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India’s wheat export ban, understanding India’s agricultural exports & challenges

  • Category
    Economy
  • Published
    23rd May, 2022

Overview

  • Analysis
    • Recent statistics
  • Global Agricultural Trade
  • India and WTO
  • Conclusion

Context

India has banned exports of wheat recently, citing a risk to food security, partly due to the war in Ukraine and as a scorching heatwave curtailed output and domestic prices hit a record high.

Analysis

India’s agricultural export

  • India is one of the largest agricultural products exporters in the world. During 2021-22, the country crossed US$ 50 billion in agriculture exports with a 19.92% increase from US$ 41.87 billion in 2020-21.
  • It exports rice, meat, grains, wheat, nuts, onions, fruits, pulses, dairy products, alcoholic beverages, cereals, cashews, vegetables, etc.
  • Rice is the largest exported agricultural product from India and contributed to more than 17% of the total agriculture export during the year 2021-22.
  • Buffalo meat, wheat and maize are among the largest exported products with the contribution of 6%, 4% and 2% to 2021-22 agriculture exports respectively.
  • The largest importers of India’s agricultural products are the US, China, Bangladesh, UAE, Vietnam, Saudi Arabia, Indonesia, Iran, Nepal and Malaysia.
    • The other importing countries are Korea, Japan, Italy and the UK.

Recent Agricultural export statistics:

  • Wheat: India is world's second biggest producer of wheat after China. Though India is not a major exporter of wheat, but India’s share now stands at 5% as against 0.3% in 2019–20.
  • Rice: India’s share in global exports of rice has increased from about 22% in 2018–19 to 40% in 2021–22.
  • Sugar: India’s share in sugar exports, which has increased to over 11% as against 3.4% in 2017–18. 

Global Agricultural trade:

  • World Bank predicted that food prices are expected to soar by 22.9% this year, driven by a 40% rise in wheat prices.
  • Primarily because Ukraine and Russia together account for about 14% of global wheat production, and about 29% of all wheat exports.
  • India is a crucial supplier of wheat to its neighbours. Apart from Afghanistan which recently received large consignments of wheat from India on humanitarian grounds, Bangladesh is another big importer of Indian wheat.
  • India produced around 7 million tonnes of wheat during 2021-’22 and out of that nearly 50% was imported by Bangladesh.
  • Food protectionism:
  • Indonesia began restricting exports of palm oil, a common ingredient found in many of the world's food, cosmetics and household items. It's the world's top producer of the product.
  • Egypt had banned exports of key staples such as wheat, flour, lentils and beans amid growing concerns over food reserves in the Arab world's most populous state.

India and WTO:

  • India’s agricultural exports are under intense scrutiny in the World Trade Organization (WTO).
  • In 2019, Australia, Brazil, and Guatemala complained to WTO’s dispute settlement body that the Indian government was implementing several subsidy schemes for promoting sugar exports.
  • The complainants argued that by implementing these subsidy schemes, the government had violated the rules of WTO’s Agreement on Agriculture (AoA), which prohibit the use of export subsidies.
  • In December 2021, the dispute settlement panel adjudicating the dispute gave its ruling against India.
  • Several countries, including Japan, Russia and the US, have sought clarifications from India as to whether its exports of food grains are in any way linked to the Open Market Sales Scheme of the Food Corporation of India.

WTO’s Agreement on Agriculture:

  • It is aimed to remove trade barriers and to promote transparent market access and integration of global markets.
  • The WTO’s Agriculture Committee oversees implementation of the Agreement and provides a forum for members to address related concerns.

Important Government Intervention

  • Financial Assistance Scheme: FAS is the export promotion scheme by the Agriculture and Processed Food Products Export Development Authority (APEDA). It aims to assist businesses in export infrastructure development, quality development and market development. 

APEDA

  • APEDA was formed in 1986 for the development of the exports of the agriculture industry in India.
  • APEDA is entrusted with the responsibility of export and promotion of 14 agriculture and processed food product groups.
  • Agriculture Export Policy: The Agriculture Export Policy was announced in 2018 with a focus on agriculture export-oriented production, export promotion, better farmer realisation and synchronisation with the policies and programmes of the Government of India.
  • Agri-clusters: Agri-clusters have been activated by forming cluster-level committees, forming FPOs, connecting exporters to the FPOs, and sorting out the issues of transportation/ logistics/ pack houses, etc.
  • Farmer Connect Portal: A Farmer Connect Portal has been set up through APEDA for providing a platform for FPOs/FPCs, cooperatives to interact with exporters.
  • Digital platforms: A number of digital platforms, using technologies like blockchain, for traceability have been developed for enabling smooth flow of business and ensuring transparency in the system, such as HortiNet for mango, vegetables and citrus fruits, net, TraceNet for organics, Peanut.net, farm registration app, Meat.net and Grapenet.
  • TMA Scheme: ‘Transport and Marketing Assistance (TMA) for Specified Agriculture Products’ is a scheme for providing assistance for the international component of freight to mitigate the freight disadvantage for the export of agriculture products and assistance for the marketing of agricultural produce.

Required measures

The country needs to address the following elements of the agri-food supply chain to emerge as a top global exporter:

  • Agri-production practices
  • Supply chain and logistics
  • Streamlining regulatory compliance practices
  • Delivering transparency and traceability using technology
  • Developing products suited to the global palate.

conclusion

India’s ban on wheat exports has delivered a fresh blow to world markets already reeling from tight supplies due to output issues in traditional export powerhouses Canada, Europe and Australia and snarled supply lines in the war-torn Black Sea area. However, India is a crucial supplier of wheat to its neighbours and the Indian government is committed to ensuring food security of neighbours and vulnerable countries.

PRACTICE QUESTION

Q1. What are the challenges in growth of India’s agricultural exports? Suggest reformmeasures to boost agricultural export.

Q2. “The agriculture sector is critical for India from a consistent growth and food security perspective.” Discuss the steps taken to revitalise the agriculture sector.

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