A rational agricultural import and export policy is required, as India needs to balance the interests of the both.
Status of India’s agricultural trade
Exports- It fell 8.2% in FY ended March 2024 on the back of shipment curbs on a host of commodities, from cereals and sugar to onions.
As per Department of Commerce data the value of farm exports declined from 48.82 billion in 2023-24 to 53.15 billion of 2022-23.
From 2013-14 to 2019-20 the exports declined with increase in imports.
Imports- The decrease in overall agricultural imports in 2023-24 was mainly attributed to lower imports of edible oils, driven by a decline in global prices.
However, imports of pulses surged, indicating a shift in consumption patterns or domestic production inadequacy.
Import dynamics- The trend suggests a trade imbalance, where imports outpaced exports, potentially due to factors such as domestic demand, import dependencies, or trade agreements.
Why India needs a rational export-import policy?
Decline in exports- Restrictions on the export of key commodities such as sugar, rice, wheat, and onions have contributed to the decline in agricultural exports.
Policy paralysis- Government’s export bans and duty impositions can hinder investment climate and undermine ease of doing business, particularly in the agricultural sector.
Political impact- During election season measures such as subsidies, loan waivers etc., may have short-term benefits but can also strain fiscal discipline and impact the economic health of the agricultural sector.
Concern of import policy- The removal of import duties on certain agricultural products aims to reduce consumer prices and promote trade but it raises concerns about the impact on domestic production and crop diversification.
Impact on farmers- A reduction in onion prices, for example, can lead to significant revenue losses for farmers, impacting their livelihoods.
Trade diversification- By facilitating a diverse range of imports and exports, India can reduce its dependence on specific markets or commodities, thus mitigating risks associated with fluctuations in global demand or prices.
Foster global relations- A coherent import-export policy strengthens India's position in international trade negotiations and fosters positive relations with trading partners, leading to mutual benefits and opportunities for collaboration.
Global uncertainty- A rational import-export policy is needed to tackle issues such as Russia-Ukraine war, COVID-19 etc., which disrupted global supply chains and trade flows, impacting agricultural imports.
Restrictions imposed by India on Agricultural exports
Sugar- India, the world’s second producer of sugar has banned it’s export for the first time in 7 years as lack of rain has cut cane yields.
Non-basmati rice-A ban on white non-basmati rice exports since along with a 20% export duty on parboiled grain shipments, resulted in a reduction of non-basmati rice exports.
Decline in rice production due to deficient monsoon rainfall
Low rice stock could pose a threat on PMGKY and public distribution system.
Possibility in yield reduction due to a new virus that has caused dwarfing of paddy plants in Punjab and Haryana.
To curb threat of inflation and to divert broken rice for India’s ethanol production.
Wheat- Export restrictions is aimed at preventing the speculative trading in wheat to stabilise the agriculture sector.
Onion- The exports were banned in 2023 to ensure adequate availability for local consumption against the backdrop of estimated lower Kharif and Rabi crops in 2023-24 compared to the previous year and increased demand in the international market
What lies ahead?
A more balanced approach is needed, considering the interests of both producers and consumers, as well as the short-term and long-term goals of the agricultural sector.
Temporary tariffs could be considered as an alternative to outright bans or quantitative restrictions, providing a more predictable regulatory environment for stakeholders.
The creation of buffer stocks for essential commodities is proposed as a means of market intervention to manage price volatility.
