Modi has a plan to double farm incomes by 2022. But here's the problem
Modi govt believes a boost to farm export is a sure-shot way to help double farmers’ income by 2022.
India had its first export of grapes to the United Kingdom. The multinational retailer then surprised him with a bonus of 10,000 pounds besides immediately clearing all payments.
Twenty-seven years later, Marks & Spencer continues to be Agrawal’s client. The only difference is that his Mumbai-based company Euro Fruits now has a turnover of Rs 125 crore and exports grapes to 19 European countries.
Agrawal says the 250 farmers from Nashik, Latur and Solapur in Maharashtra, who cultivate the grapes for him following strict export timelines, have also risen with him. He says the farmers earn Rs 75-80/kg for premium grapes while the domestic varieties sell for half of that amount.
The Narendra Modi government also believes a boost to farm export is a sure-shot way to help double farmers’ income by 2022. Its agriculture export policy, released nine months ago, lays out the economics.
Once a farm product is exported at scale, it reduces a glut in the market, thereby checking a drop in prices and allowing farmers to realise better prices for their produce. Also, cultivation of export-quality products fetch better prices for farmers.
“There will always be a big price difference between Alphonso mangoes selling in New York and in Mumbai. Won’t a farmer whose alphonso is sold in New York earn more?” says Paban Kumar Borthakur, who heads the Agricultural and Processed Food Products Export Development Authority, a commerce ministry body that facilities half of India’s agricultural exports.
But the premise of using farm exports as a tool to double farmers’ income hinges on too many assumptions.
First, government policy says the size of India’s agricultural exports need to reach at least $60 billion by 2022. That will be quite a jump given agricultural exports in FY2019 were just $38.5 billion and $38.21 billion the year before. But there have been quantum leaps before: agricultural exports — from a low of $17.92 billion in FY2010 — had peaked to $42.86 billion in FY2014.
Second, export growth needs to come from non-traditional produce while holding on to big-ticket items. Presently, marine products, basmati rice, buffalo meat, spices and nonbasmati rice make up 55% of the total agriculture export basket.
Though the export policy talks about best sellers like rice and meat and fringe items like grapes, bananas, vegetables and cashew as “high potential”, the government at present seems to be concentrating more on the latter, giving thrust to the cultivation of grapes, mangoes, chili, moringa, lemons and pineapples. The export data, complied by Directorate General of Commercial Intelligence and Statistics in Kolkata, factors in 43 principal agriculture items.
Thirdly, farmers can earn more if the country exports more processed agricultural items than raw produce. “The acceptance of Indian food products in the USA and Europe has risen. But farmers’ income up substantially only if we export processed food. For that, food processing and agriculture ministries must work in tandem,” says Amit Dhanuka, chief executive of Kejriwal Bee Care India, a Delhi-based honey exporter.
Fourthly, coordination among ministries and agencies, both at the Centre and states, is crucial if India has to upscale agriculture exports.
Look at the sheer number of union ministries involved in agriculture exports: agriculture and farmers’ welfare, fisheries, animal husbandry and dairy, food processing, micro, small and medium enterprises, commerce and industry, and even external affairs.
Then, every state government has a series of departments aiming towards similar goal — agriculture, veterinary, fishery, horticulture and small scale industries.
If all of these departments have a role in boosting agriculture exports, who is at the driver’s seat?
After all, who will tell farmers — the commerce or the agriculture ministry — about the type of mangoes they should grow more if they want a premium price? Or, why should basmati rice growers must not use tricyclazole fungicide if they want to export to the European Union and do not want the consignments returned?
Of late though, commerce ministry has prepared state-specific agriculture export guidelines to identify focus hubs, key commodities and the work allocation for every agency. Uttar Pradesh, Gujarat, Kerala and Maharashtra have already okayed the draft policies.
Tackling Trade Winds
In the midst of volatile multilateral and bilateral trade ties among countries, right diplomacy can determine the future of India’s agriculture exports.
As of now, India’s share in global agricultural trade is just 2.4% as against US’ 9.8% and the Netherland’s 6.7%, according to figures available with APEDA.
New Delhi has been unable to convince Beijing that China’s worries over Indian buffalo meat carrying foot and mouth disease are unfounded. Thus, the third most exported agriculture item from India cannot be sent to one of the world’s biggest markets. But the meat does go to China — via Vietnam. The south-east Asian country imports India’s buffalo meat and resells it to its clients in China. In FY2019, Vietnam imported 5.6 lakh metric tonnes of buffalo meat from India, valued at $1.7 billion or 48% of the total buffalo meat export.
The volume of India-China agricultural trade is bound to reduce unless the government clinches a diplomatic victory. After all, China too has been seeking Indian market access for its dairy products such as chocolates and candies, which are presently banned.
With South Korea and South Africa too, India’s key demand has been market access for its buffalo meat.
The other item facing scrutiny are mangoes and rice, with the US imposing stricter norms to check pests and pesticides. The government is in talks with Washington on the high cost of inspecting mangoes and the tolerance level for pesticide residue in rice.
The hiccups with Russia are related to the non-recognition of some Indian agricultural product test laboratories.
Also, India has been pursuing hard with Japan and Vietnam to allow the export of grapes to the two countries. But bilateral ties are such that India may occasionally gain or lose commercially as other nations battle it out.
The US-China trade war, for example, has offered new avenues for Indian exporters, including those in agriculture. “For grape exporters, the US’ decision to increase duties on Chinese produce is good news,” says Agrawal of Euro Fruits.
Take the case of Iran. Its basmati rice import from India rose 42% in FY2019 (14.8 lakh metric tonnes worth $1.56 billion) as compared to the previous year. But the demand may fall as a US trade embargo on Iran has kicked in.
That is where the question of Indian farmers’ earnings comes in. “If uncertainties in Iran continue, it will impact farmers in seven basmati-growing states. The prices of basmati in Punjab and Haryana have already fallen 15% due to fear of not finding an alternative market by October this year,” says Vinod Kumar Kaul, executive director of All India Rice Exporters Association.
Yes, exports have a direct correlation with farmers’ earnings. The question is how much of a strategic market access India will be able to gain to make its farmers richer.