Is India turning into a high cost economy for agricultural commodities and less export competitive?
Agricultural exports are key source of foreign exchange, particularly for India, given the number of people dependent on this sector. Apart from quantum available for exports and quality of produce, policy procedures also determine a country’s ability to score big on exports. Of late, the value of agricultural imports for commodities like pulses, cooking oil is on a rise. There are supply side issues for these commodities. At the same time, agricultural commodities produced in abundance in India, are facing ‘price’ as a barrier for exports. Lower agriculture productivity and high cost of production are a few reasons for this phenomenon.
As per Agricultural and Processed Food Products Export Development Authority (APEDA) statistics, during 2016-17, India’s agriculture and related products exports were 16.17 billion USD, of which three items, buffalo meat, basmati and non-basmati rice together accounted for 9.66 billion USD. During the same period, India’s imports were to the tune of 7.37 billion USD, of which pulses and wheat accounted for 4.91 billion USD. During the period 2011-12 to 2016-17, agricultural imports ballooned from 3.72 to 7.37 billion USD, suggesting growing reliance on imports for pulses and wheat for domestic requirement. India’s agricultural exports declined 17.33 to 16.17 billion USD during the same period. During 2013-14, agricultural exports touched a high of 22.71 billion USD.
These statistics point towards the weak competitive nature of Indian agriculture produce in export markets though India ranks among top ten nations for most agricultural commodities. Price alone may not be a factor for export competitiveness but for many export destinations it remains a major one. The big gains in agricultural productivity attained during Green Revolution era have stagnated and India needs to catch up with other nations in terms of productivity. Quality and procedural issues can be fixed but productivity related issues point to a deeper malaise and that needs to be addressed on several fronts.
A few aspects, though not comprehensive, those requiring quick attention are listed below.
Fragmentation of holdings is a major problem and no pragmatic solution could be evolved till date. Consolidation of land holdings can attract big investments, enable adoption of mechanization and high cost technologies. There is a need to collectivise farmers through a working mechanism. Public Private Participation (PPP) in fallow tracts can be one way to begin with.
Research and Development (R&D) has to deal with farmer specific problems and research should be location specific. Academic research being done by state agricultural and veterinary universities should be prioritised low. Currently R&D spending in agriculture is not up to the mark, with just 0.3% of Agricultural GDP going into agricultural research. R&D, programmes, particularly, like developing new high yielding varieties are long drawn programmes and incur huge costs.
Rising wages and labour scarcity is also adding to the higher cost of agricultural production without much improvement to farm productivity. Rural labour employment guarantee programmes have aggravated the situation. This will push farmers, who can afford, to adopt mechanization at a significant capital cost.
Judicious use of inputs like pesticides, herbicides can reduce cost of farm production. Improving efficiency of inputs like water and fertilizers by adopting micro irrigation can significantly improve farm profitability.
Credit from institutional sources is meagre and farmers have to rely on other non institutional sources which also add to higher cost of production. Risk mitigation measures through crop insurance are low and insufficient. Credit and Insurance issues need to be fixed to enhance productivity.