of $4.33 bn back in 2011-12. It remained at reasonably high levels until 2013-14 ($3.64 bn), before plunging to $1.62 bn by 2016-17 and $1.06 bn in 2019-20. There was a recovery thereafter to $1.90 bn in 2020-21 and $2.82 bn in 2021-22. But during this fiscal, not only have exports collapsed to $512.04 million in April-December (from $1.97 billion in April-December 2021), imports have also soared from $414.59 million to $1.32 billion for the same period. In other words, India has turned from a net exporter to a net importer of cotton. The third commodity is cashew. During April-December 2022, imports have posted a 64.6% rise to $1.64 billion from $996.49 million in April-December 2021, even as exports of cashew products have plummeted from $344.61 million to $259.71 million for the same period. A similar trend has been witnessed in spices, with exports de-growing (from $2.95 billion to $2.75 billion) and imports edging up ($955.75 million to $1.03 billion). The policy implications From the chart, it can be seen how closely India’s farm performance is linked to international commodity prices. The UN Food and Agriculture Organization’s (FAO) Food Price Index — having a base value of 100 for the 2014-16 period — averaged 122.5 points in 2012-13 and 119.1 points in 2013-14. Those were the years when India’s agri-exports were at $42-43 billion. As the index crashed to 90-95 points in 2015-16 and 2016-17, so did exports to $33-34 billion. The exports recovery in 2020-21 and 2021-22 happened along with — rather, on the back of — rising global prices and the FAO index averaging 102.5 points and 133 points in the two years. The FAO index peaked at 159.7 points in March 2022, just after the Russian invasion of Ukraine. Since then, it has fallen every month, with the latest reading of 131.2 points for January 2023 the lowest after the 129.2 points of September 2021. Going by past correlation, one can expect this to lead to India’s farm exports slowing down in the months ahead. Moreover, this could be accompanied by increased imports, as was the case from 2014-15 to 2017-18. In the event, the focus of policymakers too, may have to shift from being pro-consumer (to the extent of banning/ restricting exports) to pro-producer (providing tariff protection against unbridled imports). Secondly, the government needs to do something about cotton and edible oils. India’s cotton production has declined from the high of 398 lakh bales in 2013-14 to a 12-year low of 307.05 lakh bales in 2021-22. Clearly, the effects of not allowing new genetic modification (GM) technologies after the first-generation Bt cotton are showing, and impacting exports as well. A proactive approach is required in edible oils as well, where planting of GM hybrid mustard has been permitted with great reluctance — and which is now a matter before the Supreme Court.
