Context:
Recent data from the Department of Commerce reveals a decline in India’s agricultural exports, registering USD 23.6 billion in April-September 2023, down from USD 26.7 billion in the same period in 2022. Concurrently, agricultural imports also decreased from USD 19.3 billion to USD 16.2 billion, leading to a slight reduction in the agricultural trade surplus.
Relevance:
GS III: Agriculture
Dimensions of the Article:
- Factors Contributing to Decline in Agricultural Exports (April-September 2023)
- Impact of Global Prices on India’s Agricultural Exports
- Consequences of Declining International Prices for Indian Agriculture
Factors Contributing to Decline in Agricultural Exports (April-September 2023)
Government Restrictions:
- Bans and restrictions on key commodities like wheat, rice, and sugar.
- Prohibition of broken rice exports in September 2022.
- Imposition of a 20% duty on white non-basmati grain shipments.
- Complete ban on exports of white non-basmati rice in July 2023.
Sugar Export Policy Changes:
- Shifting sugar exports from the “free” to the “restricted” category.
- Introducing caps on the total quantity of sugar that can be exported annually.
Global Price Softening:
- Decline in global prices following the peak reached after Russia’s invasion of Ukraine.
Impact on Trade Surplus:
- Resulting in a notable decrease in India’s agricultural trade surplus during April-September 2023.
Impact of Global Prices on India’s Agricultural Exports
Correlation with UN Food and Agriculture Organization’s Food Price Index (FFPI):
- Strong correlation between India’s agricultural exports and global price trends.
- Notable changes in the FFPI influence the value of India’s agricultural trade.
Historical Trends:
- Agricultural exports in India closely follow FFPI fluctuations.
- Decline from USD 43.3 billion in 2013-14 to USD 35.6 billion in 2019-20 aligning with FFPI drop (from 119.1 to 96.5 points).
- Subsequent rise in exports as FFPI reached unprecedented levels in 2022-23.
Expectations for 2023-24:
- Anticipated decrease in the value of both agricultural exports and imports in India.
- Despite the easing of supply disruptions from the Russia-Ukraine conflict.
FAO’s Projections:
- The Food and Agriculture Organization’s (FAO) supply and demand brief for 2023-24 projects global ending cereal stocks.
Consequences of Declining International Prices for Indian Agriculture
Cost Competitiveness Impact:
- Lower international prices reduce the cost competitiveness of India’s agricultural exports.
- Increased vulnerability of Indian farmers to imports.
Sector-specific Challenges:
- Cotton Sector:
- Cotton exports from India witness a significant decline.
- Imports surge by 2.5 times from 2021-22 to 2022-23.
- Edible Oils Sector:
- India’s edible oil imports more than double between 2019-20 and 2022-23.
- Surge attributed to soaring global prices post the war in Ukraine.
Continued Imports Despite Price Collapse:
- Prices of crude palm, soybean, and sunflower oil collapse globally.
- Imports continue at a low 5.5% duty, contributing to trade challenges.
Government Priorities and Impact on Agriculture:
- Government’s focus on controlling food inflation, especially before national elections.
- Prioritization of consumer interests over producers’ concerns.
- Unhindered imports of edible oil and pulses, coupled with export restrictions on cereals, sugar, and onions.
Impact on GDP Growth:
- Neglecting concerns of manufacturers and producers negatively impacts GDP growth.
-Source: Indian Express
