Farm trade paints an optimistic picture of the economy

November 23, 2012 0 Comments

By, Ashok Gulati and Surbhi Jain

It has never happened since Independence.
May be not even in the last 1,000 years what happened during October 2011-September 2012. India exported 10 million tons of rice, valued at around $6 billion, becoming the largest exporter of rice, replacing Thailand and Vietnam, generally the two largest exporters of rice.

This is now known to many in rice circles.

But what is little known is that in 2011-12, India also emerged as the largest exporter of beef (buffalo) meat, exporting 1.7 million tons worth almost $3 billion, beating Brazil, Australia and US, which are traditionally the largest exporters of beef.
Marine exports added another $3.4 billion and raw cotton $4.3 billion. But the biggest surprise came from guargum meal exports worth $3.3 billion, which even surpassed oilmeal exports of $2.4 billion. Sugar exports worth $1.8 billion (almost 3.3 million tonnes) also added to the buoyant agri-exports.

In all, agri-exports during 2011-12 were more than $37 billion against an import of agri-commodities worth around $17 billion, making India a large net exporter of agri-produce. This has remained true as Indian agriculture got more and more globalised, as measured by agri-trade as percentage of agri-GDP

The agri-trade (exports plus imports) as a percentage of agri-GDP, which was about 5 per cent in early 1990s when economic reforms started is today more than three times of that, touching 18 per cent in 2011-12. This is a remarkable success story of Indian agriculture, which has not been given as much attention and credit as it deserves.
The year 2011-12 may be a little upswing year for agriculture, but the long-term trends do suggest strongly that Indian agriculture is very much globally competitive, and one can tap this potential even more to benefit our farmers, provided we have a stable, predictable, and rational agri-trade policy.

A case in point is that of rice exports policy. As is well known, India had banned exports of wheat and common rice way back in 2007, and these were opened only in September 2011. A four years exports ban resulted in massive accumulation of cereal stocks at home that crossed 80 million tons on July 1, 2012, way above the buffer stock norms of maximum 32 million tons.

And when the exports were opened, rice exports zoomed as flood waters gush through the sluice gates!

Two things need to be noted: (a) when India exports 10 million tons of rice in a global market that hovers around 35 million tons, world price of rice is likely to collapse to Indian prices (large country effect) reducing the marginal returns to exports dramatically.

Therefore, there is need to impose an optimal export duty, say, 5-7.5 per cent, which could ensure good, returns to Indian exports of rice. (b) This export duty is also justified on the need to save water (and power).