You are here: Home » Economy & Policy » News
Business Standard

India looks for wider Chinese market access to arrest falling farm exports

After peaking in FY14, agro exports saw a sharp fall lead by guar gum, buffalo meat, cotton and oil meal

Dilip Kumar Jha  |  Mumbai 

Logistics, trade, global market

India is looking for greater access to the as it seeks to arrest the fall in farm commodity exports.

After hitting a record of $43.2 billion in 2013-14, India's exports of agricultural produce began declining gradually due to lack of innovation and competitiveness and the sustained increase in minimum support prices (MSP). Consistently falling prices, changing preferences and domestic policies have also contributed to fall in major items such as buffalo meat, guar gum and oil meal. The silver lining is in seafood, which has had very good growth the past few years.

Both countries have discussed the issue of expanding bilateral trade at the informal meeting between Indian Prime Minister Narendra Modi and Chinese President Xi Jinping in Mamallapuram, Tamil Nadu.

The decline in exports, which began after FY14, has continued this fiscal. Between April and August 2019 alone, products registered with the government owned Agricultural & Processed Food Products Export Development Authority (Apeda) reported a decline of 16 per cent in dollar terms and a staggering 22 per cent drop in cereal exports. Apeda oversees half of India's overall farm exports. The total drop in exports does not seem that sharp due to sea food exports.

With Chinese president Xi Jinping's two-day visit, exporters are looking for a big boost to India's farm commodities, especially those impacted by the ongoing US-China trade war.

While China has already allowed its market access to many of India's farm commodities including rice and sugar, the country is looking at including many other products, especially marine and other items. India's Dhampur Sugar has signed a memorandum of understanding (MoU) with Chinese importers for shipment of 50,000 tonnes of sugar. Exports of certian products such as buffalo meat are routed through Vietnam, despite their having received formal approval for direct entry into China.

chart

While China has already started importing limited quantities of rice from India, there is further potential of around $500 million worth of rice trade, according to experts. India's marine exports have had impressive growth, though, surging to $485 million in the first half of the current financial year from around $141 million in 2017-18.

"Now, we are talking about $1 billion worth of marine exports to China only. There is a huge demand for India's agricultural produce in China, but market access has been an issue which China should resolve. In the recent past, China has shown some interest to expand market access to India, which has been encouraging," said Ajay Sahai, Director General, Federation of Indian Export Organisation (FIEO).

Oil meal exporters have been the major losers the past few years, with importers cutting expenses on animal and bird feed. Cotton prices fell due to prolonged bearish phase in which China reduced cotton buying, while buffalo meat started losing ground after India's tough stand on abattoirs. The crude oil fall after FY15 has drastically cut guar gum demand.

"India's exports of agricultural commodities are declining for quite some time. Issues like access output, buffer stock and price decline are also impacting the country's With land being limited and productivity going down, prices of agricultural commodities will only rise in the long run. Interestingly, India's agricultural exports have a lot to do with the purchasing power of consumers in importing countries. With most global economies facing problems, India's overall agricultural exports may suffer some short-term impact. But we are very bullish about the long term," said Sahai.

Meanwhile, independent experts have raised a red flag on India's competitiveness in the global agricultural produce market.

"Indian commodities would be able to find space in the international market only if they are quality- and price-competitive. By increasing minimum support price (MSP) without considering the ground reality of the international market, Indian produce has become outpriced. Hence, its exports of agricultural commodities have been declining steadily," said Vijay Sardana, an agricultural economist.

chart

Another reason for the decline is lack of innovation. Since consumers in importing countries get substitute supplies from other countries at much better prices, they prefer to import from other regions, said Sardana.

Between the crop years 2013-14 and 2019-20, the government raised MSP of all farm commodities by 50-60 per cent.

Data compiled by the Food and Agricultural Organisation (FAO) of the United Nations have reported a sustained decline in the prices of global agricultural commodities due to bumper production.

First Published: Sat, October 12 2019. 17:43 IST
RECOMMENDED FOR YOU