UNDERSTANDING THE BASICS

• Agricultural exports in India fell by 8.2% in the fiscal year ending March 31, 2024.
• The total value of farm exports was $48.82 billion, down from $53.15 billion in 2022-23 and $50.24 billion in the previous fiscal.
• The decline in exports earlier was attributed to a crash in global agri-commodity prices.
• The UN Food and Agriculture Organization’s food price index dropped significantly from an average of 119.1 to 96.5 points between 2013-14 and 2019-20.
• Following the global price recovery post-Covid-19 pandemic and Russia’s invasion of Ukraine, India’s farm exports and imports reached all-time highs in 2022-23.
• However, these numbers dropped in the fiscal year just ended, indicating fluctuations in trade performance.

DRIVERS OF EXPORTS

• Sugar Export Restrictions:
  • Sugar exports plummeted to $2.82 billion in 2023-24 due to a ban on exports during the current production year from October 2023.
  • Previous fiscal years saw higher export values, reaching $5.77 billion and $4.60 billion.
• Non-Basmati Rice Export Constraints:
  • Restrictions on white non-basmati rice exports since July 2023 caused a decline in exports to $4.57 billion in 2023-24 from a record high of $6.36 billion in 2022-23.
  • Parboiled grain shipments are currently permitted, subject to a 20% duty.
• Impact on Wheat and Onion Exports:
  • Wheat exports were halted in May 2022, leading to a drastic fall in export value to $56.74 million in 2023-24 from an all-time high of $2.12 billion.
  • Onion export restrictions were eased with conditions like a floor price and duties, resulting in lower export volumes and revenues.
• Positive Trends in Other Export Items:
  • Basmati rice exports surged to $5.84 billion in 2023-24, surpassing previous highs.
  • Spices exports crossed the $4 billion mark for the first time, indicating growth in these sectors.
• Mixed Performance of Other Items:
  • Items like buffalo meat, oil meals, and raw cotton saw increased exports over 2022-23 but were below their historical peak levels.
• Overall Export Scenario:
  • The export landscape is mixed, with certain sectors facing challenges due to export restrictions, while others show positive growth trends.

DRIVERS OF IMPORTS

• Decrease in Edible Oils Imports:
  • Overall agricultural imports in India decreased by 7.9% in 2023-24, primarily due to a significant drop in imports of edible oils.
  • Vegetable oils import bill reduced to below $15 billion, a decline from the previous year’s $20 billion.
• Import Trends by Commodity:
  • Vegetable oils, fresh fruits, pulses, spices, cashew, raw cotton, and natural rubber are among the top agricultural import items.
  • Vegetable oils experienced a substantial decrease in import value, contributing to the overall dip in agricultural imports.
• Factors Influencing Import Trends:
  • The decrease in vegetable oil imports can be attributed to lower global prices, with the FAO index and vegetable oil sub-index declining.
  • Lower prices resulted in a reduced import bill for vegetable oils in the last fiscal year.
• Rise in Pulses Imports:
  • Despite the overall decrease in agricultural imports, imports of pulses nearly doubled to $3.75 billion in 2023-24.
  • This marks the highest level since 2015-16 and 2016-17 when imports were at $3.90 billion and $4.24 billion, respectively.
• Overall Impact on Import Dynamics:
  • While the decrease in edible oils imports has reduced foreign exchange outflow, the significant rise in pulses imports indicates changing consumption or production patterns within the agricultural sector.

POLICY TAKEWAYS

• Need for Policy Stability:
  • Farmers and agri-traders seek policy stability and predictability to plan their activities effectively.
  • Sudden bans or restrictions on agricultural exports can significantly impact farmers’ revenues and disrupt market dynamics.
• Impact of Export Bans on Producers:
  • Export bans prioritize consumer interests but can lead to revenue losses for producers, affecting their livelihoods.
  • The example of onion growers illustrates how price fluctuations directly impact their earnings.
• Recommendations for Export Policy:
  • Economists suggest adopting a more predictable and rules-based export policy.
  • Introducing temporary tariffs instead of outright bans or quantitative restrictions can maintain market stability while balancing consumer and producer interests.
• Challenges with Import Duties:
  • The reduction or elimination of import duties on certain commodities like pulses contrasts with the government’s goal of promoting crop diversification.
  • Lower import tariffs may hinder efforts to encourage farmers to shift from water-intensive crops like rice, wheat, and sugarcane to less water-guzzling pulses and oilseeds.
• Balancing Interests in Export-Import Policy:
  • The incoming government post-elections may need to develop a more rational export-import policy.
  • This policy should consider the interests of both producers and consumers while aligning with the short- and long-term goals of the agricultural sector, including crop diversification and market stability.