India fast heading for agri trade deficit despite being a farm economy

Trade surplus of 145% narrows to 6% in four years on rising import, falling exports

From a 150 per cent surplus of export over import, India’s trade balance in agricultural and allied products has slipped in four years to near-equality.

Data compiled by the Directorate General of Commercial Intelligence and Statistics under the ministry of commerce and industry showed India’s exports of agri and allied products declined by 25 per cent to $24.7 billion for financial year 2016-17, as against nearly $33 billion in 2013-14. In contrast, import of agri and allied products jumped in the same period to $23.2 billion, from $13.5 billion.

Many meteorological zones saw two subsequent years of drought since FY14, which lowered output of many products, including some essentials like pulses, edible oil and sugarcane. 

Their consumption continues to increase with a growing population and a strengthening dollar eased their import costs. At the same time, the government was worried at less output in rice, wheat and maize, resulting in a continuation of restriction on their export. The result was a narrowing of the trade surplus in agri and allied products.

“Till the government encourages exporters to flush out more agri products into the world market, wherever possible, the current sentiment of more import and less export would continue,” said Madan Sabnavis, chief economist, CARE Ratings. Boosting of export would help farmers get more return than only selling in domestic markets.

A report by the Center for Environment and Agriculture, in association with Tata Strategic Management Group, emphasises the need to quadruple India’s agri and allied exports by 2022.

“The export target of $100 billion in five years is achievable, as India is the largest producer of milk, second largest in fruit, vegetables and fish, and the third largest in egg production in the world. This is all due to small and marginal farmers, who deploy family labour and engage in intensive multi-cropping all year. They also manage livestock and poultry efficiently, using agricultural waste as animal feed and to produce manure. But, farmers need long-term policy support from the government,” said Rajju Shroff, chairman, Crop Care Federation of India (CCFI).

The World Trade Organisation (WTO) estimates global export in agri products at a little over $1,500 billion annually. India’s is a little less than $25 billion.

“To double farmers’ income (by 2022, the official aim), our focus should shift from production to increasing of consumption within and outside the country. To bring price stability in domestic market, we must access foreign markets. One way to double farmers’ income is to increase our agricultural export to over $100 billion by 2022,” said S Ganesan, advisor, CCFI.