Impact of US Tariffs on Andhra Pradesh’s Aquaculture

The aquaculture industry in Andhra Pradesh faces challenges due to new tariffs imposed by the United States. Chief Minister N Chandrababu Naidu has reached out to the central government for assistance. The state is a major exporter of shrimp and fish, and the tariffs threaten the livelihoods of thousands of aqua farmers.

Current Context of Tariffs

The Trump administration has implemented a 27% tariff on aqua exports from India. This includes a 5.77% countervailing duty and a 1.38% anti-dumping duty. Such tariffs will drastically increase export costs. Competing countries like Ecuador benefit from lower tariffs, making Indian products less competitive.

Impact on Aqua Farmers

The profit margins for aqua farmers are already slim, ranging from 5% to 6%. With increased tariffs, they may need to raise prices. This could lead to a decline in exports as Indian products become more expensive compared to those from Ecuador, Vietnam, and Taiwan. A decrease in exports will force farmers to reduce production, impacting their income and job security.

Scale of the Aquaculture Industry

Andhra Pradesh is the leading state in aqua production in India. In the 2023-24 period, it produced 0.94 million tonnes of seafood, predominantly shrimp. Aquaculture has expanded in the last two decades, supported by government initiatives. The industry has created jobs in related sectors such as cold storage and fish processing.

Economic Contribution of the Seafood Sector

The seafood sector plays important role in Andhra Pradesh’s economy. It contributes about 8% to the Gross State Domestic Product (GSDP). In the financial year 2023-24, the state exported 347,927 tonnes of seafood worth USD 2.369 billion. Frozen shrimp accounted for portion of these exports, denoting its importance.

Future Prospects of Aquaculture

The Naidu government aims to expand aquaculture from 400,000 acres to 1 million acres by 2029-30. This growth is essential for achieving double-digit inclusive growth. However, the new tariffs pose a threat to this ambitious plan. The competition from Ecuador and other countries will require strategic responses to maintain market share.

Global Seafood Market Dynamics

The USA and China are the largest importers of Indian seafood. In 2023-24, frozen shrimp accounted for 40.19% of total seafood exports by quantity. The USA alone imported 297,571 MT of frozen shrimp, making it the largest market for Indian seafood. This dependency on a few key markets puts stress on the vulnerability of the industry to international trade policies.

Summary of Key Data

– Andhra Pradesh contributes 76% shrimp and 24% fish to national aquaculture output. – The state exported seafood worth USD 7.38 billion in 2023-24, with frozen shrimp being the top export. – Approximately 8 lakh farmers are directly or indirectly dependent on the aquaculture sector. – The seafood sector earns the state around Rs 3.5 billion annually.

Questions for UPSC:

1. Examine the impact of international trade policies on local economies, using the aquaculture industry as a case study.
2. With suitable examples, discuss the role of government support in promoting agricultural sectors in developing economies.
3. Critically discuss the challenges faced by small-scale farmers in the context of global market competition.
4. Analyse the relationship between export tariffs and domestic agricultural production, taking into account the aquaculture sector.

Answer Hints:

1. Examine the impact of international trade policies on local economies, using the aquaculture industry as a case study.

1. International trade policies, like tariffs, can affect local producers’ competitiveness.
2. In Andhra Pradesh, the 27% tariff on aqua exports increases costs, impacting profit margins for farmers.
3. Countries with lower tariffs, such as Ecuador, gain a competitive edge in the global market.
4. Local economies may suffer from reduced export revenues and job losses in related sectors.
5. Trade policies can lead to economic dependency on a few key markets, increasing vulnerability to policy changes.

2. With suitable examples, discuss the role of government support in promoting agricultural sectors in developing economies.

1. Government initiatives can provide subsidies and support for infrastructure development in agriculture.
2. In Andhra Pradesh, both TDP and YSRCP governments have encouraged aquaculture through various schemes.
3. Investment in technology and training can enhance productivity and sustainability in farming practices.
4. Examples include the expansion of aquaculture acreage from 400,000 to 1 million acres by 2029-30.
5. Government support can help farmers adapt to global market changes and improve their competitiveness.

3. Critically discuss the challenges faced by small-scale farmers in the context of global market competition.

1. Small-scale farmers often operate with thin profit margins, making them vulnerable to price fluctuations.
2. Access to markets and resources is limited, hindering their ability to compete with larger producers.
3. Global competition can lead to price undercutting, further squeezing small farmers’ profitability.
4. Tariffs and international trade policies can disproportionately affect small-scale farmers, as seen in Andhra Pradesh.
5. Small farmers may lack the financial resilience to adapt to sudden market changes or policy shifts.

4. Analyse the relationship between export tariffs and domestic agricultural production, taking into account the aquaculture sector.

1. Export tariffs increase production costs, which can lead to higher prices for consumers and reduced demand.
2. In Andhra Pradesh, the new tariffs may force aqua farmers to reduce production due to decreased export viability.
3. Higher tariffs can lead to a decline in export volumes, impacting farmers’ income and livelihoods.
4. Domestic agricultural sectors may struggle to maintain production levels in the face of international competition.
5. Long-term reliance on exports makes domestic agriculture vulnerable to global trade policy changes.