India has been the net exporter of agricultural commodities since 1991, however, there is scope for increasing its net export. This article suggests the strategy to achieve this.

Foreign exchange reserve: then and now in terms of grains

• In the mid-1960s the country had about $400 million.
• If India had spent all its foreign currency reserves just on wheat imports, it could have imported about seven million tonnes (mt) of wheat.
• Today, India has foreign exchange reserves of more than $500 billion.
• Even if the country has to buy 20 mt of wheat at a landed cost of $250/tonne, it will spend just $5 billion it is just one per cent of its foreign exchange reserves.
• In that sense, the biggest reform in the last three decades that has led to “aatma nirbharta” in food is the correction of the exchange rate.
• Another factor is coupling and the gradual integration of India with the world economy.
• This has helped India increase its foreign exchange reserves from $1.1 billion in 1991 to more than $500 billion today.

India: Net exporter of agricultural products

• India has been the net exporter of agricultural products ever since the economic reforms began in 1991.
• The golden year of agri-trade was 2013-14 when net agricultural trade surplus was $24.7 billion.
• In 2019-20, agri-exports were just $36 billion, and the net agri-trade surplus at $11.2 billion.
• With this dull performance doubling agri-exports by 2022 looks almost impossible.

Let’s look at what India exports

• Marine products with $6.7 billion exports top the list.
• The second is rice at $6.4 billion of which basmati is at $4.6 billion and common rice at $2.0 billion.
• Next is spices at $3.6 billion.
• Other items are buffalo meat at $3.2 billion, sugar at $2.0 billion, tea and coffee at $1.5 billion, fresh fruits and vegetables at $1.4 billion, and cotton at $1 billion.

Strategy to increase export

• If one chalks out a strategy we would need to keep in mind the principle of “comparative advantage”.
• That means exporting more where we have a competitive edge, and importing where we lack competitiveness.
• Together power and fertiliser subsidies account for about 10-15 per cent of the value of rice and sugar produced on a per hectare basis.
• So, we should offer similar incentives for exports of high-value agri-produce like fruits and vegetables, spices, tea and coffee, or even cotton, as we do for rice and sugar?

Decreasing the edible oil imports

• On the agri-imports front, the biggest item is edible oils — worth about $10 billion i.e. more than 15 MT.
• India needs to decrease imports through augmenting productivity and increasing the recovery ratio of oil from oilseeds and in case of palm oil, from fresh fruit bunches.
• The maximum potential of increasing production lies in oil palm.
• This is the only plant that can give about four tonnes of oil on a per hectare basis.
• India has about 2 million hectares that are suitable for oil palm cultivation — this can yield 8 mt of palm oil.
• But it needs a long term vision and strategy.

Issue of subsidy to rice and sugar

• Rice and sugar cultivation are subsidised through free power and highly subsidised fertilisers, especially urea.
• It is leading to the virtual export of water because of their high water requirements.
• One kg of rice requires 3,500-5,000 litres of water for irrigation, and one kg of sugar consumes about 2,000 litres of water.
• This leads to increased pressure on scarce water and highly inefficient use of fertilisers.
• It may be worth noting that almost 75 per cent of the nitrogen in urea is not absorbed by plants.
• It either evaporates into the environment or leaches into groundwater making it unfit for drinking.

Consider the question “While India has been the net exporter of agricultural products ever since the economic reforms of 1991, it is far from realising its potential to become the leading agri-produce exporter. In light of this, suggest the strategy that India should follow to increase India’s net agri-exports.”

Conclusion

The government must focus on augmenting export and decrease import dependence in agricultural products which will further its goal of aatmanirbharta and doubling the farmers’ income.

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