Introduction

Appreciating the role of farmers towards nation building, by and large the focus of the Government so far has been to support the farmers through policy incentives largely in the form of production and procurement subsidies primarily focusing on enhancing agriculture production, output and yield levels and post production interventions resulting in substantial marketable surpluses. While these efforts take care of the supply side efficiency, for DFI to happen; focussing on monetising huge demand opportunities across various global markets beyond domestic boundaries becomes the need of the hour. This would not only maintain demand supply balance in the domestic market (necessary to avoid price falls resulting into loss to the farmer’s income) but also enable the farmers to be a part of the Regional and Global value chain (GVC) and enhance his income at the time when prices for his produce in the global market becomes much remunerative as compared to the that prevailing in the domestic market.

Enhanced exports clubbed with effective Supply Chain Management (SCM) would pass on the benefit of price differential in favour of export markets to the farmers. Hence at the time when India is in the process of integrating its agriculture with the global market in the WTO regime, an enhanced focus on exploiting the rules of trade in the favour of Indian farmers by means of export promotion in agro commodities having high comparative advantage and import prohibition in sectors witnessing high production advantages becomes critical. This paper highlights the opportunity that Indian agriculture possess in the global market versus the challenge faced by Indian traders towards exploiting the real potential and finally suggests a suitable action plan towards strategizing the global reach of Indian produce to suitable export markets on one hand and ensuring the reach of enhanced export earnings to the actual producers of these agricultural commodities at the farm level.

Production versus exports: a status check

It is highlighted that Indian agro commodities are goods that have demand globally and the failure is actually the lack of professional management i.e., lack of market intelligence that does not allow relevant market linkages, and therefore the crop planning and production is not suitably market-led. Furthermore, the trade policies are not promotional in nature, but are restrictive, random and unfocused.

Production advantages of Indian agriculture

As per FAO world agriculture statistics, India is the world's largest producer of many fresh fruits and vegetables, milk, major spices, select fresh meats, select fibrous crops such as jute, several staples such as millets and castor oil seed. India is the second largest producer of wheat and rice, the world's major food staples.

 

Rank in production

 

 

India is also the world's second or third largest producer of several dry fruits, agriculture-based textile raw materials, roots and tuber crops, pulses, farmed fish, eggs, coconut, sugarcane and numerous vegetables. India ranked within the world's five largest producers of over 80% of agricultural produce items, including many cash crops such as coffee and cotton. India is also one of the world's five largest producers of livestock and poultry meat, with one of the fastest growth rates. India is the world's largest producer of many fresh fruits and vegetables, milk, major spices, select fresh meats, select fibrous crops such as jute, several staples such as millets and castor oilseed

Lentils and many other food staples production also increased year over year. Indian farmers thus produced about 71 kilograms of wheat and 80 kilograms of rice for every member of Indian population. The per capita supply of rice every year in India is now higher than the per capita consumption of rice every year in Japan.

FAO studies also claim that India can easily feed its growing population, plus produce wheat and rice and other agricultural crops for global exports. India is the sixth largest producer of coffee after Brazil, Vietnam, Colombia, Indonesia, and Ethiopia. With 2 per cent share in the global area under coffee, India contributes about 4 per cent to world coffee production. India is the largest producer and consumer of black tea in the world.

India’s stand in Global Agriculture Production

Product	India share in production global (%)	Major producing countries in order of ranking
Cereals:
Rice	22.07	China, India, Indonesia, Bangladesh, Vietnam, Thailand
Wheat	14.66	China, India, Russia, France, Canada
Maize	3.60	China, Brazil, Argentina, Ukraine, India
Sorghum	9%	Mexico, Nigeria, Sudan India, Ethiopia
Millets	41.25%	India, Niger, China, Mali, Nigeria
Animal Products:
Hen Eggs	7%	China, India, Mexico, Brazil , Japan
Buffalo meat	43.78%	India, Pakistan, Egypt, China, Nepal
Goat meat	39.77%	China, India, Pakistan, Nigeria, Bangladesh
Processed fruits and vegetables:
Cucumber & Gherkins	0.24%	China, Russia, Turkey, Ukraine, Spain (India-25th)
Groundnut	17%	China, India, Nigeria, Sudan, Argentina
Fresh fruits & vegetables:
Banana	27%	India, China, Philippines, Brazil, Indonesia
Papaya	49%	India, Brazil, Nigeria, Indonesia, Mexico
Mango, Guava	42%	India, China, Thailand, Indonesia, Mexico
Apple	3%	China, Poland, India, Turkey, Italy
Grapes	4%	China, Italy, Spain, France, Turkey, Argentina, India
Oranges	12%	Brazil, China, India, Mexico, Spain
Pineapple	6%	Costa Rica, Brazil, Philippines, Thailand, China, Indonesia, India
Citrus	6%	China, Nigeria, India, Columbia, Angola
Tomatoes	13%	China, India, Turkey, Egypt, Italy
Potatoes	13%	China, India, Russia, Ukraine, Germany
Peas Green	23%	China, India, France, Egypt, UK
Eggplant	28%	China, India, Egypt, Turkey, Indonesia

Source: Authors compilation from various sources.

Strong production base not able to leverage international market

Above figures indicate huge production potential of Indian agricultural produce as against other global producers of the same commodity. With immense governmental support to the farmers and involvement of various stakeholders towards enhancing yield levels, these production figures are expected to rise further in times to come. These production efficiencies leading to marketable surpluses was expected to convert into enhanced presence of these products in the global market as exports.

However, it has been witnessed that despite huge production surpluses, India’s presence in the global market for most of these agro products is minimal. For example, even though India is the largest producer of Milk and milk products; our share in total world exports is meagre 0.2 percent; for cereals it is 1.4 percent, coffee, tea and spices 4.4 percent and fisheries only 2.6 percent. This fact is further substantiated by the comparison of the rank analysis between production and exports as seen in the table below.

Production versus Exports: India’s status versus World

Agri Products	India’s ShareIn World Exports	Rank in World
		Production	Exports
Coffee, Mate & Spices	4.4	5	5
Tea	4.1	2	5
Sugars	1.9	2	10
Fish	2.6	2	12
Oil seed	1.5	1	12
Cereals	1.4	3	14
Tobacco	1.7	3	15
Edible vegetables	1.5	2	17
Edible fruit	1	1	25
Dairy product	0.2	1	47

Source: Author’s compilation from various sources

These comparative figures are alarming especially in case of fruits and vegetables where India is the largest producer of many fruits including banana, mango, papaya and third largest for apples with total number of varieties for mangoes across various agro climatic zones of India crossing approx. 1000 still leading to 25^th position when it comes to exports. Comparative analysis of India’s production versus exports vis-à-vis other global players in table below highlights the need of an immediate policy focus towards bridging this gap.

Indian agro exports not catching up with production level

This is attributed to the fact that there exists stiff competition for all these sectors. Brazil gives India tough competition in case of sugar, coffee, tobacco and mango. The USA competes for groundnut, rice, tobacco, grape, apples, wheat, poultry meat and fish exports while China has recently emerged as a major competitor for groundnuts, apples and fish. Even smaller economies like Vietnam and Turkey are occupying much larger shares in the global markets as compared to India.

Stiff competition in the International Market

Commodities	India’s top export partners#	Major Importing Countries	Competing suppliers in importing markets	India’s share in import markets(%)
Grape	Netherland (43.3)UK (15.4)Russia (10.1)	USA	Chile (60.2), Mexico (32.7), Peru (3.7)	0
		Netherland	South Africa (28.9), Chile (11.2), Peru (12.8)	13.4
		UK	South Africa (21.5), Spain (20.2), Chile (10)	2.9
Mango	UAE(20.5), Saudi(16.1),UK (9.5)	USA	Mexico (55.7), Ecuador (11.2), Peru (11.3)	0.5
		Netherland	Brazil (32), Peru (28.7), Côte d'ivoire (6)	0
		France	Spain (17.2), Peru (15.8), Israel (8.8)	0
Groundnut	Indonesia (30.3)Vietnam (15.0)Malaysia (10.2)	Netherland	Argentina (64.3), USA (9.7), Brazil (4.9)	0.6
		China	USA (50.2), Senegal (31.4), Argentina (12.2)	0
		Vietnam	USA (23.9), Brazil (6.3)	43.6
Onion	Bangladesh(26.88), Malaysia(23.20), UAE (17.99), Sri Lanka(10.09), Pakistan(8.03)	USA	Mexico (65.2), Canada (13.5), Peru (11.4)	0
		UK	Netherland (40), Spain (18.3), Poland (8.5)	0.3
		Russia	Netherland (28.8), Tajikistan (20.6), China (15)	0
Potato	Sri Lanka(35.19), Nepal(26.58), Mauritius(9.73)	Belgium	France (39.4), Netherland (33.5) Germany (13.4)	0
		Spain	France (53.7), Netherland (21.4) United Kingdom (16.2)	0
Tomato	Pakistan(49.67), UAE(32.80), Bangladesh(11.95)	USA	Mexico (83), Canada (15.9), Guatemala (0.4)	0
		Germany	Netherland (27.8), Egypt (15.2), France (7.9)	0
		Russia	France (53.7), Netherland (21.4) United Kingdom (16.2)	0

 

Above table further highlights two prime issues regarding India’s agro trade patterns (i) India’s export markets do not match with prime importing countries for respective products. For example, 50 per cent of Indian mangoes are exported to Middle Eastern markets of UAE, Saudi Arabia and UK. However the world import demands have been seen rising in developed markets of Netherlands, USA and France where India’s presence is absolutely nil. This is despite the fact that India produces approximately 1500 varieties of mangoes grown across various agro climatic zones and are available throughout the year and (ii) 80 per cent of India’s agro exports barring few exceptions are sent to developing countries. For instance, Indian groundnut seem to be capturing a reasonable share of around 43 per cent in Vietnam possibly due to the impact of Indo-ASEAN FTA. Similar is the situation witnessed in all the prime export potential products from India as seen in table 6.5 below. 

Global position of India’s agro exports

Commodity	Major Exporting Countries/major competing suppliers	India's share in World Exports
Tea	Sri Lanka(23.3),Kenya(18.6),China(15.3),United Kingdom(4.1)	8.7
Rice	Thailand(35.2), Viet Nam(12.5),USA(11.3),Pakistan(11.1)	4.1
Sugar cane	Brazil(43.6),Thailand(10.6),France(5.2),Mexico(3.5),Germany(2.4)	2.3
Coffee	Brazil(22.3),Viet Nam(7.8),Germany(7.7),Colombia(7.4)Switzerland(4.8)	2
Tobacco	Germany(14.3),Netherlands(14.2),Brazil(7.5),Poland(4.6), USA(4.3)	1.7
Mangoes	Mexico(15.9),Netherlands(12.8),Brazil(10.9),Peru(8.9),Thailand(7.4)	1.1
Potatoes	Netherlands(22.3),France(15.5),Germany(8.8),Egypt(5.8),Canada(5.2)	1
Tomatoes	Mexico(25.2),Netherlands(18.4),Spain(14.1),Morocco(5.4),Turkey(5.2)	0.9
Grapes	Chile(19.4),USA(15.2),Italy(9.3),Netherlands(7.9),Turkey(7.9)	0.8
Wheat	USA(23.7),France(14.4),Australia(13.4),Canada(12.2)	0.1
Rapeseed	Canada(43.2),Australia(10.2),France(10.1),Ukraine(5.9),UK(3.9)	0
Cocoa	Côte d'Ivoire(29.2),Ghana(25.5),Nigeria(8.7),Netherlands(6.6)	0
Apples	Italy(14.2),USA (13.6),China(13.1),France(10.6),Chile(9.7)	0
Bananas	Ecuador(24.2),Belgium(14.3),Colombia(8.8),Costa Rica(7.8)	0
Cucumbers	Spain(28.3),Netherlands(20.5),Mexico(13.1),Canada(6.9),Jordan(6.3)	0
Poultry Meat	Brazil(28.4),USA(17.7),Netherlands(8.9),France(5.8),Poland(4.7)	0
Fish	China(11.5),Norway(9.4),USA(5.3),Viet Nam(4.4),Canada(3.9)	2.6
Eggs	Netherlands(21.6),USA (9.1),Turkey(8.9),Germany(7.4),Poland(6.3)	0.2

Note: Figures in brackets are the percentage share in total world export of respective countries i.e India’s major competing suppliers.

Indian agro exports not been able to catch up with production: possible reasons

Much analysed reason towards this mismatch between the ranks in production versus exports may be attributed to both issues on the supply side as well as the demand side. Issues on the supply side include domestic inefficiencies in terms of regulatory limitations leading to production related issues followed by post-harvest losses enunciated by poor reach of logistics networks until the farm level. However, it will not be wrong to contemplate that even if the issues on the supply side are resolved, price competitiveness of Indian agri exports vis-à-vis competing players in the global market would depend on many demand side factors.

 Figure below highlights these reasons.

 

Supply side Constraints

As indicated in the figure above, Indian agro exports are primarily hit at three levels

1.  Higher price as compared to other competing players

2. Poor quality not in sync with the standards of the importing countries and

3.  Absence of market information and global market linkages.

Instances of very high final landing price as compared to other competing suppliers can be witnessed in case of mangoes in the USA. The USA seems to be one of the biggest importers for mangoes and tea. All the other competing suppliers of mangoes in USA market including Thailand (5798USD/ton), Brazil(1277), Peru (1255)& Mexico (840); reaches US port at much cheaper price as compared to Indian Alphonso reaching at 6462 USD/ton. Similar situation prevails in the case of tea in the US; rice in the UK, refined sugar in Australia and most of the other agro exports thus losing our export opportunity in the developed country markets where demands for agri imports are on rise.

The reason of this high uncompetitive prices for Indian agro exports is an outcome of poor economies of scale which comes as a vicious circle starting from small land holdings^[1] due to which farmers are not been able to engage in farm mechanisation and possibilities of technology interventions in the form of better agricultural machinery and implements becomes an impossible story. They have limited access to technology, agricultural inputs, credit, capital, and markets.

This leads to poor yield levels^[2] as against even some smaller ASEAN and African countries as seen in case of Nicaragua having better yield levels than us in case of groundnuts, Cape verde (40.6 tons/hectare) in mangoes versus India (6.3). Similar is the case with Israel in cow milk wherein its productivity levels are 10.3 versus India’s 1.2.

 

 

Small landholdings aggravated by inefficient primary level aggregation due to multiple intermediaries along with poor educational levels of farmers on technical knowhow leads to absence of technology interventions and subsequently poor yield levels. This gets further aggravated by poor supply chain management and inefficient domestic logistics. The connectivity of land locked production areas to the ports or terminals is a stiff challenge like in case of Bihar, Jharkhand, NE states and hilly regions

like HP, Uttarakhand and J&K. Also, the link roads from farms to the main road is underdeveloped in most of the states. Congestion at the ports due to high waiting periods of the shipment is another major issue. The issue of poor connectivity becomes critical in case of perishable export potential products including mangoes, grapes, tomatoes etc. wherein availability of containers at the optimum time becomes crucial. Exporters face volatile freight rates in the peak season. Inadequate number of trolleys at the airport adds on to the issue. There is no dedicated space offered for off-loading of the perishable commodities at CFOs.

Poor economies of scale leads to smaller export consignments thus poor negotiating power of Indian exporters for suitable INCO terms and international ship freight rates. All these inefficiencies at each level add up to a very high price by the time Indian exports reach the destination port. Chapter 5 on Agri Marketing reforms details this issue. 

Demand Side Constraints

The supply side constraints further intensifies when final landing prices of Indian agro products in the importing destination finally reaches its peak due to  high tariff/import duty rates levied in importing developed country markets. The European Union, Japan, and the United States use, to varying degrees, such protection tools: low but highly dispersed ad valorem tariffs, specific duties, seasonal tariffs, tariff escalation, and preferential access along with tariff-rate quotas.

High tariff peaks and dispersions

Indian agro products bearing high export potential have been facing high import duties in prime importing countries. For instance, marine products, which are the highest export earner of India, attracted approx. 18 percent duty in EU and 21 percent in China. Similarly, India’s rice export attracted 50% duty rate in Philippines and a specific rate of Indonesian Rupiah 430 per kg in Indonesia.

Tariff peaks and dispersion faced by Indian exports

 

Country	Major items and their shares in tariff peaks
EU	Prepared F&V (20),Fish& Fish products(11), Fruits and vegetables(10), Dairy products(10)
Japan	Food industry products (24),prepared F&V(20), Dairy products(18) and Cereal and Cereal products (12)
USA	Dairy products(42), Food industry products(16) and Sugar and cocoa preparations (12)
Canada	Dairy products(23), F&V(16), Cereals & Cereals preparation(13) & Food industry products(13)

Figures in parenthesis are the number of product lines on which the import duty has been more than 50%. 

Sri Lanka and the Philippines’ imposed tariffs of 35% and 40% respectively on Indian wheat imports. There is much variation in the duty imposed on sugar. It varied from zero in Malaysia and the EU for limited shipments under the SP agreement to 20% in Indonesia and Pakistan and 25% in Bangladesh. There is no duty on India’s cotton exports to major destinations except China, which imposes a duty of 54%. Bangladesh, India’s major trading partner, imposes a tariff of 37.5% on milk imports.

The European Union, Japan, and the United States use, to varying degrees, similar protection tools: low but highly dispersed ad valorem tariffs, specific duties, seasonal tariffs, tariff escalation, and preferential access along with tariff-rate quotas. Tariffs for a specific range of products depend on numerous factors, including the date of entry (seasonality factor), the degree of processing (escalation phenomenon), and the relationships with exporting countries (preferential agreements and regional and bilateral free trade agreements—FTAs). The EU's highly complex import tariff regime aims to protect domestic production of fruit and vegetables during the growing season. For this reason, the regime's key features are as follows: (i) relatively low tariffs on imports of tropical fruit, for example 5.8 percent on pineapples and 0 percent on papayas and mangoes; (ii) differentiated tariffs for temperate and semi-tropical fruits, so that tariffs are higher during the season for European producers and lower out-of-season; and (iii) generally higher overall tariffs for vegetables, with no seasonal differentiation.

Rising non-tariff barrier for agro exports in existing markets

India’s farm exports also have to face a series of non-tariff barriers in top consuming markets – for example, a ban on import of mangoes by the EU that was lifted in January 2015. Other examples of market denials are ban on rice imports by Iran and green pepper by Saudi Arabia. Besides, Vietnam refuses to allow Indian peanuts. China does not buy non-basmati rice from India but sources the same from Pakistan as well as Cambodia, Myanmar, Vietnam and Thailand. The proposed US legislation requiring agriculture imports to be mandatorily inspected and audited by USFDA will increase the cost of compliance and hurt India’s farm exports.

Prevalence of non-tariff barriers and high cost of compliance worsen the price competitiveness of Indian Agro exports. This becomes important due to the very fact that about 14% of Indian agricultural exports are subjected to only NTMs and 79% are subjected to both Tariffs & NTMs. There is widespread use of NTMs by both developed and developing countries.  In major importing countries, NTM coverage is 100% across commodity groups. It is estimated that over 50 percent of Indian exports to EU, less than 33 percent of exports to US while 45 percent of exports to Japan are subject to NTMs. In Argentina, Brazil, Chile and Romania non-tariff measures are applied widely to food drink and tobacco products. The non-tariff measures applied in these countries are predominantly for the protection of human, animal and plant health; while in China, measures most frequently applied is import inspection.

There is concern in India that agricultural exports to some developed countries are not being given fair treatment. It is generally believed that sanitary and phyto-sanitary (SPS) measures are applied in the guise of protecting plant, human and animal life in order to keep a check on exports. These measures are believed to be applied in an indiscriminate manner, often lacking transparency and requiring costly compliance. These relate to export of spices, fishery products, rice, tea, and egg powder. India’s peanut exports also face severe standard requirements in the EU markets.

Making Indian Agro globally competitive

The experiences of world-wide agro predominant economies prove that export orientation of the agriculture sector is sustained when complemented with a quality produce, sizeable processing industry and strong domestic market. As seen in the sections above, India lacks in these requirements, agricultural exports potential has not been fully tapped. It is because of these reasons, there is a strong need for strategic interventions in line with prevailing export requirements to provide a boost to agro exports in order to fully tap the vast production potential across diverse agro climatic zones in the country. Appreciating various concerns right from supply side to the demand side hampering the reach of Indian exports to the growing markets of developed economies; a solution matrix is suggested below.

Solution Matrix towards DFI towards exploiting India’s Production advantages for Trade

 

 

 

 

The government strategy towards using trade as an instrument for doubling farmer’s income should clearly be divided into two (i) export promotion and (ii) import substitution.

Export Promotion

Appreciating the concern that for DFI to happen, trade promotion of surplus agro production beyond domestic boundaries becomes the need of the hour; this section dwells upon the eight pronged strategy covering Product Segmentation, Quality Enhancement, Market Diversification, Market Penetration, Value Addition, Agriculture Infrastructure Upgradation, Skill Development and Branding/Promotion supported by conducive exports policy and regulations which are critical in ensuring competitiveness of India’s agro export trade globally. The flow chart below highlights the sequential and systematic step by step approach towards needful efforts to be taken by the Indian government for export promotion.

Market Intelligence

One of the prime reasons for the poor presence of Indian exports in the shelves of global retail chains is its inability to appreciate the variation in consumer preferences across various importing countries. For example; amongst the prime mango importing countries; most of them dislike the sweet taste and bright yellow colour of the mango since the consumers possess the taste for sour unripe mangoes; on the other hand; consumers in some African countries like Guatemala prefer to eat mangoes along with roasted pumpkin seeds. Similarly, Indo ASEAN FTA despite being instrumental in lowering down tariffs on Indian rice, could not find its place amongst the consumers in these rice consuming countries due to preference of local consumers for sticky rice as against the Indian Basmati rice.

Hence enhanced export earnings to be then transferred to farmers for DFI to happen, will only be possible when the existing structure of forward integration (looking for export markets for already produced goods) is shifted to backward integration which would mean planning our production based on world demand through in-depth market intelligence. Indian production should take into account the current and estimated trade volumes in the product category based on underlying demand trends, potential for differentiation, comparative cost advantage, quality enhancement at farm level and value addition across the value chain. This would help to decide the priority launch products and corresponding export markets, and subsequently develop the local market strategy ensuring the right products, prices, positioning and channels.

Hence there is a need for a strong Trade Analytics division to be created within existing export promotion body which would involve mapping of commodity wise importing markets across the globe, India’s unique competitiveness vis-à-vis key competitors, existing tariff structure and non-tariff barriers, and export norms in the context of WTO requirements, current status of quality standards & food regulations in target markets need to be disseminated to the exporters in timely manner. There should be an option of a public relation officer to address the trade related information and import being followed across the countries. Building an information hub for providing comprehensive information on trade opportunities and business environments in the different countries is needed.

Export Strategic plan: Market intelligence to Market linkages

 

 

Image credits: Flickr.com

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