Reversal Of Fortunes: From net farm exporter to net importer

Between 2013-14 and 2016-17, India’s exports of agricultural commodities have dipped from $43.2 billion to $33.8 billion, even as imports have climbed from $15.5 billion to $25.6 billion

Written by Harish Damodaran | New Delhi | Updated: June 1, 2017 5:02 am
india exports, beef exports High global prices, in turn, helped boost the competitiveness of India’s farm exports that grew from just over $ 7.5 billion in 2003-04 to $ 43.2 billion in 2013-14.

Falling exports and rising imports — this has been the story of the country’s agricultural trade over the last three years, notwithstanding the Narendra Modi government’s ambitious Make in India initiative.

Between 2013-14 and 2016-17, India’s exports of agricultural commodities have dipped from $43.2 billion to $33.8 billion, even as imports have climbed from $15.5 billion to $25.6 billion (see table). The resultant trade surplus — the country has always been a net exporter in farm products — has narrowed down from $27.7 billion to a mere $8.2 billion over this period. The above adverse movement of $19.5 billion, courtesy both reduced exports and increased imports, has mainly had to do with global prices. The United Nations’ Food and Agriculture Organisation’s Food Price Index (FPI; base period 2002-04=100) soared from an average of 97.7 in 2003 to 229.9 in 2011. The index fell subsequently, but remained well above 200 levels even in the next three years: 213.3 in 2012, 209.8 in 2013 and 201.8 in 2014.

High global prices, in turn, helped boost the competitiveness of India’s farm exports that grew from just over $ 7.5 billion in 2003-04 to $ 43.2 billion in 2013-14. The surge, significantly, wasn’t powered by the items making up the country’s traditional agri-export basket: Coffee, tea, spices, cashew, tobacco, marine products, oil meals, etc. While these did grow, the real drivers, however, were commodities not as high-profile or major foreign exchange earners before the start of the century. We can single out five such dynamic, “non-traditional” export items: Buffalo meat, guar-gum, raw cotton, basmati rice and maize (corn).

The story of buffalo meat – India emerging from nowhere to become the world’s No. 1 beef exporter, displacing Brazil – is well known. A fourteen-fold jump in exports, from $341 million to $4.8 billion in the span of a decade, owed itself to both rising global prices (especially during 2009-14) and modern integrated slaughterhouses that could process and supply a relatively cheaper product (buffalo meat sells at a discount to regular cattle beef) to low- and middle-income developing countries in Southeast Asia, West Asia and North Africa.

No less spectacular a tale is guar-gum, whose exports shot up from a measly $110.5 million in 2003-04 to — hold your breath — $3.9 billion in 2012-13. The underlying stimulus here was the shale boom in the US. The said gum, extracted from the seeds of guar or cluster bean (a hardy legume crop grown mostly in Rajasthan), is used as a thickening agent in the fracking fluid injected into shale rock formations at high-pressure to create cracks and allow gas/oil to flow through them. As hydrocarbon drilling services firms like Halliburton, Schlumberger and Baker Hughes began stockpiling guar-gum during the boom, its prices and exports from India also spiralled.

The last decade saw India also emerge as the world’s largest exporter of rice (ahead of Thailand and Vietnam) and No. 2 in cotton (after US). Equally amazing was corn. In 2000-01, the country hardly shipped out 32,500 tonnes of this feed grain worth $5.97 million. By 2012-13, these numbers had touched 4.79 million tonnes and $1.31 billion, respectively, with the Kosi-Seemanchal belt of Bihar and Odisha’s Nabarangpur district becoming major sourcing centres for multinational traders despatching the grain to Indonesia, Malaysia and Vietnam via Kakinada and Visakhapatnam ports. In all the three commodities, exports were also enabled by production-boosting technology — Bt transgenics in cotton, high-yielding single-cross hybrids in maize and the blockbuster Pusa-1121 basmati variety in rice. But all this is now history. The end of the decade-long global commodity boom has also engendered a collapse of India’s agri-exports.

In 2016-17, guar-gum exports were valued at only $467 million. Oil-meals, likewise, brought in barely $800 million, compared to $3 billion-plus in 2012-13, while cotton exports have shrunk 62 per cent over their 2011-12 high of $4.3 billion. Annual corn shipments, too, are down to around $150 million. These can be primary attributed to international prices: At their peak, corn and soyabean futures at the Chicago Board of Trade quoted at $8.49 and $17.94 per bushel on August 10, 2012 and September 4, 2012, respectively, whereas they are currently trading at $3.67 and $9.13 per bushel. The ruling benchmark Cotlook ‘A’ Index price of 87.20 cents a pound is a fraction of its corresponding all-time-high of 244 cents on March 8, 2011.

But it isn’t exports alone. Declining global prices have also pushed up imports and made the latter cheaper. This can be seen, for instance, in wheat, where India has turned from an exporter to the tune of $1.93 billion in 2012-13 and $1.57 billion in 2013-14 to an importer of $1.27 billion during the fiscal gone by. Even more striking is soybean. In 2012-13, the country exported soybean meal valued at Rs 14,155.97 crore, as against the corresponding Rs 7,611.05 crore imports of soya oil. By 2015-16, however, meal shipments had plunged to Rs 1,511.69 crore, whereas soyabean oil imports had spurted to Rs 19,419.01 crore. Thus, from a net exporter of Rs 6,544.92 crore, India became a net importer of Rs 17,907.32 crore in respect of this commodity complex.

The ultimate cost of the external terms of trade turning unfavourable — the latest FPI reading of 168 for April 2017 is well below the record 238 reached in February 2011 — is being borne by the farmer. Domestic soybean prices in the last three years have come down from Rs 4,000-4,500 to Rs 2,500-3,000 per quintal levels. At the height of the shale boom, spot prices of guar-seed in Jodhpur scaled an unprecedented Rs 30,432 per quintal on March 21, 2012. The same rates today are in the region of Rs 3,450!

The global bull run in agri-commodities, no doubt, benefited farmers in India. One proof of it is tractor sales, which rose from 1.90 lakh units in 2003-04 to 6.34 lakh units in 2013-14. But, as boom has given way to bust, the resultant impact has been seen in sales plummeting to 4.94 lakh units in 2015-16, before recovering somewhat to 5.83 lakh last year. Without a turnaround in international commodity prices, doubling of farm incomes and Make in India (more exports, less imports) vis-à-vis agriculture might remain elusive goals.

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  1. A
    AlsoIndian
    Jun 1, 2017 at 12:27 pm
    Whatever statistics you bring to the Bhakts, they always find a way and reason to keep their nose brown. The continuous failure of Modi government in various areas is apparent but "Savan ke andhe ko sabhi hara nazar aata hai". The person blinded in savan sees everything green. Keep it us Bhakts!
    Reply
    1. J
      Just Me
      Jun 1, 2017 at 12:10 pm
      Can we conclude that reporters of IE do not know the difference between net importer and net exporter? A reduction in surplus does not make one a net importer!
      Reply
      1. K
        kg
        Jun 1, 2017 at 12:10 pm
        Consider:Appreciation of Rupee, Decrease in fake exports (Hawala through fake companies),Increase in value added exports instead of raw material,Fall in Dairy(at the cost of?) increase in Meat export, Fall in foodgrain export and increase in Meat export(cattlefeed?),Little significance of much hyped "Meat export" in overall exports and it's costs probably override any benefits.
        Reply
        1. K
          kg
          Jun 1, 2017 at 12:00 pm
          Statistics can be selective and misleading, However, from whatever is presented, I gather; Following have not been factore in:Appreciation in Rupee, The "hawala" export ha (Black money returning to India from fake companies abroad for fake "exports"), Change in nature of exports from RAW to value added products.Further, Meat export affecting domestic consumption of grains used to feed cattle.Also, effect of Meat export on Dairy export (Fall).Also MEAT EXPORT IS NOT AT ALL SUCH A HUGE EXPORT and it's disastrous effects on other industries need to be evaluated.And I am no economist, but I can see so many gaps in this report.
          Reply
          1. M
            Mukesh Goswami
            Jun 1, 2017 at 2:35 pm
            Appreciation in Rupee ?? Joke ?? where was rupee in 2003-04 ?? What hawala has to do with exports ?? What black money we got from demonetisation ?? All cash came to the system.. Meat export is of animals who do not yield milk, if you don't understand this basics, God help you.. Meat export is over Rs 1 lakh crore.. you dumb bhakt..
            Reply
          2. P
            Prasanta Mishra
            Jun 1, 2017 at 11:53 am
            India badal raha hay.bhokton bajao tali.
            Reply
            1. M
              mimi sur
              Jun 1, 2017 at 11:33 am
              Thanks to Indian population growth as well rapid urbanization . While there is a dip in growth of population for all communities, Muslims continue to grow at higher rates . Average fertility among muslin women still the highest in India . Gov needs to bring no-more-than-2 child rule. The one breaches this should be given no job, be it gov or private, he/she can't do any business either . Such type of stringent rule like China can save India .
              Reply
              1. P
                pappu
                Jun 1, 2017 at 12:02 pm
                from where does your "facts" gleened from, let me guess... BhaktPuran!
                Reply
                1. M
                  mimi sur
                  Jun 1, 2017 at 2:30 pm
                  Those who can't argue on facts, only say one thing..."Bhakts" . Check latest population census . Must be a Leftists or pseudo-secular or a high-breeder musulmaan.
                2. A
                  AlsoIndian
                  Jun 1, 2017 at 12:29 pm
                  Irrelevant comments. Always find a way to demonize Muslims. Sorry for your mindset!
                  Reply
                  1. M
                    mimi sur
                    Jun 1, 2017 at 2:31 pm
                    Those who can't argue on facts, only say one thing..."Bhakts" . Check latest population census . Must be a Leftists or pseudo-secular or a high-breeder musulmaan.
                3. M
                  M.Shiva Kumar
                  Jun 1, 2017 at 11:25 am
                  Not at all surprising considering the fact that India, particularly in recent times, has no holistic economuc policy for any sector of economy leave alone agriculture. The recent CSO data on GDP, show a declining figure on the revised methodology and there is no official response for this. In agriculture during the year 2016-17 India, as per reorts, had bumper crop of 100 million tons of wheat, yet the Government imported wheat to the extent of $1268.64 millions.
                  Reply
                  1. M
                    Manas Sarkar
                    Jun 1, 2017 at 11:23 am
                    This figures only adds confusion.We need to check the total export. To increase the product value, sometimes process foods are sold. Also need to check the export of yarn and fabrics, as sel raw cotton is not good for any country.
                    Reply
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