Agriculture

The fiscal year that ended on March 31, 2023, saw new highs for both agricultural imports into and exports from India.

According to preliminary data from the Department of Commerce, overall agriculture exports will reach $53.15 billion and imports will reach $35.69 billion in 2022–23, respectively, breaking their previous records of $50.24 billion and $32.42 billion.

The resulting surplus in agricultural trade has decreased slightly, from $17.82 billion to $17.46 billion. If fertiliser imports are included, which increased from $14.17 billion in 2021–2022 to $17.21 billion in 2022–2023, the surplus is significantly reduced.

Exports drastically decreased from $43.25 billion to $32.81 billion between 2013–14 and 2015–16. Global pricing were the main motivator.

The Food Price Index (FPI) of the UN Food and Agriculture Organisation plunged from an average of 119.1 points in 2013–14 to 90 points in 2015–16. However, as imports increased, the farm trade surplus decreased from a high of $27.72 billion in 2013–14 (net of fertiliser imports of 21.46 billion) to a low of $8.05 billion in 2016–17.

By 2020–21, the FPI—a weighted average of global food commodity prices over a base period value of 100 (2014–16), had recovered to 102.5 points. It then increased to 133 points in 2021–22 and 139.5 points in 2022–23. And as a result of India’s agri-commodities becoming more globally price competitive, exports increased dramatically over the course of these three years, reaching $41.90 billion, $50.24 billion, and $53.15 billion.

Exports of marine products increased steadily, rising from $5.02 billion in 2013–14 to $8.08 billion in 2022–23. Additionally, during this time, rice exports increased from $7.79 billion to $11.14 billion. However, non-basmati rice has been the main driver, more than tripling in value from $2.93 billion to $6.36 billion, while the value of exports of expensive basmati rice has actually decreased (from $4.86 billion to $4.79 billion).

Exports of basmati are mostly made to nations in the Persian Gulf and, to a lesser extent, to the US and UK. The destinations of non-basmati cargoes are more varied and span Asia (Bangladesh, China, Sri Lanka, Malaysia, Vietnam, UAE, and Iraq) and Africa (from Senegal, Ivory Coast, and Benin to Somalia and Madagascar). India is now the world’s largest rice exporter, surpassing Thailand, thanks to non-basmati.

Less than $810.90 million in sugar exports in 2017–18 have increased to $1.97 billion in 2019–20, $2.79 billion in 2020–21, $4.60 billion in 2021–22, and $5.77 billion in 2022–23, respectively. In addition to refineries in Bangladesh, Indonesia, Malaysia, Saudi Arabia, and Iraq, Indian mills have established markets for both raw sugar and regular plantation whites in countries in Africa, Afghanistan, Sri Lanka, and China. In the process, the nation overtook Brazil to become the second-largest exporter in the globe.

Spices and buffalo meat are two commodities whose exports had experienced significant growth before tumbling in recent years.

Exports of spices increased significantly from $2.5 billion in 2013–14 to around $4 billion in 2020–21. Instead of the typical plantation spices like pepper and cardamom, it was headed by seeds like cumin, turmeric, ginger, coriander, fennel, and products of the mint family. But since then, shipments have remained flat. Shipments of buffalo meat have also never recovered to the $4.78 billion high they hit in 2014–15.

The decrease was significantly greater for oil meals, raw cotton, and guar gum. Exports of the three in 2022–23 ($781.43 million, $617.14 million, and $1.6 billion) paled in comparison to their peaks in cotton exports in 2011–12 ($4.33 billion) and guar-gum exports in 2012–13 ($3.92 billion and $3.04 billion, respectively).

India has surpassed China to become the world’s top producer (ahead of China) and No. 2 exporter (after the US) of the natural fibre thanks to the cultivation of genetically modified Bt cotton and high worldwide prices. But because Bt’s yield improvements are waning and the regulatory system forbids the use of new gene technologies, the nation has switched from being a net exporter to an importer of cotton.

Exports of guar-gum (a thickening agent used in shale oil and gas production) and oil meal benefited from the rise in global commodity prices from 2003–2004 to 2013–2014. In the more recent post-Covid boom, they haven’t displayed the same vigour, in part because domestic crop shortages, particularly in cotton and soyabean, haven’t produced enough surpluses for exports.

Vegetable oils are the most significant, with imports more than doubling in value between 2019–20 and 2022–2023, from $9.67 billion to $20.84 billion. According to the Solvent Extractors’ Association of India, imports increased in volume from 13.18 million tonnes (mt) in the 2019–20 oil year (November–October) to 14.03 mt in 2021–22. They increased by 23.7% from November to March 2022–2023 compared to the same time in the prior oil year.

About 60% of India’s needs for vegetable oil are satisfied by imports. With the value of imports falling from $4.24 billion (6.7 mt) in 2016–17 to $1.94 billion (2.5 mt) in 2022–23, that dependence is currently just about 10% for pulses.

Contrarily, imports of spices, cashews, and cotton—commodities for which India has historically been a net exporter—have demonstrated an upward tendency. The increase in spice imports is a result of decreased pricing competition (as compared to Vietnam and Guatemala for pepper), as well as sluggish or declining domestic cotton output.

In the current fiscal year, there may be two obstacles to agri-exports.

The first is global prices: The most recent FPI reading for April 2023 was 127.2 points, down from the March 2022 peak of 159.7 points and the 2022–2023 average of 139.5 points.

The second source is domestic, more particularly worries about food inflation before the 2024 presidential elections. Wheat exports were outlawed by the Narendra Modi administration in May. Exports of broken rice were therefore prohibited, and in September, all shipments of non-parboiled non-basmati rice were subject to a 20% tariff. Sugar exports have also ceased since the beginning of this month.

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