Agricultural Export Policy in India: Navigating Challenges for a Competitive Market

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In recent times, the Indian government has taken measures to control food inflation by imposing a Minimum Export Price (MEP) of $1200 for basmati rice. As a result, traders in the Punjab-Haryana region are now hesitating to purchase basmati rice, causing a drop in prices for farmers compared to the normal situation when exports were unrestricted.

This high MEP has the potential to benefit Pakistan, India’s primary competitor in the basmati rice export market. In this scenario, it becomes imperative for India’s agricultural export policy to shift from being restrictive to stable and competitive.

 Agricultural Export Policy in India

What is the Agricultural Export Policy in India?

Agricultural Export Policy, commonly known as the ‘Agri-Export Policy,’ is a set of government regulations, measures, and incentives designed to manage and promote the export of agricultural products from a specific country. This policy includes export subsidies, tariff reductions, quality standards, market access agreements, financial incentives, and trade facilitation initiatives to help agricultural producers and exporters reach international markets, enhance their competitiveness, and expand export opportunities.

Vision: In December 2018, the Indian government introduced a comprehensive Agricultural Export Policy with the vision of making India a global force in the agricultural sector and increasing farmers’ incomes through appropriate policy instruments that enhance India’s agricultural export capabilities.

Promoting Export Competitiveness: The primary objective of the policy is to make Indian agricultural products competitive in international markets. This involves measures like reducing export restrictions, streamlining export procedures, and providing financial support to exporters.

Market Diversification: The policy aims to diversify India’s export markets by identifying new potential trade partners. This helps reduce dependency on a single market, making the agricultural sector more resilient to global economic fluctuations.

Enhancing Infrastructure: The government is committed to improving agricultural infrastructure, such as cold storage facilities, transportation, and packaging, to maintain the quality and freshness of agricultural products during export.

Quality Standards: Adhering to international quality standards is essential for gaining acceptance in global markets. The policy encourages Indian producers to meet stringent quality benchmarks to build a reputation for quality and safety.

Trade Facilitation: Simplifying export procedures, reducing paperwork, and expediting customs clearance are part of the policy’s efforts to make the export process more efficient and hassle-free for agricultural exporters.

Financial Support: Financial incentives are provided to exporters to offset the costs associated with exports, including the provision of Export Credit Insurance, Market Development Assistance (MDA), and Transport Assistance (TA).

Research and Development: The policy focuses on research and development to improve agricultural productivity, crop quality, and post-harvest handling, which is vital for enhancing India’s competitiveness in the global market.

Why is an Agricultural Export Policy Needed?

Economic Impact: In recent years, the agriculture export sector has played a significant role in India’s total exports. For instance, in the fiscal year 2022-23, India’s agricultural and processed food exports reached nearly 53 billion US dollars. However, India’s share in global agricultural exports was just 2.2% in the year 2016.

Food Security: India supports approximately 17.84% of the world’s population but has limited resources, with only 2.4% of the world’s land and 4% of its water resources. A well-planned export policy can generate additional revenue that can be reinvested to enhance food security and increase farmers’ income.

Controlling Food Inflation: Agricultural exports can help stabilize domestic prices, especially during bumper crop years. This price stability can benefit both consumers and producers.

Job Creation: According to the NSSO’s periodic labor force survey for the year 2021-22, the agriculture sector is the largest employer in India, engaging approximately 45% of the workforce. Promoting agricultural exports can create more employment opportunities, especially in rural areas, where livelihoods are closely tied to agricultural activities.

Balance of Payments (BOP): In recent years, agricultural exports have made a significant contribution to India’s foreign exchange reserves. It aids in offsetting trade deficits and maintaining a stable currency.

Crop Diversity: India is one of the largest producers of various agricultural commodities, including rice, wheat, spices, and horticultural products. These products have significant export potential, and a well-structured export policy can harness this capability.

Trade Relations: Developing trade relationships with different countries is crucial for India’s agricultural exports. For instance, India has witnessed consistent growth in agricultural exports to countries such as the United States, Saudi Arabia, and the United Arab Emirates.

Structural Challenges: An export policy can address various structural challenges in India’s agricultural sector, including low productivity, weak infrastructure, global price volatility, and market access issues. Major challenges associated with India’s agricultural export policy include:

Restrictive Export Policies: Restrictive export policies that benefit domestic consumers at the expense of farmers have been a major impediment to achieving export targets. The imposition of a $1200 MEP for basmati rice can potentially lead to a significant drop in its exports.

Subsidies: India’s agricultural policies have often been influenced by populist measures, especially during election seasons, where they increase subsidies for food for consumers and fertilizer subsidies for farmers. Several states announce loan waivers and provide free electricity to farmers, which, despite being politically popular, can have negative fiscal discipline and financial health implications for the agriculture sector.

Inadequate Investment in Research and Development: Investment in agricultural research and development in India is limited to around 0.5% of the total domestic production of agriculture, which is insufficient to drive significant growth. Doubling or even tripling this investment is necessary if India aims to become a global powerhouse in agriculture.

Quality and Standards: Maintaining consistent quality and meeting international standards is a crucial challenge for agricultural exports. Adhering to the sanitary and phytosanitary measures (SPS) of importing countries can be challenging because the presence of pests and diseases in Indian agriculture continues to be a concern.

Read Also: “India’s Maritime Economy and Blue Bonds: The Role of Blue Bonds in Sustainable Growth”

Basic Infrastructure: Inadequate infrastructure for storage, transportation, and processing can lead to post-harvest losses, which can hinder India’s competitive edge in agricultural exports.

Competitiveness: India must compete in the global agricultural market and, therefore, needs to be competitive in price determination and quality. Fluctuations in exchange rates can impact India’s competitive edge in agricultural exports.

Environmental and Sustainability Concerns: Balancing increasing agricultural exports with environmental sustainability is a challenge because excessive resource consumption can have long-term consequences.

Key Government Initiatives to Boost Agricultural Export policy in India:

Operation Greens: Operation Greens is an initiative aimed at stabilizing the supply and prices of essential agricultural products, including fruits and vegetables. Its objective is to reduce price volatility, ensure remunerative prices for farmers, and enhance sustainable agricultural exports.

Market Access Initiative’ (MAI): MAI is a program that supports export promotion activities, capacity building, and market research, particularly in international trade fairs. It helps Indian agricultural exporters find new markets and reach them.

SAMPADA Scheme: The Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters (SAMPADA) aims to modernize infrastructure for agro-processing groups to reduce post-harvest losses, increase the shelf life of agricultural products, and enhance the competitiveness of Indian agricultural exports.

National Horticulture Mission: The National Horticulture Mission (NHM) focuses on promoting sustainable horticultural practices, including organic farming, precision farming, and efficient water use, to support the production of high-value horticultural products for export.

E-NAM (Electronic National Agriculture Market): E-NAM is an all-India electronic trading portal for agricultural commodities. It enables farmers to sell their produce directly to buyers and contributes to reducing intermediaries, ensuring fair prices, and enhancing stability.

APEDA (Agricultural and Processed Food Products Export Development Authority): APEDA is responsible for boosting the export of scheduled products and providing guidelines for the quality, standards, and certification requirements for exporters.

Establishment of Agri Export Zones: Agri Export Zones (AEZs) are being set up in different parts of the country to promote the export of specific agricultural commodities. They provide a conducive environment for sustainable agricultural exports through infrastructure development and technological integration.

Promoting Organic Farming: The government has initiated programs to promote organic farming, which contributes to environmental sustainability and increases the export capacity of organic products.

Enhancing Productivity: Increasing agricultural productivity is crucial for competitiveness. This requires investments in research and development, seeds, irrigation, fertilizers, and improved agricultural practices.

Diversifying the Export Basket: There should be efforts to diversify the agricultural export basket, give preference to value-added products, reduce dependency on a few selected commodities, and target a wide range of international markets.

Quality Assurance: To ensure quality and meet international standards, it is essential to establish uniform quality and standardization protocols for agricultural products, especially horticultural commodities. This is necessary for stable, consistent quality and adherence to international standards.

Infrastructure Development: Investments in modern infrastructure, such as cold storage, processing facilities, transportation, and logistics, are required to reduce post-harvest losses and enhance export competitiveness. Financial incentives, subsidies, and credit facilities should be provided to encourage investment in agriculture, infrastructure, and processing facilities.

Technology Adoption: To increase productivity, advanced agricultural technologies, precision farming, and efficient irrigation techniques need to be adopted. Supporting agri-startups and the development of innovative solutions can contribute to increased agricultural production and export capacity.

Promoting Sustainable Practices: To ensure environmental sustainability, encourage practices like organic farming and sustainable agriculture that use resources responsibly.

Learning from International Best Practices: Learning from successful agricultural export policies and best practices in other countries can provide valuable insights. Strengthening diplomatic efforts to negotiate trade agreements and improving access to international markets should be a priority.

Conclusion: India should strive to establish a dynamic, responsible, and adaptable agricultural export policy for sustained growth in the global agricultural trade market. It should prioritize long-term sustainability, environmental responsibility, and the welfare of farmers to ensure the success of agricultural exports.

Read More: Agricultural Export Policy in India


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