Finance commission identifies three reasons for India’s low agri exports despite high farm production

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Jeera farmers of Rajasthan

In a meeting held last Friday, the 15th Finance Commission headed by Chairman, N K Singh, highlighted that India’s agricultural exports have been volatile for the last 10 years, but have flattened more recently. The commission attributed the effect of falling global prices and repeated drought during 2014, 2015 and 2016 behind the 10 per cent CAGR drop in exports.

Even as India produces the second-highest amount of agricultural produce in the world, the country does not appear in the list of top 10 agri exporters. India is a world leader in many significant agriculture categories and has a competitive advantage over other countries due to diverse agro-climatic conditions and relatively low cost of labour and manufacturing.

However, despite India’s global advantage in terms of hectares of arable land, it significantly lags smaller countries in exports in terms of dollars per hectare, mostly due to low yields and farm productivity; low focus on value addition; and large domestic market, said a statement by the Finance Commission.

In the meeting that was held in the wake of effectively utilising the third tranche of money under Prime Minister Narendra Modi’s Atma Nirbhar Bharat scheme, it was underlined that the recent growth rates show that agri-food production is rising faster than growth in domestic demand, and volume of the export surplus is rising.

Further, India’s processed exports have been steadily improving, but still has a higher global share of raw commodities than processed goods, the Finance Commission added. This offers scope and opportunity for capturing overseas markets to earn foreign exchange and enable producers to earn higher prices for farm produce, it further said. Meanwhile, India’s top 50 commodities and agriculture products make up 75 per cent of its total exports and India exports 70 per cent of its agricultural produce to 20 countries. While India imports over $20 billion in agriculture products, it still maintains a significant trade surplus of $18 billion.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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