India’s Agricultural Exports Flourish Amid Volatile Foreign Trade
Strong local production, along with supply disruptions in competing markets, have helped India’s agricultural exports grow even as broader foreign trade remains volatile.
India’s exports contracted by 5.12% in October, though some commodities continued to grow. Along with chemicals, drugs and pharmaceuticals, exports of agricultural products and animal husbandry have remained strong this financial year.
Exports of agriculture rose by 48% in October 2020, and by 25.5% including allied activities, according to quick estimates by the Ministry of Commerce & Industry. While outbound shipments fell during the nationwide lockdown imposed in March-end, agricultural exports have been rising since June. For the financial year so far, agricultural exports rose by 14% and by 3.2% including allied activities. This, despite a contraction of 19% in overall merchandise exports.
The rise in India’s agriculture exports is likely because of a combination of factors, said Ranjan Kumar Ghosh, professor at the Centre for Management in Agriculture at IIM-Ahmedabad. Agricultural production has been strong and the disruptions caused by the pandemic in competing markets may have helped shore up India’s share of agricultural exports to other countries, he said.
While the pandemic hampered export links in other countries, the nature of India’s unorganised agricultural markets, with shorter supply chains may have allowed exports to continue amidst the pandemic, Ghosh said.
Commodities Leading The Exports
The rise has been led by exports of rice, which rose by 40.68% between April-October 2020 on an annual basis, recording a growth of 113.6% for October alone.
For rice, exports have grown over 50% in value terms with non-basmati rice showing steeper growth, said Hetal Gandhi, director at Crisil Research. Along with a low base of 2019, the surge in exports is also because of an increase in prices of rice in competitive nations like Thailand, leading to a higher demand for Indian rice from African countries.
To Saudi Arabia, which made up for over 13% of India’s total exports of rice, exports grew by 20.2% in the first half of the ongoing financial year and by 80.75% in September. Data for exports to specific geographies is available till only September.
Exports of spices rose by 0.8% between April-October 2020, rising by 21.85% in October. Spices like cumin have seen higher demand from the U.S, UK and Australia, while demand for chilli has increased from countries like Bangladesh and Sri Lanka, said Gandhi.
Coarse cereal exports saw the sharpest growth rates compared to all agricultural commodities but they constitute less than 1% of the overall production, Gandhi said.
While U.S. and China saw fewer agricultural exports in the current financial year, other major trading partners including the United Arab Emirates and Saudi Arabia saw a pick-up.
Arindam Das, joint director at the Foundation for Agrarian Studies, said along with a surplus agricultural production, the deregulation in farm laws is also likely to help boost exports. According to Ghosh, of all the changes in the farm laws, the amendments in the Essential Commodities Act may be of particular help with the release of pent up capacity in the sector.
Ghosh remains cautious. While there may have been a surge in growth in the short run, it remains to be seen if the trend will persist, he said. “Despite the government’s conscious push to increase India’s export markets, the need to strengthen India’s export value chain remains.”