Context & Background
- India’s trade composition: Merchandise exports are currently flat or declining, but agricultural exports are showing resilience and growth.
- Significance: Agriculture trade surplus is one of the few areas where India consistently exports more than it imports, contributing positively to the trade balance.
Relevance : GS 3(Indian Economy , Agriculture)
Current Performance
- FY 2024–25 (Apr–Jun):
- Agri exports: $13.44 billion (up 5.84% YoY from $12.69 billion).
- Agri imports: $9.12 billion.
- Trade surplus in agriculture: $4.32 billion.
- Full FY 2023–24: $43.74 billion exports, slightly higher than $43.71 billion in FY 2022–23.
Key Drivers of Growth
- Strong segments: Marine products, coffee, fruits & vegetables, basmati rice, and buffalo meat.
- Falling segments: Oilseeds, non-basmati rice, oilmeals, wheat.
- Government policy impact:
- Ban/restrictions on exports of certain commodities (rice, wheat, sugar) to manage domestic inflation and food security.
- Removal of such restrictions can directly impact export volumes.
Trade Composition
- Top 5 export items (Apr–Jun 2024–25):Marine products – $4.05B (24.05% share).Basmati rice – $1.94B (14.45% share).Non-basmati rice – $1.63B.Spices – $1.45B.Buffalo meat – $0.79B.
- High growth items: Fruits & vegetables (+13.79%), spices (+9.49%), marine products (+19.45%).
- Declining items: Oilmeals (-12.25%), oilseeds (-8.57%), processed fruits & vegetables (-2.96%).
Global Market Dynamics
- Global food price trends: UN FAO Food Price Index shows a decline from 2019–20 highs, reducing export value growth rates.
- Geopolitics & tariffs:
- US presidential trade policy (especially potential Trump return) could impose a 50% tariff on marine products, affecting $3.5B worth of exports.
- Brazil and other competitors could capture Indian market share in key commodities like frozen shrimp.
- Competition: Vietnam, Ecuador, and Indonesia are strengthening positions in seafood exports; Brazil in agri commodities.
Domestic Factors Affecting Exports
- Inflation control measures:
- Export bans/restrictions on rice, wheat, sugar reduced outward shipments.
- Production trends:
- Shift in cropping patterns and yields affect exportable surplus.
- Logistics & port capacity:
- Growth in marine exports is tied to port infrastructure efficiency.
Trade Surplus Trends
- Agriculture trade surplus decline:
- From $27.7B in FY 2013–14 to ~$5.9B in FY 2023–24 due to faster growth in imports.
- Rising imports of vegetable oils, pulses, and fruits are eroding the surplus.
- Import pressures:
- Dependence on edible oils (palm, soybean, sunflower) remains high.
- Seasonal fruit imports (apples, pears, citrus) and pulses (lentils, chickpeas) fill domestic supply gaps.
Risks Ahead
- US tariff uncertainty: Could hit $3.5B marine exports heavily.
- Global demand slowdown: Economic weakness in importing nations may reduce demand.
- Commodity price volatility: Weather events (El Niño, monsoon variability) can affect yields and prices.
- Policy unpredictability: Sudden export bans hurt long-term buyer trust.
Strategic Implications for India
- Need for diversification: Reduce dependence on a few commodities like marine products and basmati rice.
- Value addition: Increase processed and branded food exports to capture higher margins.
- Trade agreements: Secure preferential market access with major buyers to counter tariff threats.
- Import substitution: Focus on domestic oilseed and pulse production to reduce import dependency.
- Sustainability: Align exports with climate-resilient farming to maintain long-term competitiveness.
