Despite India’s global advantage of hectares of arable land, it lags smaller countries in exports ($/hectare).
This is mainly due to low yields, farm productivity, low-value addition, and a large domestic customer. The percentage of farm products exported from India from the total production of farm products is low when compared to many other farm product exporting countries because
- There is a shortage of post-harvest infrastructure required that is suitable for export. To collect farm products from the farmers’ farms and then undertake cleaning, Grading, sorting, packaging, and exporting.
- Suppose a trade buyer purchases the total farm product available for harvest from the farmer’s farm, then after harvesting. In that case, the percentage of farm products that can be exported depends on the farming system & farming practices undertaken. Most of the time, farmers undertake farming systems, farming practices, harvesting practices for “QUANTITY” rather than “QUALITY” because of the absence of “Trade Buyers” working in close co-operation with farmers and lack of trust factor and a good base for “Trade Transaction” between “Farmers” and “Trade Buyer.” This results in a tiny percentage of farm products exported out of farm products’ total quantity. Then there is the problem of disposing of the non-export grade farm products that remain with trade buyers after grading and sorting. Farmers do not want to deal with two different trade buyers ( i.e., one for export-grade and one for non-export grade). Most farmers are interested in selling whatever they produce and harvest without getting into all sorts of activities like MRL testing, Grading, and sorting. Most farmers are interested in selling whatever is available after harvest to a single trade buyer at the maximum possible Farm-Gate Price.
- Excessive use of harmful chemicals while farming to get more production quantity per acre per year. This results in an increase in MRL (Maximum Residue Level) in the farm products exported and then get rejected in the international market.
India is the world’s second-largest producer of agricultural products, but it does not make the top 10 list of agri exporters. India is the world’s leader in several important agricultural categories. This country has a competitive advantage due to its diverse agro-climatic conditions, low labour costs, and manufacturing. According to a statement from the Finance Commission, India has a global advantage in terms of hectares of arable soil, but it lags smaller countries in exports per hectare ($). This is due to low yields, low farm productivity, low focus on value-added, and large domestic markets.
The Chairman of the 15th Finance Commission, N K Singh, pointed out that India’s agricultural exports had been volatile over the past 10 years but have slowed down in recent years. According to the commission, falling global prices and frequent droughts in 2014, 2015, and 2016 are responsible for India’s 10 percent CAGR decline in exports.
In the meeting that was held in the wake of effectively utilizing the third tranche 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. The export surplus volume is increasing. The Finance Commission also stated that while India’s exports of processed goods have been steadily increasing, it still has a larger global share than processed goods in raw commodities. It further stated that this gives India the potential to capture overseas markets and earn foreign currency, which will allow producers to get higher prices for their farm produce.
India’s top 50 agricultural products and commodities account for 75 percent of its total exports. India also exports 70% of its agricultural produce abroad to 20 countries. India has a trade surplus of $18 million, even though it imports more than $20 billion worth of agricultural products.