The High Level Group (HLEG) on Agricultural Exports, which was set up by the Fifteenth Finance Commission, has recently submitted its report to the Commission. The HLEG was established with the aim of recommending quantifiable performance incentives for states to boost agricultural exports and promote crops for significant import substitution.
The Role of the Finance Commission
The Finance Commission is a constitutional entity mandated to determine the methodology and formula for tax revenue distribution between the Centre and the states, and among the states, based on current constitutional arrangements and requirements. According to Article 280 of the Constitution, the President of India must constitute a Finance Commission every five years or earlier if necessary. The 15th Finance Commission, under the leadership of NK Singh, was established by the President of India in November 2017, and its recommendations will be effective from April 2020 to March 2025. For the Financial Year 2020-2021, the Ministry of Finance released a section of grants-in-aid as part of the Tied Grant recommended by the 15th Finance Commission.
Aims and Objectives of the HLEG
The HLEG was constituted to evaluate export and import substitution opportunities for Indian agricultural products, including commodities, semi-processed and processed goods, in light of changing international trade scenarios. It also aims to propose strategies to increase farm productivity, encourage higher value addition, reduce waste, enhance logistics infrastructure, and improve the sector’s global competitiveness. Furthermore, the HLEG aims to identify barriers to private sector investments in the agricultural value chain and recommend policy measures and reforms to attract the required investments.
Recommendations by the HLEG
The HLEG emphasized the need to focus on 22 crop value chains guided by a demand-driven approach, suggesting that people should take the initiative and responsibility for improving supply rather than relying solely on government services. It also highlighted the importance of addressing Value Chain Clusters (VCC) holistically and prioritizing value addition.
Introduction of State-led Export Plan
A business plan for a crop value chain cluster is proposed, outlining the opportunity, initiatives and investment needed to meet the desired export aspiration. These plans are intended to be action-oriented, time-bound, outcome-focused and prepared collaboratively with private sector players and Commodity Boards, ensuring participation from all stakeholders.
The Role of Private Sector and Central Government
Private sector players are recommended to play a key role in ensuring demand orientation, focusing on value addition, and guaranteeing that project plans are feasible, robust, implementable, and adequately funded. The Central government’s role should be to act as an enabler by enforcing robust institutional mechanisms for funding and support.
India’s Estimated Agricultural Export Potential
HLEG notes that India’s agricultural export potential could increase from USD 40 billion to USD 70 billion within a few years. The estimated investment in agricultural export could range from USD 8 to 10 billion across inputs, infrastructure, processing and demand enablers. This boost in exports could potentially create 7-10 million jobs, leading to higher farm productivity and increased farmer income.
Last Modified: February 8, 2024