India’s agricultural exports are poised to scale a new peak in the financial year ending March 31, 2023. But so are imports, bringing down the overall farm trade surplus.

Agriculture trade in a nutshell

• India’s agricultural exports are expected to reach a new high in FY 2022-23.
• The value of farm exports from April-December 2022 was 7.9% higher than the same period of the previous year, totalling $39 billion.
• Imports of agricultural produce have also grown 15.4% from $24.1 billion in April-December 2021 to $27.8 billion in April-December 2022, resulting in a shrinking of the overall farm trade surplus.
• As a result, there has been a further shrinking of the surplus on the farm trade account.

Note: This newscard provides useful insights regarding agricultural exports-import balance. Aspirants are not advised to memorize the numbers but imbibe the trend.

Drivers of Exports

The two big contributors to India’s agri-export growth have been rice and sugar.

(1) Rice

• India in 2021-22 shipped out an all-time-high 21.21 million tonnes (mt) of rice valued at $9.66 billion.
• That included 17.26 mt of non-basmati (worth $6.12 billion) and 3.95 mt ($3.54 billion) of basmati rice.
• In the current fiscal, the growth has been primarily led by basmati rice.
• Its exports have gone up by 40.3% in value (from $2.38 billion in April-December 2021 to $3.34 billion in April-December 2022).
• The corresponding increases have been less for non-basmati exports: 3.3% in value ($4.51 billion to $4.66 billion) and 4.6% in quantity (12.60 mt to 13.17 mt).

(2) Sugars

• Sugar exports hit a record value of $4.60 billion in 2021-22, as against $2.79 billion, $1.97 billion, $1.36 billion, and $810.90 million in the preceding four fiscals.
• This fiscal has seen a further surge of 43.6%, from $2.78 billion in April-December 2021 to $3.99 billion in April-December 2022.
• India exports of rice and sugar are well on course to touch, if not top, $11 billion and $6 billion respectively in 2022-23.

Key imports

More than a general export slowdown, it’s the growth in imports that should be cause for concern.  This has come mainly from three commodities-

(1) Edible oils

• The first is vegetable oils, whose imports shot up from $11.09 bn in 2020-21 to $18.99 bn in 2021-22.
• Imports now account for over 60% of the country’s estimated 22.5-23 mt annual oil consumption.

(2) Cotton

• India has turned from a net exporter to a net importer of cotton.
• India’s cotton exports reached an all-time-high of $4.33 bn back in 2011-12.
• It remained at reasonably high levels until 2013-14 ($3.64 bn), before plunging to $1.62 bn by 2016-17 and $1.06 bn in 2019-20.
• There was a recovery thereafter to $1.90 bn in 2020-21 and $2.82 bn in 2021-22.
• But during this fiscal, imports have also soared from $414.59 million to $1.32 billion for the same period.

Policy implications

• It can be seen how closely India’s farm performance is linked to international commodity prices.
• The UN Food and Agriculture Organization’s (FAO) Food Price Index — having a base value of 100 for the 2014-16 period — averaged 122.5 points in 2012-13 and 119.1 points in 2013-14.
• Those were the years when India’s agri-exports were at $42-43 billion. As the index crashed to 90-95 points in 2015-16 and 2016-17, so did exports to $33-34 billion.
• The exports recovery in 2020-21 and 2021-22 happened along with — rather, on the back of — rising global prices and the FAO index averaging 102.5 points and 133 points in the two years.

Inferences from this trend

Ans. India’s farm exports will slow down in the months ahead.

• Moreover, this could be accompanied by increased imports, as was the case from 2014-15 to 2017-18.
• In the event, the focus of policymakers too, may have to shift from being pro-consumer (to the extent of banning/ restricting exports) to pro-producer (providing tariff protection against unbridled imports).

Way forward

• The government needs to do something about cotton and edible oils.
• India’s cotton production has declined from the high of 398 lakh bales in 2013-14 to a 12-year low of 307.05 lakh bales in 2021-22.
• Clearly, the effects of not allowing new genetic modification (GM) technologies after the first-generation Bt cotton are showing, and impacting exports as well.
• A proactive approach is required in edible oils as well, where planting of GM hybrid mustard has been permitted with great reluctance — and which is now a matter before the Supreme Court.

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