Opinion The Express View: Pricing it right

India’s exports of farm produce are set to scale a new high in 2022-23, surpassing the $50.2 billion achieved last fiscal. But so are imports, which have grown at nearly twice the rate as exports during April-December 2022 over April-December 2021. As a result, the overall agri-trade surplus is expected to further shrink from the $20.2 billion and $17.8 billion levels of 2020-21 and 2021-22 respectively. The surplus in agriculture trade matters because this is among the few sectors — software services being another — where India has some comparative advantage. The slowing down of exports, and imports rising faster, has largely to do with world commodity prices. These had peaked in March-June period following the Russian invasion of Ukraine, but have since fallen: The benchmark FAO Food Price Index reading for January was at a 16-month-low.

Policymakers in India should not be oblivious to the above international price movements. The ban or restrictions clamped on wheat, sugar and rice exports over the last one year, coupled with allowing duty-free imports of crude edible oils, were in response to high domestic as well as global food inflation. While prices are still elevated and stocks not all that comfortable, the situation can change with bumper crops. The prospects of that in wheat, mustard, chickpea and red lentil look quite bright for now. Both export and import policies need to react dynamically in the event. The Narendra Modi government has, in the past, also imposed stocking limits on the pulses, oilseeds and edible oil trade, going against the grain of its own now-aborted farm reform laws. Such manifestly anti-producer measures aren’t in the long-term interest of consumers either. Tariffs, not quantitative restrictions, are the right instruments of trade policy.

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The Modi government needs to also pay attention to India’s faltering cotton exports and spiraling vegetable oil imports. Both are manifestations of official dithering over technologies to boost crop yields. India’s cotton production peaked in 2013-14 and the output in 2021-22 plunged to a 12-year-low. Not surprising that the country has turned from a net exporter to a net importer of cotton today. The same goes for vegetable oils, where the import bill has more than doubled from $9.7 billion to an estimated $21.5-22 billion this year. A country that has a natural advantage in cultivating cotton and depends on imports to meet over 60 per cent of its edible oil consumption requirement clearly does not have the luxury to say no to new cropping technologies, genetically modified or otherwise.