Recent data from the Department of Commerce reveals a significant slowdown in India’s agricultural export sector. Farm commodities exports between April and September 2023 amounted to USD 23.6 billion, falling short of the USD 26.7 billion recorded in the same period of 2022. Additionally, the agricultural import value also declined from USD 19.3 billion to USD 16.2 billion. The combined effect of these changes has resulted in a slight decrease in agricultural trade surplus.
The Catalysts of Falling Agricultural Export
From April to September 2023, India’s agricultural exports witnessed an 11.6% decline compared to the previous year. This decrease is largely attributed to government-imposed bans and restrictions on the export of several commodities such as wheat, rice, and sugar. For instance, in September 2022, broken rice exports were banned, and a 20% duty was imposed on all white (non-parboiled) non-basmati grain shipments. July 2023 saw the complete ban of white non-basmati rice exports. Furthermore, the government shifted sugar exports from the “free” to the “restricted” category in May 2022.
International Prices and Their Impact on Indian Food Export
India’s agricultural trade, particularly exports, tends to follow global price trends. These patterns are closely related to the fluctuations in the Food Price Index (FPI) of the United Nations Food and Agriculture Organization (FAO). As the FPI rose to unprecedented levels in 2022-23, India’s agricultural exports increased; however, as global prices have fallen, the value of both India’s agricultural exports and imports is expected to decline in 2023-24.
Consequences of Declining International Prices for Indian Agriculture
Lower international prices can reduce the cost competitiveness of a country’s agricultural exports and make its farmers more susceptible to imports. Such a situation is currently being observed in the cotton and edible oils sectors in India. Cotton exports have not only declined sharply, but imports have also surged 2.5 times from 2021-22 to 2022-23 due to the price crash. Similarly, India’s edible oil imports more than doubled between 2019-20 and 2022-23 primarily because of soaring global prices, especially after the Ukraine war. Despite the recent price collapse, imports of crude palm, soybean, and sunflower oil continue at a lower duty of 5.5%.
Procedural Concerns and Negative Impacts on Growth
The government’s emphasis on controlling food inflation prior to national elections has led to prioritizing consumers’ interests over producers. As a result, restrictions on exports of cereals, sugar, and even onions persist, while imports of edible oil and pulses continue unhindered. This approach potentially neglects the concerns of manufacturers and producers, which could negatively impact GDP growth.
UPSC Civil Services Examination – Previous Year Questions
Previous year questions from the UPSC civil services examination provide insight into public investment in agriculture and the implications of implementing the ‘National Agriculture Market’ scheme. In 2020, candidates were asked to identify which of several options could be considered as public investment in agriculture. Choosing between fixing minimum support price for all crops, computerization of Primary Agricultural Credit Societies, social capital development, provision of free electricity supply to farmers, agricultural loan waiver by the banking system, and setting up cold storage facilities by the governments, the correct answer was “computerization of Primary Agricultural Credit Societies”, “social capital development” and “setting up cold storage facilities by the governments”. In 2017, the candidates were asked about the advantages or disadvantages of implementing the ‘National Agriculture Market’ scheme. The correct response highlighted it as an electronic trading portal for agricultural commodities providing farmers market access nationwide for better pricing for their produce.