India’s Agriculture and Food Exports

Opportunities and Challenges

India’s Agriculture and Food Exports
Opportunities and Challenges

Editors
Debesh Roy | Bijetri Roy

Supported by NABARD
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Contents
List of Figures and Tables vii
Foreword xi
Preface xiii
Acknowledgements xv
Contributors xvii
Abbreviations xxv

1. Introduction 1
Debesh Roy and Bijetri Roy
2. Global Regime for Agricultural Trade: Is it Benefitting
Indian Farmers? 9
Nitya Nanda
3. Trajectory of Indian Agricultural Exports: Competitiveness,
Diversification, and Growth Linkages 28
Raka Saxena, Rohit Kumar, Sonia Chauhan and Raman M.S.
4. Agriculture Trade of India and Implications for Current and
Future Trade Agreements 58
Parthapratim Pal and Subhankar Mukherjee
5. India-European Union Free Trade Agreements: Possible Threats
to Indian Agriculture 82
Bibek Ray Chaudhuri and Ayusha Sengupta
6. India-United Kingdom Trade in Agro-Foods: Challenges and
Opportunities 101
Arpita Mukherjee and Angana Parashar Sarma
7. Behind the Border Measures: Examination of Sanitary and
Phytosanitary Barriers Faced in the Case of Food Export
from India 126
Tanu M. Goyal and Arpita Mukherjee
8. Promoting Agricultural Exports: Need for National Level Policy
on Food Loss Management 147
D.S. Chauhan
vi Contents

9. Financing India’s Agricultural Exports: Current Scenario and

Way Ahead 161
S. Prahalathan Iyer and Jahanwi Singh
10. Modelling Agriculture Exports in Emerging Economy
Through Cluster Based Approach 181
Sneha Kumari, Nisha Bharti and Hema Yadav
11. Attaining US$ 100 Billion Agriculture and Food Exports:
The Way Forward 200
Debesh Roy and Bijetri Roy
List of Figures and Tables
FIGURES
Figure 1.1 India’s Exports of Agriculture and Allied Products 2
Figure 2.1 FAO Food Price Index (2014–16 = 100) 1961–2021 12
Figure 2.2 Indices of International Food Price, Production Support,
and Inter-sectoral Inequality in India 2001-19 15
Figure 3.1 Delineation of Phases in Agricultural Exports 35
Figure 3.2 Contribution of Agricultural Trade to Total Trade 35
Figure 3.3 Trends in Exports of Major Agricultural Products
from India (US$ Million) 44
Figure 3.4 Revealed Comparative Advantages (RCA) of
Agricultural Commodities Exports during 2001–2020 45
Figure 3.5 Product Diversification Index 46
Figure 3.6 ELG Versus GLE in Indian Agriculture Exports 51
Figure 4.1 India’s Total Exports of Agricultural and
Manufacturing Goods 63
Figure 4.2 India’s Trade in Agricultural Goods: Exports, Imports
and Trade Balance 63
Figure 4.3 Total Agriculture Exports and Share of Value Added
for India 75
Figure 4.4 Export Destination of India’s Processed Food for 2020-21 76
Figure 4.5 Share of China and Vietnam in India’s Total
Agricultural Exports 77
Figure 4.6 Share of India’s Top 20 Export Destinations for
Agricultural Goods Divided into Countries with
which India has Preferential Trade Agreements and
with which India Trades Only on MFN Basis 79
Figure 6.1 India’s Trade in Agro-Food Trade (2010-20) 107
Figure 6.2 India’s Share in UK’s Agro-Food Trade 109
Figure 7.1 Components of Risk Analysis 133
Figure 9.1 Trends in Outstanding Export Credit to Agriculture
and Allied Sector by SCBs 164
viii List of Figures and Tables

Figure 9.2 Maximum Estimated Share of Exports supported by

Export Credit extended by SCBs 165
Figure 9.3 Category-wise Outstanding Export Credit extended by
SCBs to the Agriculture Sector 166
Figure 9.4 Model Selection Criteria in Time Series Models 167
Figure 9.5 ARDL Lag Length Selection 170
Figure 9.6 Plot of Cumulative Sum of Recursive Residuals and
Cumulative Sum of Squares of Recursive Residuals 173
Figure 10.1 Service Mix Portfolio 193
Figure 10.2 Fish Bone Diagram 197
Figure 10.3 Model for Export of Agro Processed Produce using
Cluster Approach 198
Figure 11.1 India’s Exports of Dairy Products 214
Figure 11.2 CAGR (%) of Exports of Dairy products 214
Figure 11.3 India’s Exports of Marine Products 216
Figure 11.4 CAGR (%) of Exports of Marine Products 216
Figure 11.5 India’s Exports of Cereal Preparations 217
Figure 11.6 CAGR (%) of Exports of Cereal Preparations 218
Figure 11.7 India’s Exports of Processed Fruits, Juices, and Nuts 219
Figure 11.8 CAGR (%) of Exports of Processed Fruits, Juices,
and Nuts 219
Figure 11.9 India’s Exports of Processed Vegetables 220
Figure 11.10 CAGR (%) of Exports of Processed Vegetables 220

TABLES
Table 2.1 Share of Agriculture in the Gross Domestic Product and
Total Employment (%) 16
Table 2.2 Tariff Structure for Agricultural Goods 2006–2020 20
Table 3.1 Multi-structural Breaks in Agriculture Exports after
Economic Reforms 34
Table 3.2 Trends in Agricultural Trade of India 36
Table 3.3 The Revealed Comparative Advantage of Agricultural
Commodities Exports 45
Table 3.4 Product Diversification Index of Selected Agricultural
Products 46
Table 3.5 Percentage Distribution of the Value of India Exports 47
Table 3.6 Testing of Stationarity 50
Table 3.7 VAR Lag Selection 51
List of Figures and Tables ix

Table 3.8 Confirmation of ELG and GLE Hypothesis for Selected

Commodities 51
Table 3.9 Co-integration Test 52
Table 4.1 Tariff Structure, 2014-15, 2019-20, and 2020-21 64
Table 4.2 Summary Analysis of Preferential Tariffs, 2019-20 65
Table 4.3 Top 15 Imported Agricultural Products, 1995 and 2019 69
Table 4.5A India’s Top 10 Agricultural Exports in 2009-10 70
Table 4.5B India’s Top 10 Agricultural Exports in 2018-19 70
Table 4.5C India’s Top 10 Agricultural Exports in 2020-21 71
Table 4.6 Top 5 Export Markets for Each of India’s Top 10
Agricultural Exports in 2020-21 72
Table 4.7 Average Annual Growth Rate of Value-Added Agricultural
Products by HS Code Chapters 75
Table 4.8 Processed Food with Export Potential as Suggested by
Agricultural Export Policy 2018 76
Table 4.9 India’s Agricultural Exports: Share of Developed and
Developing Countries 78
Table 5.1 Top Imports of India from EU 88
Table 5.2 Selection of Potential Threat Agricultural Products 91
Table 5.3 Changes in Imports of Potentially Threat Agricultural
Products for India Due to Tariff Concessions to EU 95
Table 6.1 Top Export Destinations of India in Agro-Food
Products (2020) 108
Table 6.2 Top Import Sources of India in Agro-Food Products (2020) 108
Table 6.3 Top Five Agro-Food Products Exported from India to the
UK (2010, 2015, and 2020) 110
Table 6.4 Top Five Agro-Food Products Exported from India to the
World (2010, 2015, and 2020) 111
Table 6.5 Top Five Agro-Food Products Exported from the United
Kingdom to India (2010, 2015, and 2020) 112
Table 6.6 Top Five Agro-Food Products Exported from the UK to
World (2010, 2015, and 2020) 114
Table 7.1 Distribution of Notification by Risk Decision
(From January 2020 to June 2021) 134
Table 7.2 Distribution of Notification by Classification
(From January 2020 to June 2021) 135
Table 7.3 Distribution of Food-related Notifications by Notifying
Country in the EU, Switzerland, and the UK (From January
2020 to June 2021) 135
x List of Figures and Tables

Table 7.4 Category-wise Distribution of Notifications Made for

Food and Food Contact Material (From January 2020
to June 2021) 136
Table 7.5 Annual Interceptions of Harmful Organisms in
Commodities (Objects, Plants, and Produce) Imported
from India into the EU Member States, Switzerland,
and the UK (2015–20) 138
Table 7.6 Issues Detected in Food Products Originating From India 138
Table 8.1 Average Food Grain Production 149
Table 8.2 Annualised Compound Growth Rates of Food Production
and Population Growth 149
Table 8.3 Foodgrain Availability in India 149
Table 8.4 Household Food Waste in Southern Asia 152
Table 8.5 Food Production and Food Loss of Major Crops 153
Table 8.6 Magnitude of Food loss and Export Potential 153
Table 8.7 Quantitative and Qualitative Loss in Foodgrain 155
Table 8.8 Critical Loss in Agro-Commodities 156
Table 9.1 Results of Unit Root Test 169
Table 9.2 Results of Bounds Test Approach to Co-Integration 170
Table 9.3 Long-Run Coefficients 171
Table 9.4 Error Correction Representation for the Selected
ARDL (4, 0, 3, 2) 172
Table 9.5 Pair-wise Granger Causality Tests 172
Table 10.1 Situation Analysis of the Collectives: External
Environment Analysis 190
Table 10.2 Situation Analysis of the Collectives
Internal Environment Analysis 191
Table 10.3 SOSTAC Approach 194
Table 10.4 Agro-Processing Exports by Clusters Using Ansoff
Matrix Approach 195
Table 10.5 Agro-Processing Export by Collectives Using
GE McKinsey Matrix 195
Table 10.6 Strategic and Operational Approaches for
Agri Export Sector 197
Foreword
Agriculture and food exports from India crossed the
milestone of US $50 billion during 2021-22, having
grown at a robust 20 per cent over the previous year.
The achievement in the wake of the second and
third waves of the COVID-19 pandemic, reflects the
remarkable resilience of our farmers, food processors,
traders and exporters, along with policy, financial and
technical support from Government of India (GoI),
state governments, APEDA, RBI, NABARD, EXIM Bank, banks, research
institutions, extension agencies and other stakeholders. GoI’s Agriculture
Export Policy 2018, has set an agriculture export target of US $60 billion by
2022 and US $100 billion, few years thereafter. The landmark achievement
of agriculture exports gives us hope to achieve the milestone of US $100
billion within a reasonable period of time. However, the present geo-political
situation and consequent slowdown in the global economy, has created
challenges for global trade. Nevertheless, exploring new markets, signing
of a host of free trade agreements (FTAs) by India, addressing sanitary
and phytosanitary (SPS) and technical barriers to trade (TBT) issues by
improving the quality of agri-produce and traceability, increasing the share
of value-added agriculture produce in agriculture exports, creating efficient
agri-export value chains and agri-export infrastructure, and increasing agri-
export finance would facilitate the achievement of the target.
In order to transform the lives of the farming community, GoI has
envisioned the achievement of doubling of farmers’ income by 2024-25.
Promotion of agriculture exports can play a major role in this regard. Majority
of our farmers are small and marginal farm holders. The challenge is to
bring them into the fold of agri-export value chains, in order to make them
more productive and enhance their income significantly. Farmer producer
organisations (FPOs) can be energized to become an important conduit
between small and marginal holders and the agri-export value chains. We
in NABARD have the task of bringing about the overall transformation of
agriculture and rural economy. Therefore, promoting agriculture exports
forms an important part of our agenda. NABARD, along with SFAC, APEDA
xii Foreword

and EXIM Bank have a major role to play in promoting and financing
agriculture exports.
India’s agri-exports are dominated by primary products. There is a need
to give a thrust to value­added agri-exports, viz., dairy products; processed
fish and meat; and processed cereals, vegetables and fruits. Exports of organic
products too need to be given a push. Development of Agri-Export Zones
and agri-export clusters and the One District One Product scheme could
transform the agri­export sector in India.
NABARD promotes research in all areas of agriculture and rural
development through our Research and Development Fund. It gives me great
pleasure that the Institute for Pioneering Insightful Research and Edutech
Pvt. Ltd. (InsPIRE), a start-up research and consultancy firm, has come out
with this well-researched book comprising chapters authored by eminent
academicians, researchers and professionals. We are happy to support this
publication out of our R&D Fund. I hope the research findings and policy
suggestions made in the book will be useful for policy makers, practitioners
and researchers towards transforming India’s agriculture and food exports.
I also take this opportunity to congratulate ex-NABARDian Dr. Debesh
Roy and his daughter Bijetri Roy, for founding InsPIRE, and editing this
book. I wish InsPIRE success for their future research endeavours.

19 May 2022 Dr. G.R. Chintala

Chairman
NABARD, Mumbai, India
Preface
India is among the top ten exporters of agricultural products in the world.
The Agriculture Export Policy (AEP), 2018 of the Government of India,
aims at achieving an agriculture export target of $60 billion by 2022 and
US$ 100 billion within a few years, thereafter. This is indeed a challenging
task and would need a resetting of the timelines for achieving the targets.
A paradigm shift from a ‘business-as-usual’ approach to a well-calibrated,
comprehensive, strategic, and result-oriented agri-export policy and action
plan, is needed to transform agriculture exports. It is imperative to achieve
the target of the AEP, especially in the context of the COVID-19 pandemic
and the current geopolitical situation, to make India a global power in
agriculture while raising farmers’ income by harnessing the export potential
of Indian agriculture, through suitable policy interventions and technological
innovations.
A record achievement of $50.2 billion exports of agricultural products
from India in 2021-22 is a beacon of hope for achieving the target of US$ 100
billion by 2026-27. Quick and transformative reforms, and India’s signing of
Free Trade Agreements (FTAs) with its major trade partners, could facilitate
the achievement of the target. Further, Government of India has envisioned
the achievement of doubling farmers’ income by the year 2024-25, and
agriculture exports certainly have an important role to play in achieving
the same. Development of agri-export infrastructure, and efficient and
globally competitive export-oriented agri-value chains, are the right steps
for transforming India’s agriculture and food exports and doubling farmers’
income.
This Book is a collection of chapters authored by reputed academicians,
researchers and professionals, which aims at taking a deep dive into
various opportunities and challenges related to the exports of agricultural
products from India. It also aims at providing policy inputs and a roadmap
for achieving the agriculture export target of US$ 100 billion by a realistic
timeline of 2026-27. The Book covers issues related to global regime for
agriculture trade and its impact on Indian farmers, Free Trade Agreements
(FTAs), Sanitary and Phytosanitary (SPS) measures, Technical Barriers to
Trade (TBT), food loss management, agriculture export finance, agriculture
export value chains, etc. There are books in India that cover various issues
xiv Preface

related to agriculture exports but do not comprehensively cover all major

issues related to agriculture and food exports from India. This gap in the
literature is expected to be filled up by the Book.
We are confident that the suggestions and recommendations made by
the authors would prove to be useful policy inputs for the central and state
governments, APEDA, MPEDA, NDDB, RBI, NABARD, EXIM Bank, banks
and other financial institutions, as well as research-inputs for academicians
and researchers.
Finally, it gives us immense happiness for the fact that this is the
inaugural publication of the Institute for Pioneering Insightful Research and
Edutech Pvt. Ltd. (InsPIRE) (Website: https://inspire-solutions.in), a start-
up research and consultancy firm which was set up on 8th June 2021. We
shall continue our endeavour to publish well-researched books in a multi-
disciplinary setting, with special focus on policy research in the areas of
economics and climate change.

Greater Noida, India Debesh Roy

Bijetri Roy
Acknowledgements
We express our sincere gratitude to Dr. G.R. Chintala, Chairman, National
Bank for Agriculture and Rural Development (NABARD) for inaugurating
the webinar on India’s Agriculture and Food Exports: Opportunities and
Challenges, as the Chief Guest, and also for writing the foreword of this book.
The financial assistance received from Research and Development Fund
of NABARD towards publication of this book and organizing the webinar
is gratefully acknowledged. We are also grateful to Dr. K.J.S. Satyasai, Chief
General Manager, and his colleagues Ms. Balwinder Kaur, Deputy General
Manager and Ms. Shivangi Shubham, Assistant Manager, at the Department
of Economic Analysis and Research (DEAR), NABARD, for the financial
support from NABARD.
We express our sincere gratitude to Dr. Arpita Mukherjee, Professor,
ICRIER, New Delhi, for her valuable advice and guidance when we were
planning to publish this book and to organize the webinar.
We are sincerely grateful to all the authors and co-authors of this book
for contributing their well-researched and analytical chapters, and also for
presenting their chapters at the webinar: Dr. Nitya Nanda, Director, Council
for Social Development, New Delhi, Dr. Arpita Mukherjee, Professor, ICRIER,
New Delhi, Dr. Raka Saxena, Principal Scientist, ICAR-National Institute of
Agricultural Economics and Policy Research, New Delhi, Dr. Parthapratim
Pal, Professor, IIM Calcutta, Dr. Bibek Ray Chaudhuri, Associate Professor,
Indian Institute of Foreign Trade, Kolkata, Dr. Tanu M. Goyal, Consultant,
ICRIER, New Delhi, Dr. D.S. Chauhan, Chief General Manager (Retired),
NABARD, Mr. S. Prahalathan Iyer, Chief General Manager, EXIM Bank,
Mumbai, Ms. Jahanwi Singh, Chief Manager, EXIM Bank, Mumbai, Dr.
Subhankar Mukherjee, Assistant Professor, IIT Kanpur, Dr. Hema Yadav,
Director, Vaikunth Mehta National Institute of Cooperative Management,
Pune, Dr. Sneha Kumari, Assistant Professor, Symbiosis School of Economics,
Pune, Dr. Nisha Bharti, Assistant Professor and Head of the Department of
Agribusiness Management, Symbiosis Institute of International Business,
Pune, Ms. Angana Parashar Sarma, PhD scholar at BITS, Pilani, Dr. Rohit
Kumar, Research Associate, ICAR-NIAP, New Delhi, Ms. Sonia Chauhan,
Assistant Chief Technical Officer, ICAR-NIAP, New Delhi, Dr. Raman M.S.,
xvi Acknowledgements

Research Associate, ICAR-NIAP, New Delhi, and Ms. Ayusha Sengupta,

Master’s Student, Jadavpur University, Kolkata.
We express our sincere gratitude to Bloomsbury India for agreeing to
publish this book. We convey our sincere thanks to everybody at Bloomsbury
involved in this project.

Greater Noida, India Debesh Roy

Bijetri Roy
Contributors
Angana Parashar Sarma is a PhD scholar at the Birla
Institute of Technology and Science (BITS), Pilani, in the
area of ‘International Development’. Prior to pursuing her
PhD, she was working as a full-time researcher at the Indian
Council for Research on International Economic Relations
(ICRIER). She has three years of experience in conducting
policy-oriented research in the fields of trade and trade facilitation, export
competitiveness, SEZs, e-commerce and digital connectivity, start-ups and
entrepreneurship. She has conducted studies for international organisations
such as the International Labour Organization (ILO) and the Foreign,
Commonwealth and Development Office (FCDO), UK; and industry
associations such as the Confederation of Indian Industry (CII). Under
FCDO, she has worked extensively with Indian government agencies such
as the Food Safety and Standards Authority of India (FSSAI) on food safety
standards and streamlining imports, and the Department of Economic
Affairs, Ministry of Finance, for their G20 negotiations. She has over 10
publications to her credit in the form of book chapters, reports, and referred
journal articles. She has a Masters in Economics from Jamia Millia Islamia,
Delhi and a B.A. (Hons.) degree in Economics from Sri Ram College of
Commerce, University of Delhi.

Dr. Arpita Mukherjee is a Professor at Indian Council for

Research on International Economic Relations (ICRIER),
New Delhi. She has over 25 years of experience in policy-
oriented research, working closely with the government
in India and policymakers in the European Commission
and its member states, United States (US), Association
of Southeast Asian  Nations (ASEAN) and in East Asian countries. She
has conducted studies for international organisations, Indian industry
associations, non-government organisations and companies.  Her areas of
expertise include trade and investment; trade agreements; services; special
economic zones; economic corridors; retail and food supply chain; start-
ups, entrepreneurs; e-commerce and cross-border labour mobility. She
specialises in sector and product-specific market trends, go-to market
xviii Contributors

strategy, and government policies. Dr Mukherjee has a PhD in Economics

from the University of Portsmouth, UK, and prior to joining ICRIER, she
worked with the UK-based think tank - Policy Studies Institute and taught
at the University of Portsmouth. She has over 80 publications including
national and international referred journals, books and book chapters and
government reports. Dr. Mukherjee is a member of various government
committees and policy panels and is in the editorial board of 10 journals.
She has presented her work in various conferences and seminar and is in the
advisory board of academic organisations, industry associations and non-
government organisations. She is a regular contributor to newspapers and
magazines.

Ayusha Sengupta is pursuing Masters in Economics,

Jadavpur University (2021–2023), Kolkata.

Dr. Bibek Ray Chaudhuri did his Ph.D. in Economics from

Jawaharlal Nehru University, New Delhi, India. Currently
an Associate Professor of Economics at Indian Institute of
Foreign Trade (IIFT), Kolkata, India. He started his career as
a Consultant at the National Council for Applied Economic
Research (NCAER), a leading Think Tank in New Delhi,
India. He was a Visiting Fellow at School of Environment,
Education and Development (SEED), the University of Manchester, UK.
His research interests include trade, microfinance and political marketing.
He has published in journals like Journal of Business Research (Elsevier),
Market Intelligence and Planning (Emerald), Journal of Political Marketing
(Taylor and Francis), Journal of Industrial Statistics, Journal of Asian
Business Studies (Emerald). He was a recipient of the prestigious “Japanese
Award for Outstanding Research on Development”, conferred by Ministry of
Finance, Government of Japan and Global Development Network (GDN).
He is an avid traveller and likes to visit places, and his other hobbies include
reading and sports.

Dr. D.S. Chauhan was the Chief General Manager of

NABARD Uttar Pradesh Regional Office, Lucknow, before
his superannuation. A developmental banker with more
than 3 decades of working experience in rural development
banking, he has held important posts in NABARD and
Contributors xix

Bankers Institute of Rural Development (BIRD) and has worked across

the country in various capacities. An alumni of Lucknow University, Dr.
Chauhan holds a doctoral degree in Public Administration besides being
an MBA (HR) and postgraduate in Biotechnology. Dr. D.S. Chauhan has
to his credit a number of reputed national and international publications
and paper presentations and has also authored a book on Self Help Groups.
His areas of interest are Community based Organisations, Natural Resource
Management, Rural Planning and Rural Credit.

Dr. Hema Yadav is the Director at Vaikunth Mehta National

Institute of Cooperative Management (VAMNICOM),
Pune. She was director at CCS NIAM since 2005. Prior to
joining NIAM She was lecturer, Department of College
Education, Govt of Rajasthan from 1992 to 2005. Her area
of specialization is international business, agribusiness
management, Remote sensing and GIS, land use planning and terrain analysis.
She has put in 13 years of experience in different aspects of agricultural
marketing agribusiness education, teaching, training and consultancy. In
the area of agribusiness education, she was Programme Coordinator from
2008 to 2017 of NIAM s two years Post Graduate Diploma in Management
(Agri-Business Management), a flagship program of NIAM approved by
AICTE. She has organized national and international training programmes
in the area of Agricultural marketing under USAID-Africa- India trilateral
programme and under Feed the Future.

Jahanwi Singh is an economist with the Research

and Analysis Group of the India Exim Bank. She has
extensive experience in analysis of international trade,
economic policies, and industry dynamics. Her research
work has helped provide key policy recommendations
to Central and State Governments. She has also worked
on institutional capacity building assignments for export
finance in countries such as Rwanda and Ghana. She regularly contributes
to discussions on contemporary economic topics through authored articles
in media publications. Ms. Singh holds a Master’s degree in economics from
the Jawaharlal Nehru University, and a Bachelor’s degree in economics from
Miranda House, Delhi University.
xx Contributors

Dr. Nisha Bharti is working as an Assistant Professor and

Head of the Department of Agribusiness Management at
Symbiosis Institute of International Business, Symbiosis
International University, Pune, since 2013. She is a Fellow
(Doctorate) in Rural Management from the Institute of
Rural Management, Anand (IRMA). She holds a Post
Graduate degree in Agriculture from Indira Gandhi Agricultural University,
Raipur. She worked as a visiting faculty with various institutes like Gokhale
Institute of Politics and Economics, VAMNICOM, etc. She has industry
experience of working with an organization, PRADAN, for two years. She
published more than 25 papers in various top-ranked journals, including
ABDC. She is a reviewer and editorial board members in several top-ranked
journals. She was awarded Best Professor in Rural Management (Regional
round, Pune) by Dewang Mehta Foundation in 2017. She is also a recipient
of the Award of Prof. Indira Parikh Women in Education Leaders from
World Education congress in 2017.

Dr. Nitya Nanda is Director of the Council for Social

Development, a social science think tank based in New
Delhi. His areas of interest include international trade,
industrialization, development and environment issues.
He has been a consultant for several UN organizations,
including UNCTAD, UNESCAP, and UNDP; and the
European Commission. He has also been a consultant for
different government ministries and agencies in India and contributed to
formulating policies. He has published many articles in journals and edited
books, as well as pieces in magazines and newspapers. He has also authored
and edited several volumes, including Expanding Frontiers of Global Trade
Rules (2009), Hydro-Politics in GBM Basin (2015), and India’s Resource
Security (2018). His latest book is India’s Industrial Policy and Performance
(2022).

Dr. Parthapratim Pal is currently a Professor in the

Economics Group at the Indian Institute of Management
(IIM) Calcutta. He joined IIM Calcutta in 2006 as an
Assistant Professor. He has been a full professor since April
2014. He has a Masters, M.Phil., and PhD in Economics
from the Center for Economic Studies and Planning of
the Jawaharlal Nehru University, New Delhi. He has also
received education from the Cambridge University, UK and the Harvard
Business School, USA. Before joining IIM Calcutta, he has worked with
Contributors xxi

ICRIER, Economic Research Foundation and Indian Institute of Foreign

Trade (IIFT), New Delhi. Dr. Pal was also a director at the Board of Directors
of Allahabad Bank (April 2018-March 2020). He has more than 20 years
of research experience. His recent areas of interest include international
trade, regional trade agreements and regional cooperation, development
issues, WTO related issues, and international capital flows. He has several
publications in nationally and internationally reputed journals and books.
He has done a number of consultancy and research works for national and
international agencies.

Prahalathan Iyer is Chief General Manager at the Export-

Import Bank of India (India Exim Bank). He joined the
Bank in 1998. Prior to this, he was with the Associated
Chambers of Commerce & Industry of India, India Trade
Promotion Organisation and the National Council for
Applied Economic Research. At India Exim Bank, he has
worked in the areas of Export Services, Eximius Centre for
Learning, Knowledge Centre and Research and Analysis. He was a member
of the ‘Technical Committee on Services/Facilities to Exporters’, set up
by the Reserve Bank of India; ‘Task Force on Trading of Goods in Local
Currencies’, set up by the Department of Commerce, Government of India;
and ‘India-Russia Joint Working Group on Settlement of Bilateral Trade in
National Currencies’, set up by the RBI. Mr. Iyer holds a Master’s Degrees in
Economics, and Financial Management.

Dr. Raka Saxena is currently working as a Principal Scientist

at ICAR-National Institute for Agricultural Economics and
Policy Research (NIAP), New Delhi, India. Her research
interest lies in the areas of Agricultural Economics, Food
Science, Animal Science, and Agricultural Trade. She
has research experience of more than 15 years and has
published more than 50 research papers in leading journals of national and
international repute. She has also published 8 policy papers/briefs/working
papers and more than 20 book chapters. She has contributed through
evidence-based policy insights based on novel, multi- disciplinary and
multi-institutional approaches. Starting from the critical need of agricultural
research prioritization and evaluation, she continued her research agenda
for direct welfare of the farmers of this country. She has concentrated on two
vital dimensions of agriculture in the country, particularly related to market
intelligence for handling price volatility and enhancing farmers’ incomes.
xxii Contributors

Her recent work emphasizes on strategies for harnessing the agricultural

trade potential for enhancing farm incomes.

Dr. Raman M.S. is working as Research Associate, ICAR-

NIAP, New Delhi New Delhi. He obtained his Master’s
and PhD degree in his Master’s and Doctorate degree in
Agricultural Economics from Tamil Nadu Agricultural
University (TNAU), Coimbatore, Tamil Nadu, India. He
has published several research papers in various peer
reviewed journals. His research interest area lies in the area
of Agricultural Policy, Sustainability, and Agricultural Trade.

Dr. Rohit Kumar is presently working as a Research

Associate at ICAR-National Institute for Agricultural
Economics and Policy Research (ICAR-NIAP), New Delhi.
He has received his Master’s and PhD degrees in the field of
Agribusiness Management from Banaras Hindu University
(BHU), Varanasi. He has experience of more than 5 years
and has published 13 research papers in leading Indian journals. His research
interest lies in the areas of Agricultural Economics, Price Transmission, and
Agricultural Trade.

Dr. Sneha Kumari is Assistant Professor at Symbiosis

School of Economics, Symbiosis International (Deemed
University), Pune. She did her PhD as a full-time Junior
Research Fellow from the Symbiosis International (Deemed)
University. She had completed her Undergraduate studies in
Agriculture at the Indian Council of Agriculture Research
Fellowship and her Masters in Agribusiness Management
under Indian Council of Agriculture Research. She has also completed her
PGDBA in Human Resource Management and Marketing Management. She
has worked as an Assistant Professor at Vaikunth Mehta National Institute of
Cooperative Management – a National Institute of Ministry of Agriculture
and Farmers Welfare, Government of India. She has a rich experience as
Statistical Officer, Researcher and Assistant Professor. She is also associated
with different institutes for various educational and research related project
assignments. She has published several research papers in the area of big data,
agriculture, agriculture supply chain, and sustainability in ABDC and Scopus
journals and has attended several national and international conferences.
She has published two international books and one national book. She is
Contributors xxiii

a reviewer for peer reviewed international journals. She is also the Guest
Editor for Scopus and Web of Science indexed international journal.

Sonia Chauhan is presently working as an Assistant

Chief Technical Officer at ICAR-National Institute for
Agricultural Economics and Policy Research (ICAR-NIAP),
New Delhi. She has received her post-graduate degree in
Economics from Garhwal University and mathematics
from Delhi University. She is Officer In-charge, Research
Data Management / Nodal Officer, ICAR-NIAP, New
Delhi. She has experience of more than 27 years and has published more
than 35 research papers. She has also contributed in various annual reports/
article published from the institution. Her research interest lies in the areas
of agriculture policy.

Dr. Subhankar Mukherjee is Assistant Professor in the

Department of Industrial & Management Engineering,
Indian Institute of Technology (IIT) Kanpur. He obtained
his PhD from Indian Institute of Management (IIM)
Calcutta, with specialization in Economics. Prior to
that, he completed the IPMX (one-year full time MBA
programme) from IIM Lucknow, and B.E. in Mechanical Engineering from
Jadavpur University. His research interests are in the areas of economics of
development and applied microeconomics. His research has been published
in Economic and Political Weekly, Review of Agraian Studies, among others.

Dr. Tanu M. Goyal has over 13 years of policy-oriented

research experience. She did her PhD from Jawaharlal
Nehru University, New Delhi. She is a full-time Consultant
with ICRIER, New Delhi, and she has been associated
with ICRIER since the year 2008. During this period, she
has led and contributed to projects funded by the Indian
Government, international aid agencies, the private sector and industry
associations, among others. Her research interests include international
trade in services, trade agreements, services value chain and G20 issues.
Apart from these areas, she has worked on projects related to food supply
chain, foreign direct investments, development assistance and the retail
sector. She has contributed to two books, published by Sage Publications
and Springer and she has authored/co-authored several journal articles,
book chapters, working papers, opinion pieces in popular media and several
research reports.
Abbreviations
AAS Agriculture Advisory Service
ACF Autocorrelation Function
ADF Augmented Dickey-Fuller
AEP Agriculture Export Policy
AEZ Agri Export Zone
AI Artificial Intelligence
AIC Akaike Information Criterion
AIDC Agriculture Infrastructure Development Cess
AMS Aggregate Measure of Support
AoA Agreement on Agriculture
APEDA Agricultural and Processed Food Products Export Development
Authority
APMC Agriculture Produce Marketing Committee
APTA Asia-Pacific Trade Agreement
ARDL Autoregressive Distributed Lag
ASEAN Association of Southeast Asian Nations
ATARI Agricultural Technology Application Research Institute
BCD Basic Customs Duty
BTIA Bilateral Trade and Investment Agreement
CAGR Compound Annual Growth Rate
CBAM Carbon-Border Adjustment Mechanism
CECA Comprehensive Economic Cooperation Agreement
CEPA Comprehensive Economic Partnership Agreement
CII Confederation of Indian Industry
CIPHET Central Institute of Post-Harvest Engineering and Technology
CLP Critical Loss Points
CPR Cédula de Produto Rural
CSA Climate Smart Agriculture
CUSUM Cumulative Sum of Recursive Residuals
CUSUMSQ Cumulative Sum of Squares of Recursive Residuals
xxvi Abbreviations

DEZ Dairy Export Zone

DFI Doubling Farmers’ Income
DIT Department for International Trade
DoC Department of Commerce
DXI Export Diversification Index
EEA European Economic Area
EFSA European Food Safety Authority
EIC Export Inspection Council of India
ELG Export-Led Growth
EME Emerging Market Economy
e-NAM Electronic National Agriculture Market
ETP Enhanced Trade Partnership
EU European Union
EUROPHYT European Union Notification System for Plant Health
Interceptions
FAO Food and Agriculture Organization
FAS Foreign Agricultural Service
FCDO Foreign, Commonwealth & Development Office
FCI Food Corporation of India
FICCI Federation of Indian Chambers of Commerce and Industry
FIG Farmers’ Interest Group
FLM Food Loss Management
FMD Foot and Mouth Disease
FPC Farmer Producer Company
FPE Final Prediction Error
FPO Farmer Producer Organisation
FSA Food Standard Agency
FSSAI Food Safety and Standards Authority of India
FTA Free Trade Agreement
FY Financial Year
GAP Good Agriculture Practices
GATT General Agreement on Tariffs and Trade
GCMMF Gujarat Co-operative Milk Marketing Federation
GDP Gross Domestic Product
GHG Greenhouse Gas
GI Geographical Indication
Abbreviations xxvii

GLC Gas-Liquid Chromatography

GLE Growth-Led Exports
GM Genetically Modified
GoI Government of India
GPH General Principles of Food Hygiene
GVA Gross Value Added
GVC Global Value Chains
HACCP Hazard Analysis and Critical Control Points
HYV High Yielding Variety
ICAR Indian Council of Agricultural Research
IMFL India Made Foreign Liquor
INR Indian Rupee
IoT Internet of Things
IP Intellectual Property
ISCECA India-Singapore Comprehensive Economic Cooperation
Agreement
ISLFTA India Sri Lanka Free Trade Agreement
KCC Kisan Credit Card
KII Key Informant Interview
KVK Krishi Vigyan Kendra
LC Letter of Credit
LDC Least Developed Countries
LLP Low Loss Points
LPG Liberalisation, Privatisation and Globalisation
MAI Market Access Initiatives
MEIS Merchandise Exports from India Scheme
MEP Minimum Export Price
MERCOSUR Southern Common Market – Argentina, Brazil, Paraguay, and
Uruguay
MFN Most Favoured Nation
MIP Minimum Import Price
MMT Million Metric Tonnes
MoFPI Ministry of Food Processing Industries
MoSPI Ministry of Statistics and Programme Implementation
MoU Memorandum of Understanding
MPEDA Marine Products Export Development Authority
xxviii Abbreviations

MRA Mutual Recognition Agreement

MRL Maximum Residue Limit
MSME Micro, Small and Medium Enterprise
MSP Minimum Support Price
MT Million Tonnes
NABARD National Bank for Agriculture and Rural Development
NBFC Non-Banking Financial Company
NDDB National Dairy Development Board
NER North Eastern Region
NFSA National Food Security Act
NGO Non-governmental Organisation
NPOP National Programme for Organic Production
NSDC National Skill Development Corporation
NSO National Statistical Office
NTB Non-Tariff Barriers
NTM Non-Tariff Measures
ODOP One District One Product
OECD Organisation for Economic Co-operation and Development
OPEZ Organic Product Export Zone
PACS Primary Agricultural Credit Society
PEG Private Entrepreneurs Guarantee
PLI Production Linked Incentive
PMFBY Pradhan Mantri Fasal Bima Yojana
PM-KISAN Pradhan Mantri Kisan Samman Nidhi
PMKSY Pradhan Mantri Kisan Sampada Yojana
PMKSY Pradhan Mantri Krishi Sinchayee Yojana
PPP Public Private Partnership
QR Quantitative Restrictions
RASFF Rapid Alert System for Food and Feed
R&D Research and Development
RBI Reserve Bank of India
RCA Revealed Comparative Advantages
RCEP Regional Comprehensive Economic Partnership
REFP Rice Export Promotion Forum
RTA Regional Trade Agreement
SAARC South Asian Association for Regional Cooperation
Abbreviations xxix

SAE Second Advance Estimate

SAFEX South African Futures Exchange
SAFTA South Asian Free Trade Area
SCB Scheduled Commercial Bank
SCM Subsidies and Countervailing Measures
SDG Sustainable Development Goals
SIC Schwarz Information Criterion
SME Small and Medium Enterprise
SPS Sanitary and Phytosanitary
SSA Shift Share Approach
TBT Technical Barriers to Trade
TIES Trade Infrastructure for Export Scheme
TOP Tomatoes, Onions, and Potatoes
TRQ Tariff Rate Quota
UAE United Arab of Emirates
UK United Kingdom
UKGT United Kingdom Global Tariff
UKIBC United Kingdom-India Business Council
UN United Nations
UNCTAD United Nations Conference on Trade and Development
UNEP United Nations Environment Program
US United States
USDA United States Department of Agriculture
USFDA United States Food and Drug Administration
VAR Vector Autoregressive
WDRA Warehousing Development and Regulatory Authority
WTO World Trade Organization
Unit Conversion
1 lakh = 100,000
1 crore = 10 million
100 crore = 1 billion
1 lakh crore = 1 trillion

Currency Conversion
US$ 1 = INR ( ) 75.8071 (31 March 2022)
CHAPTER 1

Introduction
Debesh Roy* and Bijetri Roy**
* Chairman, Institute for Pioneering Insightful Research & Edutech Pvt. Ltd.
(InsPIRE), Greater Noida.
E-mail: [email protected]
** Managing Director and Chief Strategy Officer, Institute for Pioneering Insightful
Research & Edutech Pvt. Ltd. (InsPIRE), Greater Noida.
E-mail: [email protected]

Achieving India’s ambition of US$ 5 trillion Gross Domestic Product (GDP)

would involve turbocharging the economy at 8-9 per cent sustainable growth
over the next 4 years (2022-23 to 2026-27). This would have seemed an
arduous task after the pandemic-induced sharp dip in the GDP growth to
-6.6 per cent in the Financial Years (FY) 2020-21. However, the economy is
poised to grow at 8.9 per cent in 2021-22,1 and the ambition seems achievable,
within a reasonable time.1 The agriculture sector which contributes 15.5 per
cent2 to the economy, is estimated to grow at 3.3 per cent in FY 2022, which
is the same rate of growth as in FY 2021.2 It was the only sector that achieved
positive growth in the face of negative growth of 4.8 per cent in the Gross
Value Added (GVA) in FY 2021. This sector would need to focus on private
investments and exports, while targeting an annual agriculture GVA growth
of 5 per cent, and contribute towards the achievement of US$ 5 billion targets
by 2025-26.
A focus on reforms in agriculture marketing and agriculture exports for
doubling farmers’ income by FY 2024, would be an appropriate recipe for
stimulating the agriculture sector. Although a daunting task, the reforms,
and investments in agri-infrastructure could stimulate the agriculture sector.
Linking farmers to the export market is an important strategy to sustainably
raise farmers’ income.

1
Second Advance Estimate (SAE) of the Gross Domestic Product (GDP) (at 2011-
12 prices) estimated by the National Statistical Office (NSO), Ministry of Statistics and
Programme Implementation (MoSPI), Government of India.
2
Share of Agriculture, forestry, and fisheries sector in the Gross Value Added (GVA)
as per the SAE of National Income by the NSO, MoSPI, GoI.
2 India’s Agriculture and Food Exports

India is not only self-sufficient to meet the domestic demand for food
but is also a net exporter of agricultural products. The country is among
the major producers of cereals (wheat and rice), pulses, fruits, vegetables,
milk, meat, and marine fish. However, exporters of agri-commodities are not
successful in raising their share in global markets because of uncertainty in
the existing foreign trade regime.
The country ranks among the top ten exporters of agricultural products
in the world. The country’s share in global agricultural exports increased
from 1.1 per cent in 2000 to 2.2 per cent in 2017, valued at US$ 39 billion.
However, India’s share fell to 2.1 per cent in 2019, valued at US$ 37 billion,
and rose again to 2.2 per cent3 in 2020, valued at US$ 39 billion,4 having
grown at 4 per cent over the previous year.3,4 While Brazil’s share increased
from 2.8 per cent to 5.2 per cent (US$ 93 billion), that of China increased
from 3 per cent to 4.3 per cent (US$ 78 billion), between 2000 and 2020.5
India’s agriculture exports experienced fluctuations during the 10-
year period from 2012-13 to 2021-22, due to an uncertain and unstable
agriculture trade regime. The 10-year Compound Annual Growth Rate
(CAGR) was 1.0 per cent (Figure 1.1). During the first 5-year period from
2012-13 to 2016-17, agriculture exports declined significantly from US$ 43.1

Figure 1.1: India’s Exports of Agriculture and Allied Products

CAGR: 2012-13 to 2021-22 = 1.0 per cent; 2012-13 to 2016-17 = -6.3 per cent;
2017-18 to 2021-22 = 6.1 per cent
Source: Authors’ calculations based on data accessed from the Economic Survey,
Government of India (various issues) and DGCI&S.

3
India’s share is 3.1 per cent if intra-EU exports are excluded.
4
WTO, World Trade Statistical Review 2021.
5
WTO, World Trade Statistical Review 2021.
Introduction 3

billion (2013-14) to US$ 33.0 billion (2015-16), at a CAGR of -6.3 per cent
(Figure 1.1). The second 5-year period from 2017-18 to 2021-22, witnessed
a strong CAGR of 6.1 per cent. During this period, agri-exports decreased
from US$ 38.7 billion (2017-18) to US$ 35.0 billion (2019-20), followed by
a sharp increase to US$ 41.7 billion (2020-21), and a record US$ 50.2 billion
achieved in 2021-22 (Figure 1.1) . India’s agriculture exports grew by a robust
20.4 per cent in 2021-22, to touch US$ 50.2 billion (Figure 1.1), which is
certainly a commendable achievement by farmers and exporters, especially
in a year affected by the second and third waves of the pandemic. To catch up
with Brazil and China, India needs to bring about comprehensive structural
reforms in the agriculture sector, with a focus on agriculture and food
exports.
The Agriculture Export Policy (AEP) 2018 of the Government of India
(GoI), aims at achieving an export target of US$ 60 billion by 2022 and
US$ 100 billion within a few years, thereafter. This is indeed a humongous
task, even under normal circumstances, and more so in the aftermath of
the Covid-19 pandemic. Therefore, there needs to be a realistic resetting of
the timeline to achieve the target. Achieving the target should also involve
a paradigm shift from a ‘business-as-usual’ approach to a well-calibrated,
comprehensive, strategic, and result-oriented agri-export policy and action
plan, as an essential component of comprehensive policy reforms in the
agriculture sector. It is imperative to achieve the vision of the AEP, especially
in the context of the COVID-19 pandemic, to make India a global power in
agriculture while raising farmers’ income by harnessing the export potential
of Indian agriculture, through suitable policy interventions.
This Book is a collection of chapters authored by reputed academicians,
researchers and professionals, which aims at taking a deep dive into
various opportunities and challenges related to the exports of agricultural
products from India. It also aims at providing policy inputs and a roadmap
for achieving the agriculture export target of US$ 100 billion by a realistic
timeline of 2026-27. The Book covers issues related to global trade regime,
agriculture export competitiveness, Free Trade Agreements (FTAs), Sanitary
and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT),
food loss management, agriculture export finance, agriculture export value
chains, etc.
There are books in India that cover various issues related to agriculture
exports but do not comprehensively cover all major issues related to
agriculture and food exports from India. This gap in the literature is expected
to be filled up by the Book.
This Book has a total of 11 chapters, each addressing important aspects
of issues related to agriculture and food exports from India. Chapter 2 deals
4 India’s Agriculture and Food Exports

with the global regime for agricultural trade. It examines if the developing
countries have received the expected benefits after more than a quarter
of a century since the signing of the Agreement on Agriculture (AoA)
under the World Trade Organization (WTO) regime. Agriculture remains
highly subsidised in most developed countries, which makes the position
of developing countries like India quite imbalanced, in terms of access
to markets. The present definitions and interpretations of subsidies and
commitments have created problems for countries like India, despite the
modest subsidies provided by developing countries. Other issues discussed in
the Chapter include low tariff reduction commitments for key commodities
by most developed economies. Thus, the AoA has not been of much use in
improving market access. India has been able to export more agricultural
goods, mainly due to its ability to enhance its supplies.
The trajectory of Indian agricultural exports with reference to
competitiveness, diversification, and growth linkages form the essence of
Chapter 3. Since 2001, cotton and cereals have been the major contributors
to agriculture exports. Also, the share of meat and edible meat offal has
consistently increased. Rice, frozen bovine meat, cotton yarn, raw cotton,
ginger, pepper, and seed spices remained highly competitive commodities
in the last two decades. Crustaceans emerged as highly competitive during
recent years. The trade performance of rice is found to be impressive
over the years. With the decline of the comparative advantage for Indian
tea, the Export-Led Growth (ELG) hypothesis was supported in onion,
pepper, rice, fennel, coriander, cumin, and tea. Co-integration in selected
commodities was established among the growth and exports which denotes
a long-run relationship in exports. To sustain the global presence and
enhance competitiveness, policy facilitation is required in terms of a more
consistent agricultural export policy. Export-oriented supply chains should
be managed more efficiently for making the exports more competitive.
Effective international market intelligence efforts would help the country in
harnessing the export advantages and global opportunities in agriculture.
In a country like India, agricultural trade liberalisation is a complex
subject. While on one hand, it appears that a labour abundant country
like India will have a comparative advantage in agriculture, in reality, the
situation is different. Indian agriculture is dominated by small and marginal
farm holders whose ability to participate in international trade is extremely
limited. Many of these farmers are subsistence farmers with very little
marketable surplus and most of them suffer from various market failures and
structural inefficiencies. On the other hand, international agricultural trade
is dominated by large, developed countries who are not always cost-efficient
in their production. However, due to the huge amount of subsidisation in
Introduction 5

agriculture in these countries they can undercut the low-cost producers

from developing countries in a major way. Against the evolving backdrop
of India’s engagement in agricultural trade, Chapter 4 aims to examine how
India’s agricultural exports have evolved over the last two decades. A short
historical background and the current state of play of export of agricultural
commodities from India are presented. The evolution of India’s trade policy,
a focused analysis of India’s agricultural trade policy in the context of various
trade agreements followed by an analysis of the patterns of India’s agricultural
exports with a focus on commodity baskets and export destinations have
been discussed in the later sections of this Chapter, followed by the way
forward in relation to current and future trade agreements.
Negotiations for an FTA between India and the European Union
(EU) have been going on for a long time. It reached a stalemate due to
disagreement over issues related to, among other sectors, agriculture. Indian
negotiators were sceptical about the impact of the FTA on small farmers and
retailers. The big farmers were on the other hand in favour of the Agreement.
Given that India has come out of RCEP, the government has now renewed
its efforts to sign the Agreements that can be concluded quickly. Against
this background, Chapter 5 seeks to assess the threats to the agricultural
sector due to a possible India-EU FTA. The analysis has been carried out at a
disaggregated level and tries to pinpoint the products which face threat from
EU products. Current tariffs imposed by India on EU products have been
taken into consideration for analysing the threats among other factors like
current imports, export volumes of other countries selling the same products
to India, etc. A partial equilibrium trade model has been used to analyse
the threat. A secondary objective of the Chapter is to suggest possible tariffs
which the GoI can offer to the EU to minimise the threat from the FTA on
the agricultural sector in India.
Chapter 6 deals with the challenges and opportunities in India-the
United Kingdom (UK) trade in agro-foods. The UK is a major importer of
agro-food products from the world but prior to Brexit, the majority of its
trade was with the EU. With Brexit, the UK is diversifying its trade markets
away from the EU, focusing more on emerging economies, including India.
The Enhanced Trade Partnership (ETP) signed between India and the UK
in February 2021 is in tandem with leveraging the untapped trade potential
between the two economies. Both sides are exploring the priorities and
challenges, and food and drinks have been identified as a key sector of
interest. In agro-foods and beverages, India had a positive trade balance with
the UK in 2020 (at US$ 0.55 billion) and exports from India to the UK have
grown by 55.72 per cent during 2010 and 2020. While there is a potential
for enhancing trade, there are some key trade barriers such as high tariffs
6 India’s Agriculture and Food Exports

in India for the UK’s exports and limited market access for select products
on both sides. This along with non-tariff measures like stringent food safety
conditions or labelling requirements on both sides, are adversely impacting
Small and Medium Enterprise (SME) exporters in the food and beverages
sector. Given this background, the Chapter provides an overview of the
existing and emerging trade patterns in the agro-food sector between India
and the UK, focusing on some key products, which are currently exported
or can be exported in the future if trade barriers are removed. Identifying
a few products such as alcoholic beverages for the UK’s export to India,
organic foods for both countries, and Basmati rice for India’s export to the
UK, it analyses and assesses the impact of tariff and non-tariff measures on
exports and suggests policy recommendations on three key areas. These
are as follows: (a) tariff rationalisation, (b) removal of non-tariff barriers,
and (c) sharing of knowledge and cooperation, to address the barriers and
strengthen the bilateral trade through the ETP.
Chapter 7 is a critical examination and analysis of the Sanitary and
Phytosanitary (SPS) measures and barriers under the WTO regime, and their
impact on India’s agricultural exports. While the WTO allows countries to
have more rigid standards, these standards have to be scientifically proven
and should not cause unnecessary trade barriers. Analysing the data of
reasons for the rejection by different food products, for the EU from the
Rapid Alert System for Food and Feed (RASFF) and EU Notification System
for Plant Health Interceptions (EUROPHYT) portals, the Chapter presents
the reasons and types of rejection of food products. The rejection can range
from relabelling of products, destroying the product, and product ban. The
Chapter further examines the impact of the rejection. A recommendation
of what needs to be done in the entire export value chain from farmers to
producers and exporters to reduce rejections, focusing on what support the
government can provide, forms the conclusion and way ahead of the Chapter.
Chapter 8 deals with the issue of promoting agricultural exports and
analyses the need for a national-level policy on Food Loss Management
(FLM). The Chapter makes an analysis of food security, the issue of farm
production levels, India’s food growth trajectory, and the differentiation of
food loss from food wastage. The Chapter further discusses Critical Loss
Points (CLP) and Low Loss Points (LLP). It is high time that the GoI puts
in place a comprehensive national policy on ‘Achieving SDG 12.3 targets
by Minimising Food Loss’. The Policy has to focus not only on minimising
food loss but also on leveraging the potential to increase agro-based exports,
resulting in augmented farm-level income. These suggestions form the
crux of the conclusion, based on the identified CLPs and the available
infrastructure, vis-à-vis, the required infrastructure.
Introduction 7

Chapter 9 discusses the current scenario and way ahead in relation

to financing India’s agricultural exports. International trade entails
considerable risk, necessitating an enabling environment for producers and
firms to manage the risks to engage in trade. One of the chief concerns in
international trade is the uncertainty over the timing of payments made
by the importer to the exporter. There are five key methods of payment
for international transactions—cash-in-advance, consignment, letter of
credit, documentary collections, and open account—each with a different
associated risk for the buyer and the seller. The Chapter makes an analysis
of export finance for agricultural exports in India and the impact of export
financing on agricultural exports. The Chapter further discusses strategies
for strengthening financing for agricultural exports.
Chapter 10 analyses and deals with modelling agriculture exports in the
emerging economy through a cluster-based approach. India’s agriculture
exports (including marine and plantation products) have beaten the stagnant
data registering a growth of 17.34 per cent to US$ 41.25 billion in 2020-21.
The fruits and vegetable exports also rose to INR 11,019 crore (US$ 1,487
million) in 2020-21 from INR 10,114 crore (US$ 1,408 million) reported
in 2019-20. There has also been a hike in the value of processed fruits and
vegetable exports which grew to INR 10,277 crore (US$ 1,386 million) in
2020-21 from INR 8,315 crore (US$ 1,164 million) reported in 2019-20. The
Agriculture Export Policy announced in 2018, has been framed with a focus
on agriculture export-oriented production, export promotion, better farmer
realisation for clusters dedicated to horticulture produce. The farmer-centric
model of cluster development has been able to boost horticulture production
in Tamil Nadu, Maharashtra, Andhra Pradesh, Telangana, Uttar Pradesh, and
Bihar. The clusters in the form of Farmer Producer Organisations (FPOs)
have actively pursued growth in sales by enabling the farming community,
including the small and marginal farmers, to address their production
and marketing issues. The research was undertaken to understand the
role of clusters subject to FPO and Farmer Producer Company (FPC) in
addressing the challenges in supply chain and agri-exports and exploring
the opportunities for sustaining agricultural export in India. The Chapter
explores the five successful cluster approaches that were the key players in
horticulture exports. The findings suggest an aggregate model for boosting
agriculture exports. The drivers for the same and their linkages are discussed
in the model. The results of this study can provide useful guidance and
implications for agricultural exports to cooperatives and policymakers for
providing suitable handholding support to clusters in terms of a holistic
approach in finance, technology, capacity building, and governance.
8 India’s Agriculture and Food Exports

Chapter 11 of this Book discusses the way forward to attaining the target
of US$ 100 billion in agriculture and food exports. It presents an analysis
of agriculture export reforms, doubling farmers’ income, and agriculture
marketing reforms. The Chapter further aims to encourage export-oriented
research and development. Economic diplomacy is one of the most vital
factors which determines India’s export performance. Diplomatic efforts
are also imperative to promote Brand India. The US, for instance, has
imposed stricter norms to check pests and pesticides in the case of exports
of mangoes and rice from India. Also, some of India’s agricultural product
test laboratories are not recognised by Russia. Therefore, intense diplomatic
efforts are needed to address these as well as SPS-related issues, with India’s
major trade partners, viz., the EU, the US, the UK, China, the Association of
Southeast Asian Nations (ASEAN), the United Arab of Emirates (UAE), and
South Asian Association for Regional Cooperation (SAARC) countries, as
well as potential export markets across the globe. The Chapter also makes a
positive case for the promotion of FTAs for the growth of agricultural exports
and fostering India’s agricultural export competitiveness. The Chapter also
makes an analysis of efficient export-oriented agri-value chains, including
dairy, fisheries and marine products, processed cereals, fruits and vegetables,
and organic exports. Investment in rural infrastructure is a pre-condition to
enable the acceleration of agricultural growth, the creation of new economic
opportunities, and the generation of employment. Robust infrastructure
is a critical component of efficient agricultural and agri-export value
chains. This includes pre- and post-harvest handling facilities, storage and
distribution, cold chain, processing facilities, roads, railways, and world-class
exit point infrastructure at ports and airports facilitating quick exports. It
is also important to attract private investments in export-oriented activities
and infrastructure, in addition to public investment. Further, while the
central government may advise and allocate funds, proper implementation
of agriculture and market infrastructure reforms lies at the behest of state
governments.
This Book has carefully collated different dimensions of India’s exports
in agricultural products. The chapters have incorporated a survey of valuable
literature on the respective subjects covered, and in-depth critical analysis
based on existing evidence.
CHAPTER 2

Global Regime for Agricultural Trade: Is it

Benefitting Indian Farmers?
Nitya Nanda
Director, Council for Social Development, New Delhi
E-mail: [email protected]

Introduction
Trade in agricultural products has been declining over time and currently
accounts for less than 10 per cent of global merchandise trade, though it
has grown at a higher annual rate of 3.5 per cent compared to 2.7 per cent
for merchandise trade and 2.8 per cent for manufactured goods over the
last five years. From the beginning until the conclusion of the Uruguay
Round of negotiations, agriculture was virtually left out of the General
Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO)
framework, despite the fact that agricultural products, unlike the current
situation, accounted for about half the total global merchandise trade when
the framework was created (Nanda 2008). Yet, agriculture became among
the most contentious issues at the GATT/WTO negotiations that very often
makes or breaks the deals in WTO negotiations as a whole.
During the Uruguay Round, negotiations got stuck due to differences
in agricultural issues and the Round could be concluded only due to the
bilateral agreements between the United States (US) and the European Union
(EU)–the Blair House Accord in November 1993 where the main issue was
agriculture. In Cancun Ministerial Meeting in 2003, along with the Singapore
issues, agriculture played an important role in the washout of the Ministerial
Conference. In Bali Ministerial Conference a decade later, negotiations
could have been deadlocked but for the agreement between India and the
US on the issue of food security. India, of course, refused to ratify the Trade
Facilitation Agreement at the Bali Conference until it was agreed that the
concession that India could extract at Bali was for an indefinite period.
When GATT was signed it was the US that was calling the shot as
the EU was not yet in existence. Havana Charter was intended to provide
a comprehensive global trade regime that could not be converted to an
10 India’s Agriculture and Food Exports

international agreement due to resistance from the US as it ostensibly affected

US sovereignty. The US also ensured that its domestic policies and laws
were not undermined due to the GATT. The US was the main exporter of
agricultural goods which had its Agricultural Adjustment Act of 1933 which
enabled its government to resort to tariffs and quantitative controls and
export subsidies to stabilise domestic prices of agricultural goods (Hathway,
1997). Most developing countries were still colonised or newly independent
and hence could not get their concerns addressed.
Domestic political and social concerns in the US and other developed
countries also influenced the way agriculture was treated in GATT. Along
with economic and industrial development, agriculture was witnessing
relative decline as farmers and farmworkers were finding it difficult to
maintain parity with incomes in industry and service sectors. The fact that
the perception that agriculture is unique and linked to the food security of
a country also and should not be treated like other sectors also played an
important role in ensuring that agriculture received major exemptions from
GATT rules.
On the face of it, there were not too many exemptions. While member
countries were asked to report on subsidies, they were not prohibited and
all kinds of subsidies were allowed. Another exemption was in the area of
quantitative restrictions on which exemptions meant that they could be
used liberally including restrictions due to quality issues. Even tariff binding
on agricultural goods was so liberal that it hardly made any impact. This
essentially meant that the agriculture sector was virtually exempted from
GATT discipline.
Nevertheless, the issue of ensuring fair prices of commodities, agricultural
goods, in particular, remained an important part of the global political
economy agenda. It was discussed in many international fora including the
Food and Agriculture Organization (FAO) and United Nations Conference
on Trade and Development (UNCTAD). The problem of commodity
prices dominated the first UNCTAD in 1964 and constituted a major
part of the Final Act that came out as the outcome of the first UNCTAD.
An important initiative in this regard was the international commodity
agreements that the countries signed to stabilise the supply and prices of
certain commodities. However, none of these could achieve much in terms
of stabilising the global markets for agricultural commodities (Dubey,
2018). Given this, a full-fledged inclusion of agriculture in the GATT/WTO
framework, though raised some concerns, also brought enormous hope
for developing countries, particularly those who were highly dependent
on agriculture.
Global Regime for Agricultural Trade: Is it Benefitting Indian Farmers? 11

Agriculture: Its Importance and Peculiarities

As noted earlier, when agriculture was brought into the negotiation agenda
of the GATT Uruguay Round, developing countries had a mixed feeling.
While there was substantial hope that this could herald a new era that could
usher in the economic development of developing countries like India, at
the same time, there were substantial concerns that if things did not move
the way it was expected, it could also jeopardise the livelihoods of millions
in developing countries who were dependent on agriculture. While they
expected that opening up of markets in the developed world would enhance
export opportunities in lucrative markets, opening up of their markets along
with continued subsidies in developed countries could also adversely affect
their agriculture.
About 80 per cent of those suffering from poverty and hunger live in
rural areas and an overwhelming majority of them draw their livelihood
from agriculture and work either on their farm or as wage labourer (FAO,
2019). While some of them also earn from non-farm activities, agriculture
is their main source of livelihood (Castañeda et al., 2016). According to the
World Bank, the potential of agricultural growth in lifting the rural poor out
of poverty is two to four times higher than the growth of other sectors of
the economy.1 A cross-country study of developing countries has also shown
that agricultural growth is essential not only for accelerating the overall
economic growth but also for reducing poverty and inequality (Imai et al.,
2016).
It is well-understood that agriculture in most developing countries
absorbs the residual labour and in due course, the excess labour has to move
to non-farm activities for ensuring reduction in poverty. However, this will
take a long time and hence, in the short run, the growth in agriculture is
the best way to reduce poverty and inequality in the shortest possible time.
Since rural-urban wage differentials play an important role in rural-urban
migration, in the absence of agricultural growth, migrant labour in urban
areas also get wages that are marginally higher from the low rural wages and
remain almost equally vulnerable in urban areas as well. This was displayed
in India and many other countries when the 2020 lockdown due to Covid-19
led to huge urban-rural reverse migration as a large section of the migrant
workers found it difficult to sustain in cities beyond a few days (Lee et al.,
2021).
In contrast with this reality, many developing countries were and still
are net importers of food. Over the last few decades, the growth in food

1
Available at https://www.worldbank.org/en/topic/agriculture/overview, accessed
on 30 November 2021
12 India’s Agriculture and Food Exports

production has outpaced growth in population. In 1961, the global food

supply was 2,196-kilo calories (kcal) per capita per day which went up to
2,929 kcal per capita per day in 2018, a jump of about 33 per cent (FAO
Statistics). Most agricultural products being relatively non-elastic, such
growth has adversely impacted the prices of agricultural products. However,
more interestingly, during the last three decades of the twentieth century, in
developed countries, the supply growth outpaced the demand growth, while
in developing countries, the demand growth outpaced the supply growth,
even though the agricultural growth rate has been higher in developing
countries (FAO, 2002). This is reflected in the fact that a large number of
countries remain net food importers despite a majority of their population
being engaged in agriculture.
Much of this growth in the food supply has come from the growth in
productivity and intensity of cultivation rather than expansions in the area
of cultivation, which occurred only in Africa and Oceania. In 2020, the real
global food price was lower than that in 1961 (Figure 2.1). While the real
food price went up until around the mid-1970s, it declined substantially
thereafter, reaching the lowest level during the late 1980s. Unfortunately,
despite all these, more than 850 million people remain undernourished most
of whom ironically are associated with food production. This is because the
productivity growth has come largely through the use of more inputs rather
than cost-saving technology.

Figure 2.1: FAO Food Price Index (2014–16 = 100) 1961–2021

Source: FAO Statistics
Higher per hectare production or higher per labour unit production can
be achieved through excessive use of other agricultural inputs, including
fertilizers, pesticides, energy, water, expensive seeds, and intensive use of
machines. What appears as high productivity can even turn out to be low
productivity if an index of total factor productivity is considered for the
assessment of productivity. What is ignored is that productivity cannot
Global Regime for Agricultural Trade: Is it Benefitting Indian Farmers? 13

be assessed only in terms of per hectare production or per unit of labour

production. In fact, ‘higher productivity’ almost everywhere, including in
some developing country regions, is sustained by high agricultural subsidies
(Nanda, 2008, 2021). The fall in prices thus could be achieved due to high
subsidies or other types of market distortions.
This is mainly because technology adoption in agriculture fails to bring
many benefits to farmers. While it is commonly believed that technological
change brings down the cost of production, this might not be true in
agriculture. While in industry and services, technology is invented by
the producers themselves, in agriculture, technology is invented by agri-
business companies who corner the major part of the benefits. Even if the
new technology is cost-saving to some extent, the agro-business, with their
strong market power as well as the control over the technology, squeeze out
the benefits denying the farmers the potential cost advantages. Moreover,
higher production due to technology can also increase overall production
and thereby bringing down the prices adversely affecting the farmers.
Even the market conditions in agricultural products are not quite
favourable to farmers. Distortion in the market for agricultural goods is
another source of stress for the farmers. The market for agricultural products
is very often considered to be an example of a perfectly competitive market.
This is only partly true. There is a large number of farmers and there is also
a large number of final consumers for agricultural goods. However, the
farmers and final consumers do not interact in the market directly. There
is a chain of intermediaries that does not work in a competitive manner.
Thus, the final consumers of agricultural products do not get the advantage
of a competitive market. There exists a significant gap between the prices
the consumers pay and the prices the primary producers receive. This kind
of situation is not restricted to particular countries but has become a global
feature. These intermediaries abuse their monopolistic dominance in the
market for final products, while at the markets for primary products, they
abuse their monopolistic dominance. Moreover, farmers also face non-
competitive markets when they source their inputs. Some of the inputs
they procure, such as high-yielding varieties of seeds are also protected by
intellectual property rights and consequently command very high prices.
Globally, about 58 per cent of the labour force was employed in
agriculture in 1960, which fell to about 24 per cent in 2019. During the same
period, the share of agricultural value-added in Gross Domestic Product
(GDP) fell from about 34 per cent to about 10 per cent. In other words, in
1960, about 58 per cent of labour force was responsible for 34 per cent of the
GDP indicating that per labourer value addition in non-agricultural sectors
was 2.7 times higher than the same in the agricultural sector. In other words,
14 India’s Agriculture and Food Exports

the ratio of value addition per labourer in the non-agricultural sector to the
value addition per labourer in agriculture (let us call it co-efficient of inter-
sectoral inequality) was 2.7. In 2019, about 24 per cent of labour force was
responsible for about 10 per cent of the GDP indicating that per labourer
value addition in non-agricultural sectors was higher than the same in the
agricultural sector by about 2.91 times. This indicates that globally, people
engaged in agriculture as a whole have suffered inequality and the same has
worsened over time.
The situation is far worse in poorer countries. For example, in developing
countries, in 1991, about 53.21 per cent of the labour force generated
about 19.7 per cent of GDP, which fell to 32.09 per cent and 8.49 per cent,
respectively in 2019. This indicates that in developing countries, per labourer
value-added in non-agricultural sectors was about 4.64 times higher than
the same in the agricultural sector in 1991 and the disparity went up to
5.09 times in 2019. This also indicates that the deprivation of the people
engaged in agriculture not only creates inequality within countries but also
among countries, also because a larger proportion of people are engaged in
agriculture in poorer countries.
In India, of course, the situation is much better. In 1991, 63.32 per cent of
the labour force generated 27.33 per cent of GDP, which came down to 42.60
per cent and 16.68 per cent, respectively. This indicates, per labourer value-
added in non-agricultural sectors was about 4.59 times higher than the same
in the agricultural sector in 1991 and the disparity came down to 3.71 times
in 2019. It is to be noted that in 1991, the Indian situation was not very
different from average developing countries, but by 2019, such disparity has
reduced to a great extent. This is mainly due to the fact that India has seen
the large-scale expansion of informal employment in the manufacturing and
services sector where wages are marginally higher than those prevailing in
agriculture. The Indian employment guarantee programme that generates
non-agricultural jobs in rural areas might also have contributed to this
process.
Broadly speaking, in India, inter-sectoral inequality seems to have moved
in the opposite direction of the movement in the global food price index and
the measure of agricultural support (Figure 2.2). High global price, as well
as high production support to agriculture, appears to reduce inter-sectoral
inequality. However, developing countries, including India, find it difficult
to subsidise their farmers to any great extent, the way subsidies have been
defined and the provisions in the WTO agreement framed, these countries
will find it difficult to subsidise even if they have the resources and the
intentions (Nanda, 2017).
Global Regime for Agricultural Trade: Is it Benefitting Indian Farmers? 15

Figure 2.2: Indices of International Food Price, Production Support,

and Inter-sectoral Inequality in India 2001-19
Source: FAO, OECD, World Bank
Such a situation of high inter-sectoral inequality has been sustained by
high agricultural subsidies in developed countries that keep the prices of
agricultural products low even if the costs of cultivation go up. In 2020, the
real global food price was lower than that prevailing in 1961 (Figure 2.2).
While the real food price went up until around the mid-1970s, it declined
substantially thereafter, reaching the lowest level during the late 1980s.
Most developing countries find it difficult to provide huge subsidies even if
agriculture remains in crisis. As estimated by the Organisation for Economic
Co-operation and Development (OECD), in many developing countries,
production support in agriculture is negligible and even negative in some
cases.
The production support for agriculture in the case of India, as estimated
by OECD, remained negative throughout 2001-20 and went down to
the extent of -25.97 per cent in 2013. This is the situation in many other
developing countries (Nanda, 2021). As a result of this, agriculture in many
developing countries including India continues to stagnate. This creates a
situation where the share of agriculture in employment remains high as these
countries fail to industrialise quickly, the share of value-added in agriculture
declines as agriculture does not show high growth. Over the last three
decades, the share of agricultural value-added in GDP has declined from
27.33 per cent in 1991, to 16.68 per cent in 2019 (Table 2.1).
16 India’s Agriculture and Food Exports

Table 2.1: Share of Agriculture in the Gross Domestic Product and

Total Employment (%)
Country 1991 2001 2006 2011 2015 2016 2017 2018 2019
India GDP 27.33 21.62 16.81 17.19 16.17 16.36 16.56 15.97 16.68
Employment 63.32 59.10 55.08 49.26 45.26 44.56 43.93 43.33 42.60
Global GDP 18.60 13.35 11.66 11.07 10.41 10.32 10.21 9.88 9.99
Average Employment 36.05 33.24 30.73 28.24 26.16 25.71 25.31 24.76 24.33
Developing GDP 19.70 12.83 10.34 9.73 9.13 9.03 8.68 8.34 8.49
Countries Employment 53.21 47.81 43.12 38.38 34.52 33.94 33.34 32.65 32.09
Developed GDP – 1.73 1.33 1.40 1.32 1.29 1.32 1.24 1.20
Countries Employment 6.44 4.51 3.83 3.36 3.11 3.00 2.91 2.82 2.76
Source: World Bank, World Development Indicators Database

Liberalisation in the Uruguay Round

As a result of the Uruguay Round, agriculture was brought fully under
WTO disciplines. While in industrial goods, the focus was on the reduction
of tariffs, because of the prevailing situation, subsidies got substantial
importance in agricultural liberalisation. It has often been argued that
agricultural liberalisation stood on three pillars, namely, the reduction of
domestic production support, export subsidies, and tariffs. In that sense,
subsidies received greater importance than tariffs or market access in
agricultural liberalisation.
There was agreement on the reduction of the level of domestic support,
except for the exempted green box2 policies and the de minimis amounts
(amounts below a certain level). Developed countries were to reduce
Aggregate Measure of Support (AMS) by 20 per cent (de minimis 5 per cent)
while developing countries committed to reducing by 13.3 per cent (de
minimis 10 per cent). A methodology for measuring AMS was also agreed
upon. Developing countries were also allowed more flexibility through
longer implementation periods, along with lower reduction commitments.

2
In WTO terminology, subsidies in general are identified by ‘boxes’ which are
given the colours of traffic lights: green (permitted), amber (slow down, i.e. be reduced),
and red (forbidden). The Agriculture Agreement has no red box, although domestic
support exceeding the reduction commitment levels in the amber box is prohibited. Any
support that would normally be in the amber box, is placed in the blue box if the support
also requires farmers to limit production. The green box covers expenditures such as
government programmes for research, infrastructure, and building public food stocks,
as well as specific kinds of direct payments to farmers, which are supposed to be de-
linked from production. The amber box contains measures to support prices, or subsidies
directly related to production quantities. The blue box covers grants that are partially de-
linked from production requirements.
Global Regime for Agricultural Trade: Is it Benefitting Indian Farmers? 17

Developing countries, however, gave very little domestic support, if any.

Similarly, export subsidies were required to be reduced by 36 per cent by
value and 21 per cent by quantity in the case of developed nations, 24 per
cent by value and 14 per cent by quantity for developing nations. Here again,
export subsidies were primarily given by developed countries.
On market access, developed countries agreed to reduce bound duties
by 36 per cent over 6 years, while developing countries were to reduce
bound duties by 24 per cent over 10 years. Additionally, import measures
had to be eliminated or converted to tariffs (tariffied), and then subjected to
progressive reduction commitments, except for rice and some other staple
foods that were subject to minimum access commitments, that is Tariff Rate
Quotas (TRQs).

Subsidies: Gainers and Losers

Agricultural subsidies are given to agricultural producers in the form of direct
financial support or indirect non-financial support such as government
support to agricultural research programmes. According to OECD (2021), 54
countries—all OECD and EU countries, plus 12 key emerging economies—
provided on average US$ 540 billion per year agricultural support from 2018
to 2020. About 60 per cent of this was accounted for by the OECD countries
which accounted for about 90 per cent of the same when the WTO came into
being (Nanda, 2008). This is not because there has been a substantial change
in the OECD countries, but mainly because China has now become a major
supporter of agriculture with about 200 US dollars of average support per
year. Support by OECD countries has been around the US$ 300 billion all
along. There is, however, a major difference between China and the OECD
countries. About three-fourths of OECD support is provided as support to
producers directly. In China, it is just the opposite as it mainly consists of
market price support.
Given this, much of the subsidies offered by developed countries are real
subsidies, while most of the subsidies offered in China are notional. As the
estimate of market price support is obtained by comparing the domestic price
and the international price, the difference might come up due to various
reasons rather than just government support. It is also impacted by tariff
barriers and the WTO members have a legitimate right to maintain tariffs.
Moreover, such estimates can be credible when most countries do not give
subsidies and the international price does reflect the true demand-supply
situation. Thus, it is virtually impossible to get the true picture of market
price support offered by individual countries.
18 India’s Agriculture and Food Exports

Nevertheless, India’s production support for agriculture has been in the

negative for a long time (Nanda, 2021). Argentina and Vietnam are also
countries where government policy resulted in implicit taxation of farmers.
In India, however, there is extensive support for consumers, which is believed
to support agriculture indirectly. Therefore, on balance, Indian agriculture is
believed to receive some positive support. In Argentina and Vietnam, these
programmes are quite small, resulting in negative net support for agriculture.
In 1995-98, WTO member countries notified export subsidies of US$
10 billion. Developed countries accounted for about 90 per cent of the
total. This is, however, one area where substantial progress has been made.
Agricultural export subsidies have come down substantially and this is not
an area of concern anymore.
Net food-importing countries often welcome lower global food prices
maintained by agricultural subsidies in developed countries as it keeps their
food import price and bill low which they like as food price is a politically
sensitive issue in most countries. While it might appear to be a blessing in the
short run, it keeps their farmers and the country as a whole perpetually in
poverty. The global community must ensure that these countries can ensure
access to food for all but at the same time can ensure that their farmers get
reasonable returns.
In most developed countries, the proportion of the population
depending on agriculture varies between 2 to 7 per cent. Hence, unlike
most developing countries, farmers do not wield much political power.
Hence agricultural subsidies in developed countries reflect the political
power of the industry supplying seed, animal feed, fertilisers, pesticides,
and of course, the food industry, rather than the farmers (UN/ESC, 2004).
In developed countries, barring a few exceptions, per hectare production
is higher compared to developing countries, which is achieved mainly
through excessive use of agricultural inputs including fertilizers, pesticides,
energy, water, expensive seeds, and intensive use of machines. It is also a
fact that ‘higher productivity’ almost everywhere, including in some
developing country regions, is sustained by high agricultural subsidies
(Nanda, 2021).
The high-subsidy regions of the developed world, namely, Western
Europe, the US, Canada, and Japan consume more than half of chemical
fertilizers, pesticides, and commercial seeds, though they occupy less than 20
per cent of the total cropped land. Thus, shifting of agricultural production
from developed to developing countries may lead to lesser consumption of
these inputs globally. If agricultural production falls in these regions due
to a reduction in subsidies, agro-business companies would be badly hit. It
is this agro-business industry that is the major beneficiary of agricultural
Global Regime for Agricultural Trade: Is it Benefitting Indian Farmers? 19

subsidies in developed countries and not the farmers as such (Nanda,

2008). Moreover, such excessive use of agricultural inputs also harms the
environment apart from harming the poor farmers in developing countries
(Scown et al., 2020). Given this, cutting down on subsidies or diverting
them to environment-friendly agriculture will help achieve sustainable
development goals. Even if agricultural production is compromised in
the process, it is unlikely to harm food security as a substantial part of
agricultural output including food is used for non-food commercial
purposes.

Market Access in Agriculture

The global agricultural market is still highly distorted not only due to huge
subsidies but high tariffs as well. Developed country markets like the US,
EU, the Republic of Korea, and Japan are highly protected markets in this
regard. While the average tariff rate could be quite misleading, the Republic
of Korea and Norway have quite high average tariff rates as well. The average
duty can be misleading as a country can accord high protection to a few
products in which it has an interest while keeping the average rate low by
maintaining very low tariffs on products that it does not produce. Norway
seems to have the highest maximum applied Most Favoured Nation (MFN)
duty rate at higher than 1,000 per cent followed by the Republic of Korea at
887 per cent. In both countries, the applied MFN rates are the same as bound
rates meaning that they have not reduced the rates even a bit since what they
committed at the Uruguay Round which was very high.3 Other countries
that have the same MFN applied rates, as well as the maximum bound rates,
are Japan, the US, and Russia at 662 per cent, 350 per cent, and 100 per cent,
respectively.
In the EU, the applied MFN rate is marginally lower than the maximum
bound rate at 146 per cent and 152 per cent, respectively. In India, while the
applied maximum rate is at 300 per cent, the maximum applied MFN rate
is much lower at 150 per cent only. The coefficient of variation that gives a
measure of the degree of intervention (very low duty rates when it suits its
interest but a very high rate otherwise) or even arbitrariness is the highest
for the US duty rates at 341 per cent for the bound rates and 321 per cent
for the MFN applied rates, followed by the Republic of Korea and Japan
at 241 per cent and 225 per cent, respectively for their MFN applied rates
(Table 2.2).

3
Most Favoured Nation (MFN) rates are the rates of duty that a (WTO member)
country imposes on all WTO members on a non-discriminatory basis. These rates are
applicable unless it has a preferential agreement with the source country.
20 India’s Agriculture and Food Exports

Table 2.2: Tariff Structure for Agricultural Goods 2006–2020

Number
Country/ Coefficient of
Simple Average Maximum Duty of Tariff
Territory Variation
Lines
MFN MFN MFN
Bound Bound MFN Applied Bound
Applied Applied Applied
Year 2006 2020 2006 2020 2006 2020 2006 2020 2020 2020 2020
Australia 3.4 3.5 1.2 1.2 52 29 26 19 143 173 856
Brazil 35.5 35.4 10.2 10.1 55 55 35 35 31 54 1,064
China 15.8 15.7 15.7 13.8 65 65 65 65 75 85 1,169
European 15.4 11.6 15.1 11.2 264 319 229 200 147 138 2,101
Union
United States 5.2 4.8 5.3 5.1 350 350 350 350 341 321 1,705
India 114.2 113.1 37.6 34 300 300 182 150 46 81 1,527
Indonesia 47 47.1 8.2 8.7 210 210 170 150 50 213 1,369
Japan 28.4 17.8 24.3 15.8 958 662 958 662 230 225 1,951
Korea, 59.3 61.5 47.8 56.8 887 887 887 887 210 241 1,737
Republic of
Norway 137.6 138.2 61.1 40.1 >1000 >1000 >1000 >1000 121 193 1,410
Russian 10.7 13.5 9.7 100 227 100 116 116 2,703
Federation
Indonesia 47 47.1 8.2 8.7 210 210 170 150 50 213 1,369
Source: WTO ITC UNCTAD, World Tariff Profiles, various issues
If Russia has the highest number of tariff lines (2,703), the EU, Japan,
and the Republic of Korea are not far behind at 2,101, 1,951, and 1,737,
respectively. Even the US has quite a large number of tariff lines at 1,705.
Developing countries like Brazil, China, India, and Indonesia have a much
smaller number of tariff lines. The number of tariff lines not only indicates
how complicated a tariff structure a country has, but it also has an impact on
the estimate of the average tariff rate. Since this average is a simple average
here, the rate of duty for a large number of tariff lines that may not be relevant
for the country can be set to zero or near zero which will substantially lower
the average tariff estimate.
Most developed countries (barring exceptions like Norway) have
committed to lower tariffs on agricultural goods as they supported their
farmers through subsidies rather than import tariffs. Nevertheless, they had
to reduce their tariffs, though they still maintain high tariffs on some goods.
What is important to note is that during the Uruguay Round of negotiations,
all countries including the developing countries accepted the commitment to
reduce subsidies as well as tariff barriers. Accordingly, developing countries
have also accepted bound rates of tariffs on agricultural goods. India’s applied
rates for agricultural goods are much lower than the bound rates.
Global Regime for Agricultural Trade: Is it Benefitting Indian Farmers? 21

Impacts of World Trade Organization Agreement on Agriculture

The share of agricultural products in total merchandise exports fell from 8.1
per cent in 1995 to 7.3 per cent in 2019. This is primarily due to much higher
growth in the trade of non-agricultural products, which was quite natural as
demand for non-agricultural products in general increased at higher rates
compared to the demand for agricultural goods. Between 1995 and 2019,
average food prices rose by about 24 per cent, reversing the earlier trend
when food prices saw a substantial decline. However, it is difficult to say
whether WTO had anything to do with it or it was essentially due to a rise in
global demand for agricultural goods led by China as it became the second-
largest importing nation with a share of 12.7 per cent of world imports of
agricultural goods compared to just 3.6 per cent share in 1995 (WTO 2020).
India was not among the top ten exporters of agricultural goods in 1995,
but it emerged as the ninth largest exporter of agricultural goods in 2019.
However, it should also be noted that India was also not among the top ten
importers of agricultural goods in 1995, but it emerged as the ninth largest
importer of agricultural goods (WTO 2020). Hence, it is difficult to say
whether India has benefited from the global agricultural trade regime under
the WTO. The only thing that can be said is that the Indian agricultural
sector has become more globalised over time. However, this ranking is based
on treating the EU as one trader. If all European countries are considered
separately, then India does not enter the top ten clubs as several European
countries export and import more compared to India. Even tiny Belgium
exports and imports substantially more than India.
During 1995-2019, global exports of agricultural goods increased from
US$ 446.12 billion to US$ 1,459.05 billion–an increase by 3.27 times. During
the same period, Indian exports of agricultural goods increased from US$
5.35 billion to US$ 30.99 billion–an increase by 5.79 times (WTO 2020).
Thus, it might appear that India has gained substantially. However, during
the same period, Indian imports of agricultural goods also increased from
US$ 2.06 billion to US$ 22.60 billion marking an increase by 10.97 times.
Hence, there is no cause for celebration for India.
Region wise, North America held the highest share in exports of
agricultural products with 28.8 per cent in 1995. But in 2019, Asia took the
place of North America with almost the same share the latter had in 1995
with 28.7 per cent. Europe also saw a decline in its share from 22.4 to 20.3
per cent over the same period. South and Central America also saw a rise
in share from 14.5 per cent to 17.6 per cent, almost similar to Asia in terms
of gain in percentage points. The share of the African region remained the
same at 5.1 per cent.
22 India’s Agriculture and Food Exports

In terms of imports, Europe’s share of world imports of agricultural

products went down from 26.2 per cent in 1995 to 17.7 per cent in 2019–a
loss of 8.5 per cent of the share. The share of South and Central America also
decreased marginally, by 1.2 percentage points. The shares of all other regions
increased. Asia’s share in global imports showed distinct growth–from 34.9
per cent to 39.3 per cent (WTO 2020). The share of North America also saw
an increase from 15.7 per cent to 19.5 per cent–with all three countries in the
region contributing to the growth. In Asia, the import growth was primarily
led by China with its share increasing from 3.6 per cent in 1995 to 12.7 per
cent in 2019, while the share of Japan witnessing a massive decline from 13.3
per cent in 1995 to 5.6 per cent in 2019. While the share of India witnessed a
modest growth, the Korean share declined marginally over the same period.
Hence, it can be reasonably argued that the rise in global trade in
agricultural goods was fuelled mainly by Chinese economic growth as both
Europe and Japan saw a massive decline in their share. The decline in the share
of Europe was largely because of trade diversion due to European integration
as the intra-EU import rose from US$ 154.17 billion in 1995 to US$ 405.7
billion in 2019. Thus, growth in agricultural trade was predominantly a
South-South phenomenon rather than a North-South one, confirming that
the WTO played a minimal role in the process.
The fact that the share of Africa in world exports remained the same
at 5.1 per cent while its share in world imports increased substantially
from 5.3 per cent to 7.0 per cent indicates that it has seen import surges
in developing countries during the implementation process of AoA. One
sided-liberalisation of agriculture, namely, reduction of tariff barriers but
no reduction of subsidies resulted in a negative impact on food security,
livelihood, and rural development of poor countries in Africa.
Moreover, while traditional trade barriers in agriculture such as tariffs
continue to decline, the use of technical and regulatory barriers is on the
rise. In recent years, Sanitary and Phytosanitary (SPS) measures and
Technical Barriers to Trade (TBT4) have emerged as the greatest threat to
poor countries’ exports. By their very nature, both of these agreements may
result in restrictions on trade. All governments accept the fact that some
trade restrictions may be necessary and appropriate to ensure food safety
and animal and plant health protection; however, developed countries are
increasingly and arbitrarily using these measures.

4
Sanitary and Phytosanitary (SPS) measures are imposed by countries to protect
human, animal and plant health by preventing entry of harmful pathogens and invasive
alien species, while Technical Barriers to Trade (TBT) are used to ensure safety in general
and also to ensure compatibility of technical standards prevailing in the country.
Global Regime for Agricultural Trade: Is it Benefitting Indian Farmers? 23

Doha Round: The State of Play

In the Doha Round of trade negotiations, agricultural negotiations became
an essential component of WTO negotiations. Ultimately, agriculture
proved to be the dealmaker at Doha when the EU compromised its stance
on agriculture subsidies. The Declaration recognised the progress in
negotiations in agriculture mandated by the Uruguay Round Agreement and
proposed comprehensive negotiations aimed at substantial improvements in
market access to phase out all forms of export subsidies and substantially
reduce trade-distorting domestic support measures. However, the EU also
got its pound of flesh as it got stronger language on the environment and the
Singapore issues. The Cancun Ministerial Meeting, first after the launch of
the new round in 2001, failed because of the stand-off between the EU and the
newly formed G20 alliance over farm subsidies but also due to the Singapore
issues.5 In the so-called July Package, however, commitment to liberalise
agricultural trade could be made while dropping three of the Singapore
issues(competition policy, investment and government procurement), which
developing countries never wanted.
At the Hong Kong Ministerial Conference, the situation was no
different. A fierce tri-partite battle involving the EU, the US, and the G20,
was witnessed over the end date for the elimination of export subsidies
and disciplining food aid. However, WTO members did not want to repeat
Cancun and hence put together some tentative arrangements. In effect, the
stalemate was postponed. After the Hong Kong Conference, however, the
focus became more on market access, compared to subsidies. As developing
countries may have to face more obligations, they gave more emphasis on
Special Products (SPs) and Special Safeguard Mechanism (SSM).
The negotiations on agriculture took a completely new turn afterwards,
particularly in the run up to the Bali Ministerial Conference in 2013. With
time it became quite apparent that the method of estimating the AMS was
quite problematic. It is found by comparing the current price with the
international reference price for that product that prevailed during the base
year from 1986 to 1988. The reference price itself was questionable as the
prices of staple crops during 1986 and 1988 were among the historically
lowest and were highly subsidised. In 2019, food prices were 24 per cent
above their respective level in 1995 (WTO, 2020). Costs of agricultural
inputs have also increased substantially since 1988. Hence sticking to
5 This G20 was different from the current G20 that was formed after the global
financial crisis of 2007. It was a coalition of developing countries on agriculture and the
members were Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, India, Indonesia,
Mexico, Nigeria, Pakistan, Paraguay, the Philippines, South Africa, Thailand, Tanzania,
Uruguay, Venezuela, and Zimbabwe.
24 India’s Agriculture and Food Exports

an international reference price based on 1986-88 prices is quite absurd.

Moreover, while developing countries can keep AMS up to 10 per cent,
compared to only 5 per cent for developed countries, developing nations
have more restrictions in this regard. For developed countries, the limit is for
all crops taken together enabling them to support individual crops at a much
higher level, for developing countries, the limit is for both aggregates as well
as individual crops.
Realising that these provisions can endanger agriculture and food
security, particularly in developing countries who have followed a different
kind of policy environment to support agriculture and now would find it
difficult to switch to a system akin to the US and other developed countries
so that much of their support can be considered as green box type, India
and other developing countries demanded reform in these provisions. In
Bali Ministerial Meeting (2013), keeping all other issues aside, the WTO
members decided to proceed with the trade facilitation agreement. However,
raising a strong objection, India refused to sign a trade facilitation agreement
without addressing the domestic support issue. Eventually, India was able
to extract a peace clause of 4 years with respect to India or other countries
potentially violating provisions on domestic support.
The next year, the government changed in India and it took a harder
stance on the issue and refused to ratify the trade facilitation agreement unless
the peace clause was extended to an indefinite period from 4 years until the
time the issue of domestic production support was not amicably settled at the
WTO. India’s demand was finally accepted and the indefinite peace clause
was officially accepted at the Nairobi Ministerial Conference in 2015. The
Nairobi meeting also adopted a few more decisions on agriculture. It decided
to fully eliminate export subsidies and create a mechanism that would allow
developing countries to temporarily increase tariffs on agricultural products
in cases of import surges or price declines. A decision was also taken to find a
permanent solution to the AMS issue to enable countries to buy agricultural
products and administer prices to build public stockholding and ensure food
security.
Since then, discussions on agriculture have been at a low ebb. There
has been some progress recently after the Chair of agriculture negotiations,
Ambassador Gloria Abraham Peralta, tabled an ‘initial draft text’ at the end
of July 2021. The text focuses on the so-called trade-distorting subsidies. It
thus ignores the reality that those who subsidises their agriculture heavily are
also large exporters yet their subsidies fall mostly under the green box. There
is also ample evidence that green box subsidies are also trade-distorting. In
the absence of a review of the green box subsidies, justice for developing
countries will remain elusive.
Global Regime for Agricultural Trade: Is it Benefitting Indian Farmers? 25

As regards market access, the proposal is essentially based on the

submission of a few WTO members, which seeks to introduce enhanced
‘transparency and predictability in the application of … applied tariff rates’,
or the actual tariffs. Currently, WTO rules are based on maximum or bound
tariffs. The applied tariffs for most developing countries are much lower
than the bound tariff rates. This offers them a policy space that enables them
to raise tariffs during import surges. Shifting the focus from bound tariffs to
applied tariffs would change the rules of the game and can have far-reaching
implications.
In agriculture, Public Stockholding for Food Security Purposes (PSH)
is the most crucial issue for India. The AoA considers providing subsidised
foodstuffs to the poor as market-distorting and, therefore, implementing the
National Food Security Act (NFSA) in 2013 could mean that might breach
the 10 per cent limit of production subsidy. Two proposals that have been
included in the text can be problematic for India. The first is that a developing
country like India would have to limit its total procurement to 15 per cent
of the domestic production of ‘traditional staple food crops’ to implement
public stockholding programmes for food security purposes. This would
make it impossible for India to implement its Food Security Act. It would
also mean that it would be impossible to guarantee minimum support prices
for a range of crops that Indian farmers are demanding. Thus, the best way
to address this concern of India would be to bring this subsidy under the
green box. The second proposal states that countries maintaining public
food stocks must not allow exports from such stocks. The second proposal
was tabled by the G-33, a developing country grouping in which India has
played a major role in the past. So now it would be impossible for India to
oppose it. But implementing this proposal can also be challenging if India
has to guarantee minimum support prices.

Conclusions
For most developing countries, the nature and peculiarity of the agricultural
sector and its role in food security pose a huge challenge to deal with the
policy issues surrounding agriculture. While high food price can pose a
serious challenge to food security, the fact that the majority of the poor draw
their livelihood from agriculture, low food prices can also create vulnerability
to people engaged in agriculture–both owner-farmers and wage earners.
Food security concerns also prevent from switching over to non-food crops
and import food that might be available in the global market generally at
cheaper prices, but often subject to high volatility. Often farmers are of
course constrained by a lack of technical knowledge and adequate market
information.
26 India’s Agriculture and Food Exports

Given this, the AoA signed in 1994 along with several other agreements
of WTO was expected to herald a new era in agricultural trade and bring
much relief and prosperity to commodity-dependent countries, particularly
because, until the Uruguay Round of GATT, agriculture was virtually out
of the global trade framework. The new agreement gave a comprehensive
treatment to agriculture as it dealt with tariffs on agricultural commodities
as well as the subsidies that have impacted agricultural trade and prices.
However, after more than a quarter of a century since the signing of
the Agreement, agriculture remains highly subsidised in most developed
countries making it extremely difficult for developing countries including
India to access their markets. Moreover, the way subsidies have been defined,
and the way the related commitments have been framed, has created
problems for countries like India even though the subsidies that these
countries provide are quite modest. Tariff reduction commitments of most
developed countries are also quite low, and most of them have also stuck
to the bound levels of tariffs for key commodities. On the contrary, most
developing countries now maintain tariffs that are now much lower than
their bound levels.
Doha Round was meant to address some of the concerns of developing
countries. However, there has been relatively little discussion on agriculture,
and WTO has been adopting and negotiating new issues yet the issues that
remain pending for decades are not discussed. Trade facilitation came much
later on the table and WTO already has an agreement on it. A similar approach
can be seen even now. Developed countries are not showing much interest
in the Doha Round including agriculture, but want to move fast on newer
issues like e-commerce and fisheries subsidies. The initial text prepared by
the Chair of Agriculture Negotiations also does not inspire much confidence,
and the proposals put forward, if finally adopted, will bring new challenges
for India.

References
Andrés Castañeda, Dung Doan, David Newhouse, Minh Cong Nguyen, Hiroki
Uematsu, and João Pedro Azevedo, ‘Who Are the Poor in the Developing
World?’, Policy Research Working Paper 7844, World Bank, 2016.
D. Grigg, ‘The World’s Agricultural Labour Force 1800-1970’, Geography, 1975,
60(3): 194-202.
Dale Hathaway, ‘Agriculture and the GATT: Rewriting the Rules’, Policy Analysis
in International Economics, Washington, DC, Institute for International
Economics, 1997.
FAO, ‘World Agriculture: Towards 2015/30’, Rome: Food and Agriculture
Organization, 2002.
Global Regime for Agricultural Trade: Is it Benefitting Indian Farmers? 27

FAO, ‘The Role of Agriculture and Rural Development in Achieving SDG 1.1’,
Paper for presentation at the United Nations Expert Group Meeting on
Eradicating Rural Poverty to Implement the 2030 Agenda for Sustainable
Development, 27 February to 1 March 2019, UNECACC-AA.
Jean N. Lee, Mahreen Mahmud, Jonathan Morduch, Saravana Ravindran, and
Abu S. Shonchoy, ‘Migration, Externalities, and the Diffusion of COVID-19
in South Asia’, Journal of Public Economics, 2021, 193
Katsushi Imai, Wenya Cheng, and Raghav Gaiha, ‘Agricultural Growth, Poverty
and Inequality in Developing Countries’, Development, 2016, 58(2-3):
230-36.
Muchkund Dubey, ‘Accessing Resources from Global Market: Geopolitical
Challenges and Strategies’, in Nitya Nanda and Swati Ganeshan (eds.), India’s
Resource Security: Trade, Geopolitics and Efficiency Dimensions, New Delhi:
TERI Press, 2018, 7-12.
Murray W. Scown, Mark V. Brady, and Kimberly A. Nicholas, ‘Billions in Misspent
EU Agricultural Subsidies Could Support the Sustainable Development
Goals’, One Earth, 2020, 3(2): 237-50.
Nitya Nanda, ‘Agricultural Reforms in India: Need for a Unique Model’, Economic
and Political Weekly, 2021, 56(8): 25-29.
Nitya Nanda, Expanding Frontiers of Global Trade Rules: The Political Economy
Dynamics of the International Trading System, London and New York:
Routledge, 2008, 224.
Nitya Nanda, ‘WTO and Food Security: Challenges Ahead’, Economic and
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OECD, Agricultural Policy Monitoring and Evaluation 2021: Addressing the
Challenges Facing Food Systems, Paris: OECD, 2021.
UN/ESC, Economic, Social and Cultural Rights: The Right to Food, Report
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Agriculture (AoA), Background Paper for WTO Agricultural Symposium,
2-3 December 2020, Note by the Secretariat, Geneva: WTO, 2020.
CHAPTER 3

Trajectory of Indian Agricultural Exports:

Competitiveness, Diversification, and
Growth Linkages
Raka Saxena*, Rohit Kumar**, Sonia Chauhan** and Raman M.S.**
* Principal Scientist, ICAR-National Institute of Agricultural Economics and Policy
Research, New Delhi. E-mail: [email protected]
** ICAR-National Institute of Agricultural Economics and Policy Research, New Delhi

Background
The role of agricultural trade in achieving economic growth, alleviating
poverty, and achieving food security is incalculable for developing countries
like India. However, to safeguard the food security of the continuously
rising population of the country, it is a prime agenda to ensure an efficient
and sustainable domestic production system. The country has attained
self-sufficiency in the majority of the crops by raising agricultural output.
The increasing output is creating huge surpluses in some commodities,
which need to be effectively channelised to alternative destinations. This
is extremely important in the regime where all government policies and
agendas are directed towards enhancing the farmers’ income. The target of
doubling farmers’ income can be achieved by providing an efficient trading
environment that will promote, not only competition within the nation but
also provide opportunities to the farmer to draw benefits in international
markets. Besides, policies are required to economically divert the surplus
produce within the country towards the international markets enhancing the
farmers’ income.
The importance of India in the international market can’t be denied.
Over the years, India has developed export competitiveness in certain
specialised products (ITA, 2021). Ever since the economic reforms began
in 1991, India has maintained its position as a net exporter of agricultural
products exporting around Rs. 2.52 lakh crore worth of agricultural
products in Financial Year (FY) 2019-20. With the changing dietary pattern,
a significant change in the composition of the exported agricultural products
Trajectory of Indian Agricultural Exports 29

has been observed. There has been a sharp increase in the export of Indian
marine products over the last few years and its share of total agricultural
exports has increased from 14.5 per cent in 2015-16 to 19 per cent in 2019-
20 (GOI, 2021). Besides, there has been a rising demand for Indian Basmati
rice, non-basmati rice, spices, and sugar as evident by their rising share of
the total agricultural export. It makes evident the rising demand for Indian
agricultural products. This accentuates the need for a close examination of
export diversification across commodities and geographies.
Despite the increasing trends in agricultural exports, we have not
been able to tap the desired potential. There exists huge untapped export
potential, which could be tapped through appropriate interventions. It has
been reported that export in developing countries is highly responsive to
the quality of transport facilities, availability of trade-related infrastructures
(Moïsé et al., 2013). The role of policies targeting constraints related
to governance, infrastructural facilities, and education for improving
agricultural trade performance has been highlighted by many researchers
(Moïsé et al., 2013). Further, trade-growth linkages have attained due
attention in global trade research. Few studies have been carried out to
examine the Export-led Growth (ELG) and have established the hypothesis
that it depends on the country’s stage of development and its participation
in trade. A study conducted in the United Arab Emirates (UAE) validates
a bi-directional causality between manufactured exports and economic
growth in the short-run and the Growth-Led Exports (GLE) in the long run
(Kalaitzi and Cleeve, 2018). Likewise, it has been estimated for Nigeria that a
unit increase in agricultural exports would bring a more than proportionate
increase in the real gross domestic product (Gbaiye et al, 2013). Besides, the
empirical support for ELG can be deducted from the success of the four East
Asian Tiger economies (South Korea, Hong Kong, Singapore, and Taiwan)
(Palley, 2012).
Considering these, this study provides a snapshot of Indian agricultural
exports. The study has examined the trends and composition along with
the performance of agricultural exports. It has also focused on geographical
diversification to understand the export dynamics. In addition, the study
drew inferences about the causality and export-growth relationships. The
inferences would be useful in developing appropriate strategies for better
targeting and managing Indian agricultural exports.

Data and Approach

The study focuses on examining the trends and growth in major agricultural
exports of the country. The study also computed diversification indices for
30 India’s Agriculture and Food Exports

the selected commodities. Also, the study examined export-growth linkages.

This section discusses the data sources and approach followed for studying
these important dimensions pertaining to agricultural exports.

Data
This chapter has sourced its data from the United Nations (UN) Comtrade
database at HS 02 and HS 04 digits from 1988 to 2019. The detailed analysis
was carried out for major agricultural commodities (including livestock and
fisheries) based on the export values and shares in agricultural exports. The
ELG and GLE hypothesis was examined for major crops based on their share
in agriculture at HS 04 level classification. The detailed list of commodities
covered for analysis is given in Appendix 1.

Examining the Structural Breaks

The study identified the structural breaks in the Indian agricultural exports
from 1990-91 to 2019-20 (post-economic reform). Tests for parameter
instability and structural change have been an important part of time series
and regression analysis. Initially, Chow (1960) tested for regime change
at a time series using an F-statistic. Quandt (1960) modified the Chow
framework to consider the F-statistic with the largest value over all possible
break dates. Andrews (1993) and Andrews and Ploberger (1994) derived the
limiting distribution of the Quandt and related test statistics. Bai (1997) and
Bai and Perron (1998, 2003) further extend the Quandt-Andrews framework
by allowing multiple unknown breakpoints. We applied global information
criteria to estimate breakpoints using global minimisers of the sum of squared
residuals. The Liu, Wu, and Zidek (LWZ) (1997) and Schwarz Criterion (SC)
criteria were chosen as the selection criterion for the optimum number of
breaks. According to Bai and Perron (2003), LWZ (1997) method performs
better than the other two criteria under the no-break null hypothesis.

Export Competitiveness
The Revealed Comparative Advantage (RCA) index was used to examine
export competitiveness. This is driven by economic factors, operational
change, enhanced global demand, and trade concentration (Batra and Khan,
2005). By using Balassa’s (1965) index, RCA for the selected commodities
was calculated as follows:
Trajectory of Indian Agricultural Exports 31

Where,
RCAij = Revealed Comparative Advantage for ith country in jth product,
Xij = Value of export of jth agricultural product from ith country,
∑k(j=1) Xij = Value of agricultural export of ith country,
Xwj = Value of global export of jth product, and
∑k(j=1) Xij = Value of global agricultural exports
RCA value lies between 0 to ∞. An ith country is said to have a
comparative advantage in the production of jth product if the value of RCAij
exceeds ‘1’.

Export Diversification Index

To reap the benefits of trade, a country must expand its export basket in
terms of the goods offered and also markets accessed. A country must not
always rely on a set of countries only to export the product. In case of a
volatile policy environment in the importing nation, the exporting country
may incur a huge loss. So, a country must continue to keep adding new
markets for the products. Diversification into new primary export products
is generally viewed as a positive development. Hence, Export Diversification
Index (DXI) reveals the export strength of a country in terms of markets and
products, both. The DXI for India is defined as follows:
DXIj = (sum | hij – xi |)/2
Where hij is the share of ith commodity in the total exports of jth
country and xi is the share of the commodity in world exports. The related
measure used by the United Nations Conference on Trade and Development
(UNCTAD) is the concentration index or Hirschman (H) index, which is
calculated using the shares of all selected agricultural products in a country’s
exports:
Hj = sqrt (sum (xi / Xt)2)
Where xi is j country’s exports of ith product and Xt is jth country’s total
th

exports. The lower the index, the less concentrated are a country’s exports.

Examining the Growth Linkages

The study attempted to establish the causal relationship between major
agricultural exports and economic growth of the country. It employed
systematic time series analysis to draw reliable insights for policy inputs. The
detailed approach is illustrated below:
Checking the Stationarity of the Data
The first step in the times series analysis, before testing for co-integration and
causality, is to examine the stationarity of each time series selected for the
32 India’s Agriculture and Food Exports

analysis. Augmented Dickey-Fuller (ADF) unit root test (Dickey and Fuller,
1979) was considered to examine the stationarity. A time series is said to be
‘stationary’ if a constant mean and constant variance with its Autocorrelation
Function (ACF) is not significantly different from zero through time. The
test is applied for the parameter r in the auxiliary regression.
D1yt = ryt–1 + a1 D1yt–1 + et
Where, D1 denotes the differencing operator, i.e. D1yt = yt – yt–1.
The relevant null hypothesis is r = 0, i.e. the original series is non-
stationary and the alternative is r < 0, i.e. the original series is stationary.
Vector Autoregressive Process
Let us consider a univariate time series, arising from the model
yt = υ + ϕ1 yt–1 + ϕ2 yt–2 + ... + ϕk yt–k + ut, ut ~ IN (0, σ) ...(1)
Where, ut is a sequence of uncorrelated error terms and j, j = 1, 2, ... k is
the constant parameters. This is a sequentially defined model; yt is generated
as a function of its past values. This is a standard autoregressive framework
or AR (k), where k is the order of the auto-regression. If a multiple time
series yt of n endogenous variables is considered, the extension of (1) will
give the Vector Autoregressive (VAR)(k) model (VAR model of order k), i.e.
it is possible to specify the following data generating procedure and model
yt as an unrestricted VAR involving up to k lags of yt and can be expressed
as follows:
yt = υ + A1 yt–1 + A2 yt–2 + ... + Ak yt–k + ut, ut ~ IN (0, Σ) ...(2)
Where, yt = y1t, y2t, ..., ynt)' is (n × 1) random vector, each of the Ai is an
(n × n) matrix of parameters, υ is a fixed (n × 1) vector of intercept terms.
Finally, ut = (u1t, u2t, …, unt) is a n-dimensional white noise or innovation
process, i.e. E(ut) = 0, E (ut u't) = Σ and E (ut u's ) = 0 for s ≠ t. The covariance
matrix Σ is assumed to be non-singular. Using lag operator (L), (2) can be
written as follows:
(In – A1L – … – Ak Lk) yt = υ + ut
The process yt is said to be stable if the roots of the polynomial,
|In – A1L – … – Ak Lk| = 0 lie outside the complex unit circle, i.e. have a
modulus greater than one.
Examining Long-Term Causality
To conduct the Granger causality test, a VAR model is estimated, by
including the optimal lag length. VAR Granger Causality/Block exogeneity
wald test was applied, to verify the causal relationship between the variables.
According to Granger (1969), X is said to Granger cause Y, if the past and
the present value of X helps to predict Y and vice versa, which examines
Trajectory of Indian Agricultural Exports 33

how one variable explains the latest value of another variable. Accordingly,
if a variable Y is Granger caused by variable X, it means values of variable
X helps in predicting the values of variable Y and vice-versa. The causality
relationship among rice export, tea cotton, cotton yarn, agriculture Gross
Value Added (GVA), pepper, onion, groundnut, fennel, coriander, and cumin
exports were tested using the VAR Granger causality procedure. ELG and
GLE hypothesis were based on the direction of a causal relationship between
economic growth which is represented by total GVA and earlier mentioned
agricultural exports.
Co-integration Analysis
Co-integration depicts the long-term relationship between the variables.
It means that even if two or more series are non-stationary, and become
stationary after differencing of the same order, they are said to be co-
integrated. Johansen’s (1988) multivariate co-integration approach was used
to examine co-integration between the fennel, coriander and cumin, onions,
pepper, rice, tea, and the total GVA.
Johansen’s co-integration assumes that the series are integrated of the
same order. If the series are all integrated of order d, i.e. I (d) and a vector
β can exist so that the series will be linearly combined to produce residuals
integrated of order zero I (0), i.e. residuals that are stationary, then there
exists a long-run relationship among the variables. The long-run relationship
could be stated as follows:
β1X1t + β2X2t + β3X3t + β4X4t + β5X5t = 0
Where X1t, X2t, X3t, X4t, and X5t stand for selected variables for
integration test in time period ‘t’. Johansen (1988) and Johansen and Juselius
(1990) described two separate methods, namely, trace statistics and maximal
Eigenvalue test to find out the number of co-integrating vectors. The
maximal Eigenvalue test is the likelihood ratio test for the null hypothesis,
presence of ‘r’ co-integrating vector against the alternative hypothesis r + 1
co-integrating vector which can be stated as follows:
λmax (r, r + 1) = –T ln(1 – λr + 1)
The second procedure is also based on the likelihood ratio test. Trace
statistic verifies the increasing tendency of the trace as a result of the addition
of more Eigenvalues beyond the rth vector. The null hypothesis based on λ
trace verifies if the presence of co-integration vector is less than or equal
to ‘r’ against the alternative hypothesis, the presence of more than ‘r’ co-
integrating vectors. It can be estimated as follows:
λtrace = T
Where, λr +1 … λm are m–r smallest estimated Eigenvalue.
34 India’s Agriculture and Food Exports

Structural Breaks in Agricultural Exports

Multi-structural breaks in agriculture exports from 1990-91 to 2019-20
were obtained from the global information criterion developed by Bai and
Perron (2003). We selected a maximum of five breaks for break-test options
to identify the multiple breaks in the agricultural exports from 1990-91 to
2019-20. Both, Schwarz and the LWZ information criteria suggested two
breaks (2006-07 and 2011-12) during the period. The selection of optimum
breaks was based on the lowest Schwarz and LWZ criterion values (Table
3.1). Though 1995 did not emerge as a breakpoint in the statistical analysis,
it was selected on account of strategic reasons as a structural breakpoint
as the country joined the World Trade Organization (WTO) in this year.
Finally, the study confined to three major structural breaks with four phases
in agriculture exports, the first was from 1990-91 to 1994-95, the second was
from 1995-96 to 2005-06, the third was from 2006-07 to 2010-11, and the
fourth was from 2011-12 to 2019-20. (Figure 3.1)
Table 3.1: Multi-structural Breaks in Agriculture Exports after Economic Reforms
Multiple breakpoint tests
Compare information criteria for 0 to M globally determined breaks
Date: 11/24/21 Time: 11.53
Sample: 1 30
Included observation: 30
Breaking variables: C
Break test options: Trimming 0.15, Max. breaks 5
Schwarz criterion selection breaks: 2
LWZ criterion selected breaks: 2
Sum of Sq. Schwarz* LWZ*
Breaks # of Coefs. Log-L
Resids. Criterion Criterion
0 1 2.73E+11 –386.5202 23.04351 23.09435
1 3 2.28E+10 –349.3021 20.78905 20.94522
2 5 9.95E+09 –336.8559 20.18605 20.45303
3 7 8.18E+09 –333.9315 20.21783 20.60209
4 9 6.70E+09 –330.9227 20.24400 20.75210
5 11 5.95E+09 –329.1545 20.35287 20.99592
* Minimum information criterion values displayed with shading
Estimated break dates:
1: 22
2: 17, 22
3: 13, 18, 22
4: 13, 18, 22, 27
5: 6, 14, 18, 22, 27
Source: Computed by Authors
Trajectory of Indian Agricultural Exports
Agricultural exports (INR crore) 35

Annual growth (%)

Figure 3.1: Delineation of Phases in Agricultural Exports
Source: Based on the data from Directorate of Economics and Statistics

Trends in Agricultural Trade

India has always been a net exporter in the case of agriculture despite the
initial phases of attaining self-sufficiency in most of the commodities. The
exports of agricultural commodities picked up after 1970-71; however, a kick
start was attained only after 1994-95 with the launch of global trade reforms
and trade integration with the establishment of WTO. Over the last 25 years
since India’s liberalisation, foreign trade has expanded multifold and seen
significant structural shifts in product mix as well as geographic spread.
Liberalisation in trade policies related to easing of several trade restrictions.
Reduction in tariff levels across different products along with other trade
reforms has assisted the growth of foreign trade, especially in the first two

Figure 3.2: Contribution of Agricultural Trade to Total Trade

Source: Based on the data from Directorate of Economics and Statistics
 36

Table 3.2: Trends in Agricultural Trade of India

Net
Agriculture Total Agriculture Agriculture Total Agriculture
Net Trade Agricultural
Years Exports Exports Exports to Total Imports Imports Imports to Total
(Rs crore) Trade (Rs
(Rs crore) (Rs crore) Exports (%) (Rs crore) (Rs crore) Imports (%)
crore)
1965-66 335 806 42 536 1,394 38.43 –589 –201
1970-71 565 1,535 37 604 1,642 36.80 –107 –39
1975-76 1,686 4,042 42 2,142 5,265 40.68 –1,223 –457
1980-81 2,376 6,683 36 2,300 12,549 18.32 –5,866 76
1985-86 3,271 10,895 30 3,889 19,657 19.78 –8,763 –618
1990-91 6,013 32,527 18.49 1,206 43,171 2.79 –10,644 4,807
1995-96 20,398 1,06,353 19.18 5,890 1,22,678 4.8 –16,325 14,508
2000-01 28,657 2,01,356 14.23 12,086 2,28,307 5.29 –26,950 16,571
2005-06 45,711 4,56,418 10.78 15,978 6,60,409 3.26 –2,03,991 29,733
2010-11 1,13,047 11,36,964 10.28 51,074 16,83,467 3.41 –5,46,503 61,973
2015-16 2,15,396 17,16,378 12.55 1,40,289 24,90,298 5.63 –7,73,920 75,107
2017-18 2,51,563 19,56,514 12.86 1,52,095 30,01,033 5.07 –10,44,514 99,469
2018-19 2,74,571 23,07,726 11.90 1,37,019 35,94,674 3.81 –12,869 1,37,551
2019-20 (P) 2,52,976 22,19,854 11.40 1,47,445 33,60,954 4.39 –11,41,100 1,05,530
Source: Compiled by authors from Directorate of Economics and Statistics
P: Provisional
India’s Agriculture and Food Exports
Trajectory of Indian Agricultural Exports 37

decades of post-liberalisation. India’s total exports increased from Rs 0.32

lakh crore in 1990-91 to Rs 22.19 lakh crore in 2019-20, the total imports
also enhanced from Rs 0.43 lakh crore in 1990-91 to Rs 33.60 lakh crore in
2019-20 (Table 3.2). The composition of exports has gone substantial changes
during post-liberalisation. India’s export basket is now diversified with non-
traditional items and differential products are also gaining importance.
Agricultural exports and imports have also increased considerably during
the last 25 years. There can be seen marked surge both in the export and
import of agricultural commodities after 2005-06. The absolute agricultural
trade has expanded and also the share of agricultural exports has increased
in recent years (Figure 3.2).

Agricultural Exports
This study includes 17 agricultural commodities, namely, the meat of bovine,
crustaceans, molluscs, onions, tea, spices (pepper fennel, coriander, cumin),
rice, groundnuts, other oil seeds and oleaginous fruits, vegetable saps, extracts
fixed vegetable fats and oils, cane or beet sugar, cotton, cotton yarn, and
cotton fabric. Cereals particularly rice, cotton, fish and crustaceans, coffee,
tea, and spices hold a major share in agriculture exports. Furthermore, meat
and meat offal have increasingly found a place in India’s basket of agricultural
exports. Since 2001, cotton and cereals have been the highest contributors
to India’s export of agricultural goods. The performance of cereal exports
from India is more or less stable due to the prevalence of rice as the major
exported product in the group. It has been observed that the share of exports
of cotton has declined from 25 per cent in 2001 to less than 20 per cent in the
last 5 years. Meat and edible meat offal and fish and crustacean exports have
performed well. The share of meat and edible meat offal has increased from
3.2 per cent in 2001 to approximately 9 per cent in 2018. India is the largest
exporter of crustaceans in the world followed by Ecuador. The export shares
of coffee, tea, and spices were quite stable from 2001 to 2018.
India is the second-largest producer of rice and wheat, globally. India’s
export policy for cereals has remained unstable due to their contribution to
the country’s food security. The major export destinations for Indian cereals
are Bangladesh, Nepal, Pakistan, Saudi Arab, and the UAE. Rice has always
been the main exported cereal crop of India. India’s quest for expanding the
footprint of cereals exports through exploring new opportunities in countries
or markets has started to yield results. In terms of rice (basmati as well as
non-basmati) exports especially in 2020-21, India shipped non-basmati
rice to nine countries, namely, Timor-Leste, Puerto Rico, Brazil, Papua New
Guinea, Zimbabwe, Burundi, Eswatini, Myanmar, and Nicaragua, where
exports were carried for the first time or earlier the shipment was smaller in
38 India’s Agriculture and Food Exports

volume. The total volume of export of rice to these nine countries was only
188 metric tonne and 197 metric tonne in 2018-19 and 2019-20, respectively,
while the volume shipment rose to 1.53 lakh tonne in 2020-21 (Ministry of
Commerce & Industry, 2021).
India’s overall exports of cereals have seen a sharp spike in 2020-21 with
the export of non-basmati rice growing by 136.04 per cent to US$ 4,794.54
million; wheat by 774.17 per cent to US$ 549.16 million, and other cereals
(millets, maize, and other coarse gains) by 238.28 per cent to US$ 694.14
million (Ministry of Commerce & Industry, 2021). The sharp spike in rice
exports especially during a phase where globally the COVID19 pandemic
has disrupted supply changes of many commodities has been attributed to
the government taking prompt measures to ensure exports of rice and other
cereals. APEDA has been promoting rice exports through collaborations
with various stakeholders in the value chains. The government had set up the
Rice Export Promotion Forum (REPF), under the aegis of the APEDA. REPF
has representations from the rice industry, exporters, officials from APEDA,
the Ministry of Commerce, and directors of agriculture from major rice-
producing states including West Bengal, Uttar Pradesh, Punjab, Haryana,
Telangana, Andhra Pradesh, Assam, Chhattisgarh, and Odisha (Ministry of
Commerce & Industry, 2021).
The export of animal products has a significant contribution to Indian
agriculture. Frozen bovine meat forms the major share (88 per cent in 2021)
in meat export for India. There is an increasing demand for carabeef in the
international market. Vietnam, Malaysia, Egypt Arab Republic, Iraq, and
Saudi Arabia are the main markets for Indian carabeef and other animal
products. India ranks first in the production of buffalo meat and exports
around 70 per cent of its total production of buffalo meat. Hong Kong has
emerged as the largest importer of buffalo meat in 2021.
Fish and fish products hold significant importance in global trade.
These will remain the highly traded commodities with around 31 per cent
of the total global production going to export in 2024 (Sumaila et al, 2016).
Fisheries is an emerging and promising sector for the Indian economy.
India’s presence in the world fish market is significant as India contributes
to around 5 per cent of the total global fish export. A vast coastline provides
huge scope for India to expand in the international markets. Crustaceans
are the highest exported fish product from India contributing around 75 per
cent (in 2021) of the total export value of fish products followed by molluscs.
The technology advancement can help India to harness the export potential
of fish and fish products.
India is the largest producer, consumer, and exporter of spices and
spice products in the world. The country produces more than 50 spices and
Trajectory of Indian Agricultural Exports 39

is also the largest producer of tea and coffee. The challenges faced by the
tea industry are from both the supply and demand side. Tea consumption
has declined the world over with people shifting to healthier versions and
looking forward to organic versions too, coupled with a lack of investment
in technology, infrastructure, community development, and research into
new agricultural inputs in India. One of the strong challenges tea and coffee
growers face is climate change which has affected the yields and increased
the costs leading to a rise in local and international prices. Ginger, saffron,
turmeric, seeds of a few spices and nutmeg, mace, and cardamoms are the
emerging products under this category. Cotton has been an important fibre
crop and has played a dominant role in the country’s economy and meeting
export and import demand (Mahadevaiah et al., 2005). India is amongst
the largest producers of cotton in the world and the cotton from India is
exported in different forms. Cotton yarn (HS 5205) and cotton woven fabrics
(HS 5210 and HS 5209) form a major share in exports of cotton products.
The export value of various cotton products from 1988 to 2019 showed an
overall increasing trend. Cotton exports were highest in 2013 (highest area
and production till date), continued to decline afterwards till 2016, and then
started to increase. Raw cotton (HS 5201) is an emerging product. China
is the biggest buyer of India’s cotton. The decline in the exports of cotton
was noticed around 2014 and 2016 and happened due to the attack of pink
bollworm which destroyed a huge crop in India and affected the domestic
and exportable surpluses. Further, China introduced an embargo on Indian
cotton in 2015-16 due to its growing stocks.
The export of major commodities like rice, sugar, and cotton was
adversely affected by WTO. Growth of export of rice, sugar, cotton, molluscs,
and cotton fabric registered deceleration after 1994. The export of bovine
meat, onion, tea, spices, vegetable oil, and saps accelerated after 1994. The
export of rice, vegetable saps, and cotton registered high volatility over the
recent period. The export of bovine meat registered a growth of 14.38 per cent
annum during the pre-WTO period. The export got momentum and kept on
increasing. The period from 2006 to 2011 recorded the highest growth more
than 20 per cent. India exported bovine meat was of the highest value in 2014
and thereafter it declined. The recent decade showed even negative growth.
The crustaceans export was US$ 826 during 1994 and recorded a growth of
15 per cent from 1988 to 1994. After signing WTO, the export of crustaceans
declined over the years. Albeit it accelerated during the recent period and
obtained a growth of 10 per cent. The growth of molluscs declined over the
last two decades. The export of onion picked up after the pre-WTO period
but could not sustain for the recent period.
40 India’s Agriculture and Food Exports

India is known for its spices for long. The export of pepper after the WTO
period picked up and the growth becomes positive from negative growth
of 6 per cent. Even for fennel and coriander, the growth remained positive
throughout the selected periods. Though India is the leading exporter of
Basmati rice to the global markets, Indian rice export is highly volatile. The
export of rice registered a growth of 10.73 per cent in pre-WTO and declined
to 1.29 per cent. It rose to 9.74 per cent in 2006 and 2011 and declined to
3.54 per cent in the recent decade. India imports a huge quantity of edible
oils to meet its domestic needs. The export of groundnut, other oil seeds,
oleaginous fruits, and fixed vegetable fats, oils and vegetable saps recorded a
growth of 10-30 per cent in 2006 and 2011, but it could not be sustained in
the recent decade. The item vegetable saps showed high volatility among all
selected oil items. Among the selected commodities, the export of sugar was
affected most adversely. The growth which was more than 50 per cent in the
pre-WTO period became less than 1 per cent in the recent period. Export of
cotton and cotton yarn also declined in the post-WTO period (Figure 3.3).
Trajectory of Indian Agricultural Exports 41
42 India’s Agriculture and Food Exports
Trajectory of Indian Agricultural Exports 43
44 India’s Agriculture and Food Exports

Figure 3.3: Trends in Exports of Major Agricultural Products

from India (US$ Million)
Source: Authors’ computations

Export Competitiveness
The pattern of trade flows of agricultural commodities is presented in
Table 3.3. The results portray that the RCA of agricultural commodities at a
4-digit harmonised system. The results exhibit fennel, coriander, cumin as
the leading exported agricultural product which shows a gradual increase
in trade advantage. The reason behind this is that the grade for Indian
spices appeals sound in the international market. Henceforth, India is the
net exporter of spices especially fennel, coriander, and cumin. This is closely
followed by cotton yarn >= 85% cotton and fixed vegetable fats and oils.
The index values suggest that India enjoys comparative advantages in all the
selected commodities.
Table 3.3 and Figure 3.4 represented the RCA of agricultural commodities
exports during 2001-2020. Indian tea declined in terms of RCA indices. India
needs to strengthen the tea exports supply chain and conduct a detailed
comparative analysis to hold its traditional presence in the global market.
The trade performance of rice is found to be impressive over time.
Trajectory of Indian Agricultural Exports 45

Table 3.3: The Revealed Comparative Advantage of Agricultural

Commodities Exports
Major Exportable Products 2001 2005 2010 2015 2020
Meat of bovine 6.52 6.71 7.83 11.14 6.46
Crustaceans 9.85 7.40 4.23 8.44 9.02
Molluscs 3.18 3.33 2.79 2.86 2.87
Onions, garlic 5.60 6.10 5.07 4.43 2.98
Tea 19.91 10.91 7.34 5.78 5.46
Pepper 14.04 11.29 12.69 10.81 18.40
Fennel, coriander, cumin 14.77 17.66 18.36 25.36 32.55
Rice 12.69 16.73 7.77 17.13 19.45
Groundnuts 10.34 11.48 17.05 17.27 11.41
Other oil seeds and oleaginous fruits 20.32 12.41 10.19 6.50 5.93
Vegetable saps and extracts 9.92 10.96 9.20 11.25 5.97
Fixed vegetable fats and oils 17.92 11.84 14.76 11.44 12.98
Cane or beet sugar 4.71 0.29 1.98 3.22 6.71
Cotton 0.21 3.45 13.38 9.98 6.39
Cotton yarn > = 85% cotton 15.51 11.53 14.81 18.39 15.97
Woven fabrics of cotton, weighing <= 200 g/m² 7.22 3.83 3.18 4.45 5.52
Woven fabrics of cotton, containing weighing 5.08 2.65 2.22 3.86 4.93
> 200 g/m²
Source: Authors’ computation based on International Trade Centre, 2020

Figure 3.4: Revealed Comparative Advantages (RCA) of Agricultural Commodities

Exports during 2001–2020
Source: Authors’ computations
46 India’s Agriculture and Food Exports

Export Diversification
To construct the DXI, the Herfindahl-Hirschman (HH) Index was employed
to examine India’s export diversification of agricultural products. Table
3.4 portrays the product DXI of selected agricultural products. Figure
3.5 represents the product DXI of selected agricultural products from
2001 to 2020. A higher HH Index indicates that India already exports
to a large number of existing markets, while a low HH value indicates
concentration and shows the potential for expansion. For products like
‘woven fabrics of cotton, weighing <= 200 g/m² and other oil seeds and
oleaginous fruits’, export destinations were expanded over time indicating
higher geographical diversification. During 2020, the highest HH Index
was observed for ‘other oil seeds and oleaginous fruits, woven fabrics of
cotton, weighing <= 200 g/m², rice, cane or beet sugar, and tea. The DXI
for rice rose gradually from 56.59 per cent in 2001 to 77.13 per cent in
2020. However, the DXI for unprocessed cotton gradually declined during
the period.

Commodities
Figure 3.5: Product Diversification Index
Source: Computed by Authors
Table 3.4: Product Diversification Index of Selected Agricultural Products
Products 2000 2005 2010 2015 2020
Meat of bovine 60.01 70.15 72.52 50.38 65.30
Crustaceans 50.86 57.72 60.18 57.47 49.46
Molluscs 58.91 53.85 58.48 59.81 64.08
Onions, garlic 54.56 50.55 51.69 60.92 63.33
Tea 66.21 70.91 71.99 71.84 72.18
Trajectory of Indian Agricultural Exports 47

Products 2000 2005 2010 2015 2020

Pepper 57.81 65.47 67.21 67.89 60.90
Fennel, coriander, cumin 72.71 68.89 75.88 73.92 66.87
Rice 56.59 67.34 54.96 74.62 77.13
Groundnuts 44.45 44.03 49.77 61.31 57.63
Other oil seeds and oleaginous fruits 74.18 76.73 76.60 78.06 79.85
Vegetable saps and extracts 49.30 56.75 46.53 42.62 54.85
Fixed vegetable fats and oils 59.55 65.63 57.05 57.51 53.56
Cane or beet sugar 64.17 68.23 27.97 69.10 73.04
Cotton 54.61 44.83 38.23 50.75 41.05
Cotton yarn>= 85% cotton 74.99 74.76 72.50 52.58 64.37
Woven fabrics of cotton, weighing <= 200 g/m² 82.87 81.57 79.49 78.67 77.95
Woven fabrics of cotton, containing weighing 78.71 0.57 70.26 52.61 53.52
> 200 g/m²
Source: Computed by authors

Product-Country Export Concentration

It is noted from Table 3.5 that India is a significant exporter of cane or
beet sugar and fixed vegetable fats and oils to Sudan, Iran, and Indonesia.
In addition, processed cotton-like woven fabrics of cotton, weighing <=
200 g/m² and > 200 g/m² was much dominated in the Bangladesh market
with 9 per cent and 44.7 per cent, respectively. Onion and garlic were
dominant in Bangladesh, Malaysia, and Sri Lanka markets with 26.4,
16.4, and 12 per cent share in 2020. Tea export is mainly centred to Iran,
Russian Federation, and the US markets. Pepper lost its dominance in the
US market and diversified toward China and Thailand during the selected
period. Indian spices (fennel, coriander, and cumin) exports have diversified
from the US market to China from 2001 to 2020 Vietnam and Indonesia
market. Globally and in India, the rising importance of marine export
has been evident. The export of crustaceans was much dominant in the
US market.
Table 3.5: Percentage Distribution of the Value of India Exports
Products Major Destinations in 2020 2001 2010 2020
Hong Kong, China 0 0.1 22.8
Meat of bovine Viet Nam 0 14.4 14.5
Malaysia 29 12.2 13.7
United States of America 25.7 30 46.7
Crustaceans China 3 1.5 15.3
Japan 40.9 23.3 7.9
48 India’s Agriculture and Food Exports

Products Major Destinations in 2020 2001 2010 2020

Spain 35.9 34.9 25.1
Molluscs Thailand 1.1 4.3 14.5
Italy 10.7 17.2 12.5
Bangladesh 19.3 40.2 26.4
Onions, garlic Malaysia 31.8 23.1 16.4
Sri Lanka 17.5 9.6 12
Iran, the Islamic Republic of 4.3 9.3 19.1
Tea Russian Federation 25.6 15.5 12.7
United States of America 4.2 7 8.6
China 0.1 2.4 33.2
Pepper Thailand 0.3 1.6 10.5
United States of America 38.9 16 9.6
China 0.1 0 27.8
Fennel, coriander, cumin Bangladesh 3.3 2 11.9
United States of America 13.1 10.1 8.3
Saudi Arabia 39.4 29.9 13.7
Rice Iran, the Islamic Republic of 0 16.1 11
Iraq 0 0.9 7.4
Indonesia 52.5 44.1 34.4
Groundnuts Viet Nam 0 0.4 19.8
China 0 2.9 9.9
United States of America 14.5 8.3 12.3
Other oil seeds and
Korea, Republic of 3.8 12.9 7.9
oleaginous fruits
Nepal 0.2 1.2 4.7
Sudan 0 0 14.4
Cane or beet sugar Iran, the Islamic Republic of 0.6 0.7 13.8
Indonesia 21.7 0 8.2
Fixed vegetable fats and China 3.2 35 42
oils The Netherlands 19.4 16 11.8
United States of America 15.3 8.5 10.8
United States of America 49.1 52 42.7
Vegetable saps and
Germany 6.4 6.5 7.3
extracts
China 7 7.3 6.6
Bangladesh 23.5 11.2 48.3
Cotton China 0 59.5 31.8
Viet Nam 0.9 4.1 10.4
Trajectory of Indian Agricultural Exports 49

Products Major Destinations in 2020 2001 2010 2020

Bangladesh 15 18.6 25.2
Cotton yarn China 4.8 11.6 21.9
Viet Nam 0.3 1.3 5.4
Woven fabrics of cotton, Bangladesh 4.9 3.2 9.7
containing >= 85% cotton Korea, Republic of 0.8 0.4 8.4
by weight, <= 200 g/m² Sri Lanka 3.1 11.8 8.1
Woven fabrics of cotton, Bangladesh 7.5 21.6 44.7
containing >= 85% cotton United States of America 7.7 8.9 6.9
by weight, > 200 g/m² Sri Lanka 4.6 11.9 4.8

Growth Linkages
The effect of exports on economic growth has been established in several
studies. This is due to the impact on economies of scale, the adoption of
advanced technologies, and an improvement in capacity utilisation (Abou-
Stait, 2005; Al-Yousif, 1997; Balassa, 1978; Emery, 1967; Feder, 1982; Lucas,
1988; Michaely, 1977; Vohra, 2001). Although many advanced economies
and even some Asian countries, including Hong Kong, Singapore, Korea,
and Taiwan, have benefited from EL Growth policies since the 1980s, this
trend has made India’s policymakers shift towards an outer orientation of
the economy. During the mid-1980s, a change in policy stance was realised,
which was subsequently implemented in the 1990s in form of Liberalisation,
Privatisation, and Globalisation (LPG) reforms. Trade relations are being
established bilaterally and multilaterally in several ways. Studying exports
and economic growth in India over the period 1950 to 1992, Ghatak and
Price (1997) have found no evidence of ELG; instead, they found evidence
of GLE. Subsequently, Dhawan and Biswal (1999), re-examining the ELG
hypothesis in a multivariate cointegration framework, report that GDP
growth and terms of trade growth contribute to export growth. Similarly,
Mallick (2002) finds evidence for the GLE proposition for the period 1950-
1995, but not ELG. Using the 1990-1996 period for pre-liberalisation as
well as the 1996 Q2 to 2012 Q4 periods for the post-liberalisation, Agrawal
(2014) examined the role of exports in India’s economic growth. According
to the study, exports have not caused GDP during the pre-liberalisation
period, but have been caused by GDP. However, in the post-liberalisation
period, exports are bi-directionally causal. A weaker variant of ELG operated
in India according to the study. It is quite interesting to note that the LPG
reforms have induced India to the ELG hypothesis.
Sectoral exports and economic growth relations have also been studied
by many researchers. Faridi (2012) quantified the contribution of agricultural
50 India’s Agriculture and Food Exports

exports to economic growth in Pakistan. Osabohien et al. (2019) used the

Autoregressive Distribution Lag (ARDL) technique to analyse the long-run
relationship and the impact of agricultural exports on Nigeria’s economic
growth. Though India is an agriculture dominant country and contributes
a major share in global agriculture export, still, there was no study on
agriculture export and economic growth linkage across time series. This
section is focused on agriculture export and economic growth relation in
India after liberalisation and globalisation reforms.
Agricultural exports from India have undergone significant change in
terms of trends, composition, and diversification. Utilising econometric
time series techniques, we attempted to detect a causal relationship between
agricultural exports and economic growth. Cotton, cotton yarn, fennel,
coriander and cumin, groundnuts, onions, pepper, rice, tea, exports were
considered as these hold the major chunk in agriculture exports. Total Gross
Value Added (GVA) was selected to indicate economic growth. ADF test
results for stationarity indicated all variables have unit roots in their levels
(Table 3.6). However, all variables are stationary in their first differences.
After ensuring stationarity, VAR analysis was applied to examine the
causality. VAR lag selection was based on Akaike Information Criterion
(AIC) and Schwarz Information Criterion (SIC). Lag 2 was best for this VAR
equation system (Table 3.7).
Table 3.6: Testing of Stationarity
Null Hypothesis: Variable has a unit root
Exogenous: Constant, Linear Trend
At Level At 1st difference
Prob. Prob.
Cotton 0.66 0.00
Cotton Yarn 0.58 0.00
Fennel, Coriander, and Cumin 0.98 0.02
Groundnuts 0.19 0.00
Onions 0.12 0.00
Pepper 0.72 0.00
Rice 0.36 0.00
Tea 0.37 0.00
Total GVA 1.00 0.05

Vector Auto-regression exogenous causality results are presented in

Table 3.8. Our causality tests uncovered little support for the GLE hypothesis;
only onions, fennel, and coriander exports indicated the GLE hypothesis
(Figure 3.6). It is also noteworthy that onion, fennel, coriander, and cumin
exhibited bidirectional causality with the economic growth (total GVA).
Trajectory of Indian Agricultural Exports 51

ELG hypothesis was supported by most of the agriculture exports including,

i.e. onion, pepper, rice, fennel, coriander, cumin, and tea. Table 3.9 shows the
co-integration among the variables which denotes the long-run relationship
among variables. Co-integration analysis was conducted after establishing
causality relations among variables. It reveals that five vectors are co-
integrated which shows the strong long-run relationship among the selected
variables.
Table 3.7: VAR Lag Selection
Endogenous variables: TOTAL_GVA RICE TEA COTTON COTTON_YARN
AGRICUL... Exogenous variables: C
Sample: 1988 2020 Included observations: 31
Lag LogL LR FPE AIC SC HQ
0 –5890.657 NA 1.0E+153 380.6876 381.1501 380.8384
1 –5565.585 419.4484 6.9E+146 366.1668 371.2551 367.8254
2 –5308.474 165.8779* 3.7e+143* 356.0306* 365.7447* 359.1971*
* Indicates lag order selected by the criterion
LR: Sequential modified LR test statistic (each test at 5% level)
FPE: Final prediction error
AIC: Akaike information criterion
SC: Schwarz information criterion
HQ: Hannan-Quinn information criterion

Table 3.8: Confirmation of ELG and GLE Hypothesis for Selected Commodities
Coriander
Ground-

Fennel,

Cotton

Cotton
Pepper
Onion

Yarn
Raw
nuts
Rice

Tea

ELG Hypothesis: Exports 0.00 0.02 0.00 0.09 0.00 0.02 0.13 0.10
causing growth (Causality
results between exports and
total GVA)
GLE Hypothesis: Growth 0.01 0.92 0.58 0.49 0.00 0.83 0.07 0.42
causing exports (Causality
results between total GVA
and exports)

Figure 3.6: ELG Versus GLE in Indian Agriculture Exports

52 India’s Agriculture and Food Exports

Table 3.9: Co-integration Test

Unrestricted Cointegration Rank Test (Trace)
0.05 Critical
Hypothesised No. of CE(s) Eigenvalue Trace Statistic Prob.**
Value
None * 0.905561 208.9935 117.7082 0.0000
At most 1 * 0.829532 138.1995 88.80380 0.0000
At most 2 * 0.690497 85.12326 63.87610 0.0003
At most 3 * 0.521638 49.93964 42.91525 0.0086
At most 4 * 0.480144 27.81801 25.87211 0.0283
At most 5 0.238956 8.191924 12.51798 0.2364
Trace test indicates 5 cointegrating eqn(s) at the 0.05 level
* Denotes rejection of the hypothesis at the 0.05 level
** MacKinnon-Haug-Michelis (1999) p-values
Source: Authors’ computations

Conclusions and Implications

The role of agricultural trade in achieving economic growth, alleviating
poverty, and achieving food security is incalculable for developing countries
like India. The importance of India in the international market is continuously
increasing and the country has developed export competitiveness in certain
specialised products. There has been a rising demand for Indian Basmati
rice, non-Basmati rice, spices, and sugar as evident by their rising share of
the total agricultural export. Considering these, the study examined the
trends, composition along with performance of agricultural exports. It also
focused on geographical diversification to understand the export dynamics.
In addition, the study drew inferences about the causality and export-growth
relationships. The inferences would be useful in developing appropriate
strategies for better targeting and managing Indian agricultural exports. The
study also identified the structural breaks in the Indian agricultural exports
from 1990-91 to 2019-20 (post-economic reform) and confined to three
major structural breaks with four phases in agriculture exports, first from
1990-91 to 1994-95, second from 1995-96 to 2005-06, third from 2006-07 to
2010-11, and the fourth from 2011-12 to 2019-20.
Agricultural exports and imports have also increased considerably during
the last 25 years. The composition of exports has gone substantial changes
during post liberalisation. India’s export basket is now diversified with non-
traditional items and differential products are also gaining importance. Since
2001, cotton and cereals have been the highest contributors to India’s export
of agricultural goods. The performance of cereal exports from India is more
Trajectory of Indian Agricultural Exports 53

or less stable due to the prevalence of rice as the major exported product
in the group. It has been observed that the share of exports of cotton has
declined from 25 per cent in 2001 to less than 20 per cent during 2015-20.
Meat, edible meat offal, fish, and crustacean exports have performed well.
The share of meat and edible meat offal has also increased. India is the largest
exporter of crustaceans in the world followed by Ecuador.
The revealed comparative advantage of agricultural commodities
exhibits fennel, coriander, and cumin as the leading exported agricultural
product which shows a gradual increase in trade advantage. This is closely
followed by cotton yarn > = 85 per cent cotton and fixed vegetable fats and
oils. The index values suggest that India enjoys comparative advantages in
all the selected commodities. Indian tea declined in terms of RCA indices.
India needs to strengthen the tea exports supply chain and conduct a detailed
comparative analysis to hold its traditional presence in the global market.
The trade performance of rice is found to be impressive over time. The HH
index was employed to examine India’s export diversification of agricultural
products. For products like ‘woven fabrics of cotton, weighing <= 200 g/m²
and other oil seeds and oleaginous fruits’, export destinations were expanded
indicating higher geographical diversification. During 2020, the highest HH
Index was observed for ‘other oil seeds and oleaginous fruits, woven fabrics
of cotton, weighing <= 200 g/m², rice, cane or beet sugar and tea. Rice was
tapped more because of its relative advantage in terms of low perishability,
corresponding to which the DXI rose gradually from 56.59 per cent in 2001
to 77.13 per cent in 2020. However, the DXI for unprocessed cotton gradually
declined during the period.
The effect of exports on economic growth has been established in several
studies. This study also attempted to examine the causal relationship between
agricultural exports and economic growth. Cotton, cotton yarn, fennel,
coriander and cumin, groundnuts, onions, pepper, rice, and tea exports were
considered as these hold the major chunk in agriculture exports. Total GVA
was selected to indicate economic growth. It is also noteworthy that onion
and fennel as well as coriander and cumin exhibited bidirectional causality
with the economic growth (total GVA). ELG hypothesis was supported
in most of the agriculture exports including onion, pepper, rice, fennel,
coriander, cumin, and tea.
The country needs to focus on stable trade policy, particularly in those
commodities with greater trade potential. Also, the Sanitary and Phytosanitary
(SPS) measures should be taken care of strictly adhering to international
standards. Export-oriented production through the development of
clusters and dedicated supply chains will help to enhance the global image
of Indian products. Export-oriented supply chains should be efficiently
54 India’s Agriculture and Food Exports

managed to reduce the costs and make exports more competitive. With
the government’s focus to double agricultural exports and an Agricultural
Export Policy in place, India needs to find effective solutions to become a
global leader in agricultural exports too. Commodity outlook and market
intelligence hold the key to success. Appropriate diagnostics will help in the
selection of the right markets, appropriate segmentation, positioning, and
targeting, and will also facilitate relevant market linkages and regional crop
planning exercises.

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Appendix-I
HS_Code Commodities
0202 Meat of bovine animals, frozen
0306 Crustaceans, whether in shell or not, live, fresh, chilled, frozen, dried,
salted or in brine, ...
0307 Molluscs, fit for human consumption, even smoked, whether in shell
or not, live, fresh, chilled, ...
0703 Onions, shallots, garlic, leeks and other alliaceous vegetables, fresh or
chilled
0902 Tea, whether or not flavoured
0904 Pepper of the genus Piper; dried or crushed or ground fruits of the
genus Capsicum or of the ...
0909 Seeds of anis, badian, fennel, coriander, cumin or caraway; juniper
berries
1006 Rice
1202 Groundnuts, whether or not shelled or broken (excluding roasted or
otherwise cooked)
1207 Other oil seeds and oleaginous fruits, whether or not broken
(excluding edible nuts, olives, ...
1302 Vegetable saps and extracts; pectic substances, pectinates and pectates;
agar-agar and other ...
Trajectory of Indian Agricultural Exports 57

HS_Code Commodities
1515 Fixed vegetable fats and oils, incl. jojoba oil, and their fractions,
whether or not refined, ...
1701 Cane or beet sugar and chemically pure sucrose, in solid form
5201 Cotton, neither carded nor combed
5205 Cotton yarn other than sewing thread, containing >= 85% cotton by
weight (excluding that put ...
5208 Woven fabrics of cotton, containing >= 85% cotton by weight and
weighing <= 200 g/m²
5209 Woven fabrics of cotton, containing >= 85% cotton by weight and
weighing > 200 g/m²
CHAPTER 4

Agriculture Trade of India and Implications

for Current and Future Trade Agreements
Parthapratim Pal* and Subhankar Mukherjee**
* Professor, IIM Calcutta. E-mail: [email protected]
** Assistant Professor, IIT Kanpur. E-mail: [email protected]

Introduction
In a country like India, agricultural trade liberalisation is a complex subject.
While on one hand, it appears that a labour abundant country like India
will have a comparative advantage in agriculture, in reality, the situation is
different. Indian agriculture is dominated by small and medium farmers
whose ability to participate in international trade is extremely limited.
Many of these farmers are subsistence farmers with very little marketable
surplus and most of them suffer from various market failures and structural
inefficiencies. On the other hand, international agricultural trade is
dominated by large, developed countries who are not always cost-efficient
in their production. However, due to the huge amount of subsidisation in
agriculture in these countries they can undercut the low-cost producers
from developing countries in a major way.
Artificially cheap imports and structural weakness of agriculture in
India mean that trade liberalisation in this sector bears the risk of negatively
affecting livelihood security and food security. As a very high proportion of
India’s workforce is still dependent on agriculture, the Government of India
has been traditionally cautious about opening this sector. However, over the
years India has achieved self-sufficiency in food grains production and now
it’s also largely food secure. Consequently, India’s aspiration to become a
larger player in global agricultural trade is gaining ground. The Agricultural
Trade Policy of 2018 published by the Ministry of Commerce (MOC,
2018) highlights this more proactive role of the government in promoting
agricultural exports.
India’s traditionally cautious approach towards agricultural trade is
also reflected in the trade agreements signed by India. In the World Trade
Organization (WTO) Agreement on Agriculture (AoA), India kept bound
Agriculture Trade of India and Implications... 59

tariff rates on agricultural products up to 300 per cent to protect its domestic
agriculture. Also, due to the balance of payment crisis the country faced
in 1991, India maintained quantitative restrictions on many agricultural
commodities. Similarly, in most of the Free Trade Agreements (FTAs),
signed by India, the country has taken a more defensive approach on the
agriculture sector and kept quite a few agricultural commodities in the
‘Negative List’. Even for the agricultural commodities for which India has
committed tariff liberalisation, for many commodities India has committed
a long time horizon to implement the tariff cuts.
However, with improving technology, better control over-irrigation and
logistics, and increased production of agricultural goods India is becoming
more competitive in global agricultural trade. India is currently the biggest
producer of cereals, milk, sugar, fruits and vegetables, spices, as well as eggs
and seafood products in the world (MOC, 2018). But only recently India
has been increasing its footprint in global agricultural trade. For example,
according to WTO (2021), India is now the ninth biggest exporter of
agriculture in the world. Also, India has emerged as the top big exporter of
rice.
Against this evolving backdrop of India’s engagement in agricultural
trade, this chapter aims to examine how India’s agricultural exports
have evolved over the last two decades. The next section deals with a
short historical background and the current state of play of the export of
agricultural commodities from India. The evolution of India’s trade policy, a
focused analysis of India’s agricultural trade policy in the context of various
trade agreements followed by an analysis of the patterns of India’s agricultural
exports with a focus on commodity baskets and export destinations have
been discussed in the later sections of this chapter. The last section deals with
the conclusion and the way forward in relation to current and future trade
agreements.

India’s Trade in Agricultural Commodities: A Short Historical

Account and the Current State of Play
From ancient times to the advent of colonialism, India was one of the
dominant exporters of agricultural commodities and related products in
the world. Historically, spices and cotton goods have been exported from
India to the rest of the world. However, the quest for spices by the European
powers also brought India under colonial rules. Mercantilist policies
followed by the colonial rulers ensured that India went through a phase of
major deindustrialisation and was pushed into being an exporter of primary
commodities. One of the most remarkable developments of international
trade during the eighteenth century was that the Europeans managed to
60 India’s Agriculture and Food Exports

alter the commodity composition of Indian trade completely during this

period. India was a major producer of textiles in the early eighteenth century.
In 1750, India produced nearly 25 per cent of the world’s textile output.
But by 1900, this figure drastically declined to only 2 per cent (Simmons,
1985). By the middle of the nineteenth century, India had lost all its export
market and a very significant part of its domestic market. India experienced
secular deindustrialisation from 1750 to 1860. Since the 1860s, India’s
deindustrialisation slowed down and there was some sort of a reversal. The
‘reindustrialization’ of India was ushered primarily by the jute and cotton
textiles industries but in spite of its revival, cotton goods never regained the
position they had in India’s export basket over many centuries.
At the time of independence, India’s export pattern was very similar to
other poor colonial countries. India used to export primary commodities like
agricultural cash crops and minerals ores, and some low-value manufactured
goods like cotton and jute piece goods. Indian policymakers rightly believed
that high dependence on exports of primary commodities may be damaging
for the country’s long-term development strategy. Theoretical support for
this Policy came in the form of a thesis by two eminent economists, namely,
Raul Prebisch and Hans Singer. Their work, called the ‘Prebisch-Singer
Hypotheses’, dealt with the long-term deterioration of poor countries’ terms
of trade. Using time-series data they demonstrated that in the long run,
the average price of primary products tended to decline relative to that of
manufactured goods. Based on this observation, they argued that developing
countries should avoid specialisation in primary commodities and adopt
policies to develop their manufacturing sector. There were also other reasons
for moving away from primary commodity exports. As mentioned before,
value-addition in primary commodities is low and exports of primary
commodities are also highly price sensitive. The transformation of India
during the British rule to a primary commodity exporter exposed India to
these problems. Moreover, during this period, India’s two major exports, viz.,
products made up of cotton and jute, were facing strong competition from
synthetic polymer fibres like nylon and polyester.
During the 1960s, India witnessed another shift in government policy
against agricultural exports. Attaining food self-sufficiency or ‘food
sovereignty’ became a key policy objective. Consequently, exports of most
agricultural commodities were regulated to ensure adequate domestic
availability of important agricultural items and to keep the agricultural prices
stable in the domestic market. There was an increased focus on domestic
agriculture through research, development, and technology transfer that led
to a vast improvement in domestic agricultural production. This increased
production significantly reduced India’s imports of food grains and helped
Agriculture Trade of India and Implications... 61

India in attaining self-sufficiency in food production. This agricultural

turnaround is also known as the ‘Green Revolution’ in India.
As India started gradually liberalising its trade since the 1980s,
agricultural trade was kept largely insulated. Imports were restricted by the
use of quantitative restrictions or quotas. Agricultural exports did not do well
largely due to restrictions on the external trade of most of the agricultural
commodities and treatment of the export market as a residual one. Two
events changed India’s attitude towards international trade in the 1990s. The
first one is the financial crisis of 1991 and the next one is the signing of the
WTO trade agreement.
The policies to avert the financial crisis led to the deregulation of
international trade to a significant extent. India’s exchange rate was also
devalued and became flexible and (to some extent) market determined.
However, the agriculture sector continued to be under protection. Then,
in 1995, India signed the WTO Trade Agreement. The Uruguay Round
AoA brought agricultural trade, for the first time, under the purview of a
multilateral trading system. Agriculture was included in the original 1947
GATT Agreement, but on the insistence of the United States (US), was given
a special status.1 As a result, prior to the Uruguay Round, trade in agriculture
was highly distorted. Price fluctuations, depressed market prices due to
massive domestic and export subsidies, and impenetrable import barriers
were pervasive. Despite being low-cost producers of agricultural items,
agricultural exporters from developing countries could not compete with the
subsidised exports from developed countries. It was expected that the WTO
AoA would bring significant change in the global agricultural trade.

India and Agricultural Trade Since 1995

A watershed year for India’s international trade was 1995 when the WTO was
launched. The signing of the WTO Agreement led to the gradual removal of
trade barriers in agriculture, and lowering of its applied tariffs.2 Over the
years, India has signed several other Preferential and FTAs. The country has
1
The United States (US) signed GATT in 1947 under the condition that there
should be exceptions (Section XI of GATT) in the rules for agricultural products. These
exceptions allowed the US to continue with the use of its Article 22 of the Agricultural
Adjustment Act (AAA), which allowed the imposition of import quotas and other
quantitative restrictions to isolate its domestic market. Flexibility was also allowed with
respect to domestic and exports subsidies. In the next 40 years, agriculture retained its
special status, and successive General Agreement on Tariffs and Trade (GATT) rounds
did little to impose disciplines on agricultural trade.
2
India continued its protective stance on agriculture and kept very high tariff rates on
agricultural imports. Till 2000, India also had Quantity Restrictions (QRs) on a number
of agricultural products, which had to be removed after India lost a dispute in WTO.
62 India’s Agriculture and Food Exports

also signed a few deep integration agreements, such as the Comprehensive

Economic Partnership Agreements (CEPAs) with Japan and South Korea and
Comprehensive Economic Cooperation Agreement (CECA) with Malaysia.
The WTO AoA was supposed to provide better access to the international
market for developing countries like India. Moreover, some of India’s FTA
partners are middle-income and high-income countries. Many of these
countries were going through a phase of economic and demographic
transition, leading to increased demand for processed and semi-processed
agricultural goods and value-added food products. India being a big
producer of a diverse range of agricultural products, signing the WTO AoA
and the preferential trade agreements opened up a significant opportunity
for the country to export primary as well as processed agricultural products
to the rest of the world.
On the expected lines, since the joining of WTO, India’s agricultural
exports did increase significantly. From US$ 6.3 billion in 1995, India’s
agricultural exports have reached US$ 39 billion in 2020.3 According to
WTO (2021), India is now the ninth-largest agricultural exporter in the
world with a global market share of 3.1 per cent.4
However, India does not appear to have fared well in its agricultural
exports, relative to other sectors. Figure 4.1 shows India’s exports of
agricultural and manufacturing goods since 1980. The graphs show that
while exports of agricultural goods have risen steadily from 1995, it has
grown more rapidly since 2005-06. However, the growth of exports of
manufactured goods has been much higher. Consequently, the share of
agricultural goods in India’s total merchandise exports has come down over
the years. While agricultural exports had a share of 20.6 per cent in 1995, it
came down to 9.9 per cent in 2009 and then recovered to around 14 per cent
in 2020. It is also evident from Figure 4.1 that the Covid crisis has affected
manufacturing exports much more than agricultural exports.
India is largely self-sufficient in agriculture and runs a small trade surplus
in this sector (Figure 4.2). More than 50 per cent of India’s total agricultural
imports is due to imports of edible oil and, to some extent, pulses. India is the
largest producer of edible oil and pulses in the world, but due to high domestic

3
World Trade Statistical Review 2021, Table A14, available at wto.org, accessed on
5th January 2022.
4
It is to be noted that the country shares in WTO (2020) are calculated excluding the
intra-trade of the European Union (EU). India’s share in global agricultural exports is 3.1
per cent excluding intra-EU trade. However, in the Annexure of the same Report, data are
also presented including intra-EU trade. If intra-EU trade is included, then India’s share
in global exports is 2.2 per cent. In this paper, we will follow the convention used in the
WTO (2020) and report market shares excluding intra-EU trade.
Agriculture Trade of India and Implications... 63

demand, India runs a big trade deficit in both these commodities.5 Apart
from these two items, India is mostly self-reliant in food products, however,
in years with unusual weather conditions, India has intermittently imported
certain agricultural commodities to ease up pressure on domestic prices. The
latest data on agricultural imports suggests that cashew (unshelled), fresh
fruits, and spices are other important import items for India.6

Figure 4.1: India’s Total Exports of Agricultural and Manufacturing Goods

(Billion US$)
Source: WTO Database, https://stats.wto.org/, accessed on 7th January 2022.

Figure 4.2: India’s Trade in Agricultural Goods: Exports, Imports and Trade
Balance (Billion US$)
Source: WTO Database, https://stats.wto.org/, accessed on 7th January 2022.
5
Around 60 per cent of the domestic demand for edible oil is met through imports.
India is also the biggest importer of edible oil in the world. India’s share in global imports
of pulses was around 13.8 per cent in 2020 (Exim Bank, July 2021)
6
Import and Export from Agricultural Sector, available at pib.gov.in, accessed on
5th January 2022.
64 India’s Agriculture and Food Exports

India’s Agricultural Trade Policy

Even after participating in several international FTAs, India’s agricultural
sector remains more protected than its manufacturing sector. In the Uruguay
Round, India bound all its tariff lines related to agricultural products at rates
ranging from 10 per cent to 300 per cent. The highest bound rates apply
to oils seeds, fats, and oils and their products (product category HS 15).
As was mentioned in the previous section, ‘Edible Oils’ account for a huge
share in India’s agricultural imports. As per the WTO Trade Policy Review
of India, the average applied Most Favoured Nation (MFN) tariff for WTO
agricultural goods is 34.8 per cent, while the average applied MFN tariff for
non-agricultural goods is 12.3 per cent only (Table 4.1). It is to be noted
that India’s average tariff rate for agricultural goods has gone up in 2020-
21. It should be noted that according to the WTO rules, the government
can raise applied tariff rates to the bound tariff rates committed against
each product. Along with high applied tariffs, India also has Tariff Rate
Quotas (TRQs), Minimum Import Price (MIP), and import prohibitions
on certain agricultural commodities. The general arguments for protecting
the agriculture sector have been centred around protecting the livelihood
of a large number of small and marginal farmers who are dependent on
agriculture. Also, as agriculture is globally a highly distorted sector due
to the widespread use of domestic and export subsidies, some amount of
protection is warranted for a developing country like India.
Table 4.1: Tariff Structure, 2014-15, 2019-20, and 2020-21
MFN Applied Rate
2014-15 2019-20 2020-21
(HS12) (HS17) (HS17)
Simple average rate (%) 13.0 13.9 (14.9) 14.3 (15.4)
WTO agricultural products 36.4 34.8 36.5
WTO non-agricultural products 9.5 10.8 (12.0) 11.1 (12.3)
Duty-free (% of all tariff lines) 2.7 3.0 2.7
Simple average rate of dutiable lines only (%) 13.4 14.3 (15.3) 14.7 (15.8)
Non-ad valorem tariffs (% of all tariff lines) 6.1 6.0 6.1
Tariff quotas (% of all tariff lines) 0.0 0.0 0.0
Domestic tariff peaks (% of all tariff lines) 2.7 2.5 (3.5) 3.1 (3.7)
Source: WTO, 2020
In most cases in the FTAs that India has signed, sensitive agriculture
products have been kept on the ‘negative list’. Moreover, for the agriculture
sector, preferential tariff rates are not significantly lower than the MFN
tariff rates at this point. As India gradually reduces tariff rates in the future
Agriculture Trade of India and Implications... 65

according to the timeline committed in the respective trade agreements,

preferential tariffs will come down and preference margins will open up.
However, at this point, most preferential rates are close to MFN tariff rates

Table 4.2: Summary Analysis of Preferential Tariffs, 2019-20

Preferential WTO Non-
Total WTO Agriculture
Lines agriculture
(% of all Average Duty Average Duty Average Duty
tariff lines) (%) Free (%) (%) free (%) (%) Free (%)
MFN 14.9 3.0 34.8 4.9 12.0 2.7
APTA 27.2 13.5 4.9 32.4 4.9 10.7 4.9
Bangladesh 27.4 13.5 5.0 32.4 4.9 10.7 5.0
Lao, People’s 0.8 14.8 3.1 34.8 4.9 11.9 2.9
Dem. Rep.
ASEAN 84.0 5.0 73.7 21.4 51.1 2.6 77.0
Philippines 83.9 5.4 64.7 22.2 41.1 2.9 68.1
MERCOSUR 3.1 14.8 3.0 34.8 4.9 11.9 2.7
SAFTA non- 75.8 7.1 3.0 14.8 4.9 6.0 2.7
LDCs
SAFTA LDCs 96.2 0.8 99.2 6.1 93.5 0.0 100.0
Afghanistan 0.3 14.8 3.1 34.4 5.3 12.0 2.7
Chile 9.2 14.1 3.0 33.2 5.3 11.3 2.7
Japan 81.0 5.4 22.9 21.8 6.9 3.0 25.2
Korea, Rep. of 76.7 6.0 66.9 24.6 6.3 3.2 75.8
Malaysia 84.3 4.9 73.8 21.2 51.3 2.6 77.1
Nepal 93.7 1.1 96.7 7.4 87.9 0.2 98.0
Singapore 45.5 10.7 27.7 32.6 13.0 7.5 29.9
Sri Lanka 87.8 4.2 79.4 8.6 89.6 3.5 77.9
Thailand 1.9 14.7 4.9 34.6 5.5 11.8 4.8
LDCs 94.3 1.9 94.2 13.2 76.6 0.3 96.7
Memorandum:
Afghanistan 96.2 0.8 99.2 6.1 93.5 0.0 100.0
Bangladesh 96.2 0.8 99.2 6.1 93.5 0.0 100.0
Korea, Rep. of 78.6 5.8 68.8 24.3 6.3 3.1 77.9
Malaysia 84.5 4.9 73.9 21.2 51.5 2.5 77.2
Nepal 96.2 0.8 99.2 6.1 93.5 0.0 100.0
Singapore 86.5 4.4 77.6 21.4 53.5 2.0 81.1
Sri Lanka 91.2 2.4 79.5 5.7 89.6 1.9 78.0
Thailand 84.1 4.9 74.1 21.2 51.6 2.6 77.4
Source: WTO, 2020; see Table 3.5, page 53 of the original source for more detail on
the Table.
66 India’s Agriculture and Food Exports

in the agriculture sector. As can be seen from Table 4.2, only for certain
countries of South Asia, and Least Developed Countries (LDCs) the applied
tariffs on agricultural goods are low. For other countries, including non-
LDC preferential trade partners, India’s agriculture sector is well protected.
As far as exports are concerned, for certain agro-commodities, the
government still sees them as the residual sector where exports are seen
mostly as surplus over domestic demand. Consequently, facing inflationary
pressures, the government often imposes restrictions on exports of such
agricultural commodities. A myriad variety of trade policy instruments
including export taxes, export restrictions and prohibitions, and Minimum
Export Prices (MEPs) are used to maintain domestic price stability. For
example, in recent times, export restrictions on onions were imposed to
control domestic demand-supply imbalance.
The Government of India also has a plethora of export promotion
schemes for the agriculture sector. As reported by the Minister of Commerce,
the government has several schemes like the Trade Infrastructure for Export
Scheme (TIES), Market Access Initiatives (MAI) Scheme, Merchandise
Exports from India Scheme (MEIS), etc. In addition, assistance to the
exporters of agricultural products is also available under the Export
Promotion Schemes of Agricultural & Processed Food Products Export
Development Authority (APEDA), Marine Products Export Development
Authority (MPEDA), Tobacco Board, Tea Board, Coffee Board, Rubber
Board, and Spices Board.7 The government also has certain export subsidy
schemes including Transport and Marketing Assistance for Specified
Agriculture Products and export incentives for certain agricultural exports.
Presently, there is a dispute (DS580 and DS581) going on in WTO, where
a number of countries have alleged that export subsidies given by India to
its sugar and sugarcane producers are inconsistent with India’s obligations
under the AoA. The WTO initial panel ruling has gone against India, but
India has challenged this ruling in the WTO.8 While it is unclear what the
final verdict will be, one inference is that India will have to be more judicious
about using export promotion through subsidies in the future.
Till 2017, India was insulated from these threats from other WTO
Members as India gained immunity under a ‘Special and Differential
Treatment’ for developing countries and LDC under the Subsidies and
Countervailing Measures (SCM) Agreement. Article 27.2 of the SCM
Agreement exempts LDCs and developing countries with a per capita
income of less than US$ 1,000 from the prohibition of export subsidies. The
7
Available at https://pib.gov.in/Pressreleaseshare.aspx?PRID=1578144, accessed on
6th January 2022.
8
WTO, Dispute Settlement: The Disputes, DS581.
Agriculture Trade of India and Implications... 67

list of countries that were eligible for this exception is given in Annexure
VII of the SCM Agreement. However, India has graduated from this List
in 2017. Based on the notification issued by the Committee on Subsidies
and Countervailing Measures dated 11 July 2017 (G/SCM/110/Add.14),
India can no longer qualify for this exception which it earlier received as
a developing country. Therefore, after 2017, any export-linked incentives
given to merchandise exports can now face action under the WTO rules.9

Global Agricultural Trade Scenario Since the World Trade

Organization Agreement on Agriculture
A WTO report has thrown some useful insights into the global agricultural
trade scenario since the inception of the WTO AoA (WTO, 2021). It is
important to take stock of the global agricultural trade because it was
expected that bringing agriculture under the effective rules of the multilateral
trading system will fundamentally alter the trading pattern of agricultural
commodities across the world. This Report shows that while there are certain
fundamental changes in agricultural trade, a few things have remained the
same.
The Report shows that, in value terms, agricultural exports have
increased by more than four times from 1995 to 2019. From US$ 286 billion
in 1995, it reached around US$ 1,051 billion in 2019. However, the share of
agricultural exports in merchandise exports came down from 8.1 per cent in
1995 to 7.3 per cent in 2019. This is not surprising because since 1995, trade
in intermediate goods has gone up manyfold and to-and-fro movements
of components across borders may have contributed to the high growth of
manufacturing exports.
The Report also shows that the developed countries continue to dominate
agricultural exports in the world. North America and Europe accounted for
more than 51 per cent of the total exports in 1995. The US was the biggest
exporter with 22.2 per cent market share and the EU was the second-largest
exporter with a market share of 19.4 per cent. In 2019, the US and the EU
continue to be the top two agricultural exporters of the world with the EU
overtaking the US as the largest exporter. In 2019, the EU and the US had

9
India has contested this view in WTO and has argued that it is still under the
protective clause, but the panel report mentioned earlier has rejected India’s claim. It says:
‘It is undisputed that India has graduated from Annex VII(b) of the SCM Agreement.
Our interpretation of Article 27.2(b) leads us to conclude that the transition period set
forth in Article 27.2(b) expired on 1 January 2003, including for Members graduating
from Annex VII(b). We, therefore, find that Article 27 no longer excludes India from the
application of Article 3.1(a) of the SCM Agreement.’ Paragraph 7.322, p. 106, Document
Number WT/DS579/R, 14 December 2021.
68 India’s Agriculture and Food Exports

market shares of 16.1 per cent and 13.8 per cent, respectively. The dominance
of developed countries even in 2019 indicates that the reforms initiated by
the AoA to reduce distortion in agricultural trade may not have been very
effective as high-cost exporters are still dominating agricultural exports even
after 25 years of implementation of AoA.
Among developing countries, Brazil (7.8 per cent), China (5.4 per cent),
Argentina (3.5 per cent), India (3.1 per cent), and Thailand (2.9 per cent) are
other top countries in agricultural exports.10 To reiterate India’s position, the
WTO (2021) shows that India has emerged as the ninth biggest exporter of
agricultural commodities in the world in 2019. India was not in the top 10
in 1995.
One of the most staggering data in the WTO report is the changing
behaviour of China in the agricultural trade market. In 1995, China was a net
exporter of agricultural commodities. However, in 2019, China has emerged
as the biggest net importer of agricultural commodities in the world with
an agricultural trade deficit of nearly US$ 79.5 billion. This huge demand
coming out of China has altered the global product mix of agricultural trade
in a major way.
Table 4.3 shows the top 15 most imported products in global agricultural
trade in 1995 and 2019, respectively. The Table shows that in 2019, soyabeans
have become the biggest agricultural import. ‘Coffee, coffee husks/skins, etc.’
was the biggest imported item in 1995 and 2019, the same item got relegated
to the eleventh spot. Overall, the Table shows that there have been significant
changes in the product composition of agricultural commodities during the
WTO regime. As far as soyabeans are concerned, global imports of soybeans
increased around 7.1 times between 1995 and 2019. Specifically, China’s
import of soyabeans increased from US$ 0.09 billion in 1995 to US$ 35.34
billion in 2019, registering a 392.6 times growth during the same time.
As far as India is concerned, the country has an export presence among
some of the top imported agricultural products in 2019. For example. India
is the number one exporter of Rice in the world, with a global market share of
more than 32 per cent in 2019. For Cotton, India is the third-largest exporter
with an export share of 7.6 per cent. In Meat and Edible Meat (Offal), India
has a 4 per cent market share. India’s share in global Soyabeans export is
small (0.1 per cent), but it is among the top 10 exporters of soyabeans in
the world.1112 India is also a big exporter of Spices (HS 0910). According to
data for 2019, India is the second-largest exporter of Spices in the world

10
Op. Cit. (2).
11
WTO, 2021.
Agriculture Trade of India and Implications... 69

Table 4.3: Top 15 Imported Agricultural Products, 1995 and 2019

(Percentage shares)
Share Share
Agricultural Products in 1995 Agricultural Products in 2019
(in %) (in %)
Coffee, coffee husks/skins 5.3 Soya beans 5.5
Wheat and Meslin 4.1 Food preparations, not 3.1
elsewhere specified
Cotton, not carded or combed 3.6 Wheat and Meslin 2.8
Maize 3.2 Maize 2.6
Solid cane or beet sugar 2.9 Meat of bovine animals 2.4
Soya beans 2.9 Liquor, spirits, etc. 2.4
Cigars, cigarettes, etc 2.5 Grape wines 2.2
Liquor, spirits, etc. 2.3 Palm oil and its fractions 2.0
Bananas 2.1 Meat of swine 1.9
Tobacco unmanufactured 1.9 Baked bread, pastry, etc 1.7
Soya beans oil cakes and other 1.8 Coffee, coffee husks/skins 1.5
solid residues
Meat of swine 1.8 Malt extract, flour, dairy 1.5
preparations, lo cocoa
Rice 1.6 Animal feed 1.4
Meat of bovine animals 1.6 Soya beans oil cakes and other 1.4
solid residues
Palm oil and its fractions 1.6 Cotton, not carded or combed 1.4
Source: WTO, 2021
with a market share of 13.5 per cent.12 Though Sugar is no longer among the
top exported items in the world, according to Foreign Agricultural Service
(FAS)/United States Department of Agriculture (USDA) statistics, India
enjoys a market share of 11.5 per cent in global Centrifugal Sugar exports in
2020-21.13 Among the non-AoA products, India is a big exporter of marine
products and according to the MOC, India is the fifth largest exporter of Fish
and Fishery Products in the world (US$ 6.6 billion) and accounts for a 4.1
per cent share in world Seafood exports.14

12
Available at https://oec.world/en/profile/hs92/spices#exporters-importers,
accessed on 6th January 2022.
13
Available at https://apps.fas.usda.gov/psdonline/circulars/sugar.pdf, accessed on
7th January 2022.
14
Available at https://commerce.gov.in/about-us/divisions/export-products-
division/export-promotion-marine-products/, accessed on 7th January, 2022.
70 India’s Agriculture and Food Exports

Analysis of India’s Exports of Agricultural Commodities in

Recent Years
As discussed in Section 3, India’s agricultural exports have increased almost
steadily since 1995. However, over the years, India’s export composition and
export destinations have gone through some changes. First, we look at India’s
agricultural export composition from 2009-10 to 2020-21. In this section, we
will be following the definition of agricultural goods from an Indian point of
view and hence will include marine products in the analysis. Table 4.5A, 4.5B,
and 4.5C show India’s top 10 agricultural export items for 2009-10, 2018-19,
and 2020-21. Detailed data for the entire period is given in Annexure Tables
A1 and A2.
Table 4.5A: India’s Top 10 Agricultural Exports in 2009-10
Product Name 2009-10 Share (in %)
Basmati Rice 2,289.35 12.79
Marine Products 2,095.28 11.70
Cotton Raw Including Waste 2,050.76 11.45
Oil Meals 1,658.83 9.26
Spices 1,257.86 7.02
Buffalo Meat 1,163.54 6.50
Tobacco Unmanufactured 763.33 4.26
Fresh Vegetables 637.16 3.56
Other Cereals 625.71 3.49
Tea 623.29 3.48
Top 10 13,165.11 73.52
Total Agri Exports 17,906.24
Source: APEDA15
Table 4.5B: India’s Top 10 Agricultural Exports in 2018-19
Product Name 2018-19 Share (in %)
Marine Products 6,796.37 17.63
Basmati Rice 4,712.62 12.23
Buffalo Meat 3,587.15 9.31
Spices 3,308.27 8.58
Non-Basmati Rice 2,999.51 7.78
Cotton Raw Including Waste 2,104.41 5.46
Oil Meals 1,491.73 3.87
Sugar 1,359.58 3.53
Castor Oil 883.76 2.29
Tea 830.9 2.16
Top 10 28,074.3 72.84
Total Agri Exports 38,541.68
Source: APEDA
15
Available at ReportList (apeda.gov.in), accessed on 7th January 2022.
Agriculture Trade of India and Implications... 71

Table 4.5C: India’s Top 10 Agricultural Exports in 2020-21

Product Name 2020-21 Share (in%)
Marine Products 5,962.43 14.46
Non-Basmati Rice 4,796.02 11.63
Basmati Rice 4,018.65 9.74
Spices 3,984.75 9.66
Buffalo Meat 3,171.13 7.69
Sugar 2,790.05 6.77
Cotton Raw Including Waste 1,897.20 4.60
Oil Meals 1,575.54 3.82
Castor Oil 917.24 2.22
Miscellaneous Processed Items 864.21 2.10
Top 10 29,977.22 72.69
Total Agri Exports 41,240.06
Source: APEDA
Table 4.5A, 4.5B, and 4.5C show that over the period under consideration,
the top 10 agricultural export items have consistently contributed to around
72-73 per cent of India’s total agricultural exports. For 2020-21, Marine
products, rice, spices, and buffalo meat make up for around 53 per cent
of India’s total exports. This indicates that India’s export basket is not very
diversified, and it largely consists of primary and low value-added products.
This shortcoming has been recognised in India’s Agricultural Export Policy
2018 and the government has shown interest in promoting exports of higher
value items, including perishables and processed food.
Among the top exported items, Basmati rice, marine products, cotton,
oil meals (which includes soyabeans), spices, and buffalo meat have been in
the top 10 in all three tables. On the other hand, tobacco, fresh vegetables,
and other cereals lost their place in Table 4.5B and 4.5C. The share of tea
has gradually come down and in 2020-21, tea was only the twelfth largest
exported agricultural product with a share of 1.8 per cent in total agricultural
exports.
It is also notable that the share of non-Basmati rice has increased sharply
in India’s agricultural trade basket. From only 0.42 per cent share in 2009-10,
the share jumped to 4.6 per cent in 2011-12 and 11.63 per cent in 2020-21.
Exports of Sugar and Miscellaneous Processed Items also increased over the
years. It is notable that global data suggests that Miscellaneous Processed
Items has emerged as one of the most exported categories of agricultural
goods in 2019 and India is taking advantage of that. It is also important
to note that Miscellaneous Processed Items is a value-added category of
agricultural goods and it will be dealt within more detail later in this section.
 72

Table 4.6: Top 5 Export Markets for Each of India’s Top 10 Agricultural
Exports in 2020-21
Non-
Basmati Buffalo Marine Miscellaneous
Basmati Oil Meals Spices Sugar Cotton Castor Oil
Rice Meat Products Processed Items
Rice
Saudi Hong US US Benin US China Indonesia Bangladesh China
Arab Kong China UAE Nepal Bangladesh US Sudan China Netherlands
Iran Vietnam Japan Nepal Bangladesh Vietnam Bangladesh Iran Vietnam US
Iraq Malaysia Vietnam Malaysia Senegal Korea UAE Sri Lanka Indonesia France
Yemen Egypt Thailand Indonesia Togo Indonesia Thailand Somalia Taiwan Japan
UAE Indonesia
Share of top 5 export destinations (in %)
62.80 73.51 70.13 42.82 37.01 53.55 55.28 56.34 92.78 81.90
Memo item: Share of top 10 export destinations (in %)
79.92 88.80 81.99 61.34 56.73 77.54 69.03 77.60 97.58 90.62
Source: APEDA
India’s Agriculture and Food Exports
Agriculture Trade of India and Implications... 73

Table 4.6 shows the top 5 destinations for India’s top 10 agricultural
export items based on 2020-21 data. It shows that India’s agricultural export
items are mostly destined for developing countries, Japan, and the US, among
the developed countries. Only two European countries, the Netherlands
and France feature in this list. Among the countries featured in Table 4.6,
a large number of countries are with which India has a preferential trading
agreement or framework agreements. For example, Saudi Arabia and the
United Arab of Emirates (UAE) are part of Gulf Cooperation Council (GCC),
Vietnam, Malaysia, Indonesia, and Thailand are part of the Association of
Southeast Asian Nations (ASEAN), Bangladesh, Nepal, Sri Lanka are part of
South Asian Free Trade Area (SAFTA), etc. India also has standalone FTAs
with some of these countries like Sri Lanka and Thailand. India has deep
integration agreements with Japan and South Korea, which go beyond FTAs,
and also include provisions for investment, Intellectual Property Rights
(IPR), and other modes of economic cooperation. Currently, negotiations
are going on with the EU, the US, the United Kingdom (UK), Australia, the
UAE, and Taiwan for signing up of preferential trade agreements.
Table 4.6 also shows that market diversity varies considerably among the
top 10 crops. For example, the top 5 countries account for around 93 per cent
of India’s total cotton exports but the top 5 countries only account for 37 per
cent of India’s total non-Basmati rice exports. This shows that India’s non-
Basmati export is much more diversified and reaches a much larger number
of export destinations. For a clearer exposition of market concentration and
diversity, the share of the top 10 countries for these products is also given in
Table 4.6.
As highlighted in Section 2, the export of primary commodities, in
the long run, is detrimental to the economic development of a country.
Therefore, strategies for economic development should focus on exports of
more value-added products and processed products, given the relative prices
of such commodities increase, vis-à-vis, primary commodities over time. As
mentioned in Exim Bank (2021), the food processing sector covers fruits
and vegetables; spices; meat and poultry; milk and milk products, alcoholic
beverages, fisheries, plantation, grain processing, and other consumer
product groups like confectionery, chocolates, cocoa products, soya-based
products, mineral water, high protein foods, etc. However, an analysis of
India’s agricultural exports of value-added products over the last two decades
does not show an encouraging picture. For this analysis, we consider HS
Chapters 7, 8, 16, 20, and 21 in value-added agricultural products, following
the definition given in India’s Agriculture Export Policy 2018.16

16
Op. cit. (5).
74 India’s Agriculture and Food Exports

Our analysis shows that while the total values of agricultural exports
have increased from around US$ 5 billion to over US$ 37 billion (in nominal
terms), the share of value-added products has not kept pace with it. Rather
interestingly, the share of exports of value-added products has declined over
the last 20 years – from over 21 per cent in 2001, to around 13 per cent in the
2021 financial year – at an average annual rate of –1.2 per cent.
Figure 4.3 shows India’s total agricultural exports in US$ million (left
axis) as well the share of value added in overall exports (right axis) from
2000-01 to 2020-21. An inspection of the chart reveals the following two
points: first, the share of value added resembles a U-shape. From 2001 till
2013, there was almost a secular decline in the share, from 21 per cent to
around 9 per cent. However, post that period, the share has increased, even
though gradually, to just over 13 per cent. Second and more strikingly,
the value of total agricultural export and the share of value added tend to
move in opposite directions. From 2001 to 2013, while the total agricultural
exports increased, the share of value added in it declined. The opposite
happened post-2013, with a rise in the share of value added, even when the
total declined. The correlation coefficient between the two series is –0.87.
Given that the income elasticity of demand for value-added products is
hypothesised to be higher compared to primary goods, the stagnation in value-
added agricultural exports may be ascribed to the supply side issues, rather
than lack of demand from the rest of the world. Lack of uniformity in quality
of products, lack of standardisation, and leakage in the agricultural value
chain may be ascribed as plausible reasons for India’s lacklustre performance
in this sector. Moreover, as Table 4.7 shows, the annual average growth rate
in nominal value of export for the value-added agricultural products vary
widely, from merely 4 per cent for preparations of meat of fish, to over 13
per cent for preparations of vegetables. Future trade policies, therefore, may
be concentrated toward the products with relatively high growth potential.
The Agricultural Export Policy 2018 has taken cognisance of the importance
of India’s prospects in value added and processed agricultural goods and
suggested that India has strong export potential in some value added and
processed food. The Report has suggested such a list of products. This is
shown in Table 4.8.
Data from the last 2 years show that India’s processed food exports are
showing some promise. Despite the massive disruption of international
trade due to the Covid crisis and the follow-up problems related to shipping
disruptions and container shortage, India has managed to export processed
foods to a number of countries. Using data from APEDA, EXIM Bank (2021)
shows that exports of jaggery, confectionery products, alcoholic beverages,
milled products, miscellaneous products, and processed vegetables
Agriculture Trade of India and Implications... 75

Figure 4.3: Total Agriculture Exports and Share of Value Added for India
(2000-01 to 2020-21)
Source: CMIE TradeDx Database
Table 4.7: Average Annual Growth Rate of Value-Added Agricultural Products by
HS Code Chapters
Average Annual Growth
HS Chapter of
Rate in Nominal Value of
Agricultural Value- Commodity Name
Export from 2001 to 2021
Added Product
(%)
7 Edible Vegetables and Certain 9.33
Roots and Tubers
8 Edible Fruit and Nuts; Peel of 4.93
Citrus Fruit or Melons
16 Preparations of Meat of Fish or 4.28
Crustaceans, Molluscs or Other
Aquatic Invertebrates
20 Preparations of Vegetables, Fruits, 13.57
Nuts or Other Parts of Plants
21 Miscellaneous edible preparations 11.04

registered a high growth rate of exports in 2020-21. The main markets for
India’s processed agricultural exports are the US, the UAE, Indonesia, Nepal,
the UK, Vietnam, and China (Figure 4.4). But India seems to be increasing
its exports in the smaller markets as well. The thrust of India’s agricultural
export policy appears to have yielded results through increased penetration
of value-added products in previously unpenetrated or underpenetrated
African markets. EXIM Bank (2021) highlights the following:
Growth in exports of processed food from India during 2020-21 was
primarily driven by the increase in demand for pulses, processed fruits
76 India’s Agriculture and Food Exports

and vegetables, milled products, cereals preparations, and other processed

items, particularly from the developing markets of Asia, and the Middle
East region. Further, India’s exports of processed food to several previously
under-penetrated markets also increased substantially in 2020-21,
particularly to African countries like Djibouti, Rwanda, Central African
Republic, Sierra Leonne, Cameroon, and Mali, among others, where India’s
exports more than doubled in 2020-21.
Table 4.8: Processed Food with Export Potential as Suggested by Agricultural
Export Policy 2018
Present Projected
Level of Exports in the
Product Potential Markets
Exports Next 3 Years
(million) (million)
Angola, the US, Haiti, Namibia,
Biscuits and
$ 185 $ 350 Uganda, the UAE, Nigeria,
Confectionery
Kenya
The US, Australia, Canada, the
Indian Ethnic Foods $ 114 $ 200
UAE, Nepal
The US, Bangladesh, the UK,
Cereal Preparations $ 471 $ 800
Nepal, the UAE, Angola
Dehydrated Onion,
Other Vegetables and The US, Germany, Belgium,
$ 207 $ 400
Frozen Vegetables Russia, France
Including Gherkin
Saudi Arabia, the Netherlands,
Processed Fruits,
$ 338 $ 600 Yemen, the UK, the US,
Juices, Concentrates
Algeria, Keyna
Source: MOC, 2018

Figure 4.4: Export Destination of India’s Processed Food for 2020-21

Source: EXIM Bank (2021) quoting data from APEDA
Agriculture Trade of India and Implications... 77

The Production Linked Incentives (PLIs) introduced by the Government

of India from the 2021-22 financial years is expected to aid further in capacity
building in the food processing sector.

An Analysis of Destinations of India’s Agricultural Exports

A look at the data of the last 12 years shows that India’s exports of agricultural
commodities go to a large number of countries but the top 20 largest export
markets account for around 68-70 per cent of its total exports. In the last few
years, the US and China have emerged as the top two export destinations for
India. Bangladesh, the UAE, Vietnam, Saudi Arabia, Indonesia, and Nepal
are other big export markets of India (Table A3 in the Annexure).
A closer look at the individual country shares shows some drastic
changes over the years. For example, exports to Pakistan have almost
completely disappeared. In 2010-11, India exported US$ 1,047.21 million
worth of agricultural goods to Pakistan. In 2020-21 the value of agricultural
exports is US$ 68 million only, implying a 94 per cent decline in exports.
Another dramatic change happened with India’s agricultural exports to
Vietnam. The share of Vietnam in India’s agricultural exports was around
5.3 per cent in 2010-11. It sharply shot up to 13.81 per cent in 2017-18. For
a period of 4 years, from 2014-15 to 2017-18, Vietnam was India’s largest
market for agricultural exports. The country was importing a significant
amount of meat products (HS 02), fish and marine products (HS 03), coffee,
tea, mate, and spices (HS 09), and cotton (HS 52) from India. This suddenly
reversed from 2018-19 and Vietnam’s share in India’s total agricultural
exports dropped to 3.92 per cent. A look at the commodity level data shows
that in the last few years, India lost a significant amount of market in HS 02,
HS 03, and HS 09 in Vietnam. It is worth highlighting that India has lost

Figure 4.5: Share of China and Vietnam in India’s Total Agricultural Exports (in %)
Source: APEDA, calculated from Table A3 in the Annexure
78 India’s Agriculture and Food Exports

market in Vietnam in spite of preferential access to Vietnam through the

India-ASEAN FTA. Curiously, there seems to be a strong negative correlation
between Vietnam’s and China’s share in India’s agricultural exports over the
years (Figure 4.5).
Another feature of India’s agricultural exports is that India’s market in
African countries seems to be on the lower side. Apart from Egypt, a very
small proportion of India’s agricultural exports goes to other African nations.
There is ample opportunity to export agricultural commodities, especially
value-added commodities to these markets.
The data also show that India predominantly exports to developing
countries. If we divide India’s agricultural export destinations into developed
(including Russia and countries of the erstwhile USSR) and developing
(including the LDCs), then on average for the last 10 years, developed countries
have accounted for about around 28 per cent of India’s total agricultural
exports, whereas around 72 per cent of exports have gone to the developing
countries (Table 4.9). One possible reason can be that as India’s agricultural
exports are at the lower end of the value chain, the market for such products
might be more in developing countries than developed countries. It is also
possible that Indian agricultural exporters find it relatively difficult to meet
the Sanitary and Phytosanitary Standards (SPS) and Technical Barriers to
Trade (TBT) standards in developed countries. However, as value realisation
is typically higher in developed countries, Indian agricultural exporters
might be incentivised to explore more market access opportunities in the
developed country markets.
Table 4.9: India’s Agricultural Exports: Share of Developed and
Developing Countries (%)
2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018- 2019- 2020-
12 13 14 15 16 17 18 19 20 21
Developed 29.72 28.20 24.32 26.54 27.00 28.18 29.75 28.07 29.92 26.47
Countries
Developing 70.28 71.80 75.68 73.46 73.00 71.82 70.25 71.93 70.08 73.53
Countries
Source: Authors’ calculation based on data from APEDA
To understand the impact of FTAs and other economic cooperation
agreements, we divide India’s top 20 export destinations (top 20 based on
2020-21 data) into two groups of countries. Depending on the year, these 20
countries account for 65-70 per cent of India’s agricultural exports. In the first
group, we include countries with whom India has at least one preferential
trade agreement or economic cooperation agreement. This group includes
Bangladesh, the UAE, Vietnam, Saudi Arabia, Indonesia, Nepal, Malaysia,
Agriculture Trade of India and Implications... 79

Japan, Thailand, and Sri Lanka. The group consists of countries with whom
India trades only on an MFN basis and without any preferential trade
agreement (we are ignoring the General System of Preference (GSP) between
India and the US). This group contains the following countries: the US,
China, Iran, Hong Kong, Iraq, the Netherlands, the UK, Canada, Germany,
and Egypt. By some coincidence, each group has 10 countries. The aggregate
market shares of these two groups of countries are shown in Figure 4.6. From
the figure, it is not clear that Indian agricultural exports have performed
better for countries with economic cooperation agreements or FTAs. It
appears that agricultural exports have gone up more in countries with which
India trades only on an MFN basis. This result is not unexpected as increasing
market share in countries with which India has FTAs may not be easy as these
markets have low MFN tariffs and are relatively open. Consequently, India
may face competition from other agricultural exporters in these markets.
Also, as discussed in chapters 6 and 7 in this book, Indian exporters may
face a host of Non-Tariff Measures (NTMs) in these countries. Compliance
with SPS and TBT standards might be another important impediment facing
Indian exporters in these markets.

Figure 4.6: Share of India’s Top 20 Export Destinations for Agricultural Goods
Divided into Countries with which India has Preferential Trade Agreements and
with which India Trades Only on MFN Basis
Source: Authors’ calculation based on data from APEDA

Concluding Observations
Since the WTO AoA was signed in 1995, it is evident from data that the
domination of high-cost producers in global agricultural trade continues.
The US and the EU are still the top two exporters of agricultural commodities
in the world. No new disciplines on domestic subsidies have been
implemented since the AoA and agriculture continues to remain a distorted
sector. Even though the removal of QRs in most countries has opened up
80 India’s Agriculture and Food Exports

better market access for agricultural exporters, there are challenges. Though
the average applied MFN tariff in most countries, especially in developed
countries, is low, there are tariff peaks and tariff escalations. Low average
tariff often hides tariff peaks and tariff escalation pushes countries towards
low value-added exports. On top of these, many developed countries
are allegedly using Standards including SPS and TBT as trade-restrictive
measures.
India’s FTAs and CEPAs, however, do not appear to have affected
agricultural trade in a significant way. India has protected many of its
sensitive agricultural products by keeping them on the negative list. Also, the
preferential tariff reductions have so far not kicked in a major way and the
preference margins are either slim or non-existent. On the other hand, Indian
agricultural exports also have not got any major boost in the countries with
whom India has signed the FTAs. As we have discussed India has lost market
in a major way in Vietnam (an FTA partner) but has increased exports to the
US and China (both trade with India on an MFN basis only).
However, overall, India seems to be doing better in international trade
in agriculture. The country has been consistently running a trade surplus in
agriculture since 1995. Thanks to India’s drive towards self-reliance since the
mid-1960s, and conservative approach towards imports, India is now food
secure and to a large extent food sovereign country. India should continue to
focus on food security, livelihood security and food self-sufficiency, and treat
the essential food sector exports mostly as a vent for surplus. However, for
cash crops, commercial crops, and value-added and processed food, there is
significant potential for Indian exporters. India’s market penetration is low
in most developed country markets and in many of the markets in Africa
India’s presence is very limited. Also, India’s exports are mostly low-value-
added primary commodities.
As the Agricultural Export Policy, 2018 rightly focuses on the increase
in value-added exports, India needs to focus more on food processing and
value-addition. One way of attaining this can be the creation of agricultural
value chains in the country. To make these effective, Indian policymakers
must ensure that the large majority of small and marginal farmers are well
integrated into the development of these value chains. In this context, the
Farmer Producer Organisations (FPOs) can be effectively used for giving
farmers a scale advantage and improving the access of smaller producers to
investments, technology, and markets. To emerge as a high-value exporter
of agricultural goods, it will be important for India to develop branding and
marketing of processed products that can adhere to the standards of the
target markets and build brand reputation and recognition.
Agriculture Trade of India and Implications... 81

References
Colin Simmons, ‘De-Industrialization’, Industrialization, and the Indian
Economy, c. 1850-1947,’ Modern Asian Studies, 1985, 19 (3): 593-622.
EXIM Bank, ‘Agri Export Advantage’, EXIM Bank of India, November 2021.
MOC, Agriculture Export Policy, Ministry of Commerce, Government of India,
December 2018.
WTO, Trade Policy Review: India Report by the Secretariat, WTO Document
Number WT/TPR/S/403, 25 November 2020.
WTO, ‘Trends in World Agricultural Trade: 25 Years of The Agreement on
Agriculture (AoA): Note by The Secretariat WTO Trade Policy Review of
India’, WTO Document Number WT/INF/224/Rev.2, 14 July 2021.
CHAPTER 5

India-European Union Free Trade

Agreements: Possible Threats to Indian
Agriculture
Bibek Ray Chaudhuri* and Ayusha Sengupta**
* Associate Professor, Indian Institute of Foreign Trade, Kolkata Campus (Email ID:
[email protected])
** Master’s Student, Jadavpur University, Kolkata

Introduction
Agricultural trade has been a contentious issue given its consequences for
the well-being of low-income categories. Developing and less developed
countries have been especially sensitive to the liberalisation of agricultural
trade. The major bone of contention is the huge subsidies given by developed
countries to their farmers. This makes it difficult for the poor country farmers
to compete with products originating from such countries. During the years
before the formation of the World Trade Organization (WTO), the developed
countries pressurised the other countries to liberalise the agricultural trade
which culminated in the Agreement on Agriculture (AoA). The developing
and less developed countries were allowed a slower pace of liberalisation and
most of them retained Quantitative Restrictions (QRs). In terms of Regional
Trade Agreements (RTAs), agricultural produce has been mostly kept in
sensitive lists. In the case of a prospective Free Trade Agreement (FTA) with
the EU, the Indian agricultural produce faces both tariff escalation and non-
tariff barriers. Tariffs are in general low. So, while thinking about liberalising
agricultural trade this aspect has to be kept in mind by India. Unduly
liberalising agricultural trade can lead to import surge whereas not much
export surge is expected in this category of products. Sun and Reed (2010)
find that FTAs are trade creating for agricultural products.
European Union (EU)-India FTA negotiations have attracted much
attention among trade policymakers. In contrast to most of the developing
economies, India is regarded as a country with significant supply-side
capacity. This means that in response to any meaningful trade concessions
India-European Union Free Trade Agreements 83

resulting from a bilateral deal, Indian suppliers can substantially increase

their exports to the EU, perhaps at the cost of other developing countries
and EU domestic suppliers. In this way, the likely trade diversion in the EU
may result in reduced imports from other developing and least developed
countries and increased imports from India. On the other hand, India’s
tariff protection on a range of products is relatively high. Therefore, taking
advantage of exchanged tariff concessions under the FTA, EU suppliers
may replace India’s imports from other sources, resulting in trade diversion
for third party countries. Consequently, the overall welfare gains for India
will depend on the impact on producers due to import competition, on
consumers because of price reduction and higher variety of goods to choose
from and finally, on the government owing to import revenue changes. This
chapter assesses the potential implications of the EU-India FTA for India’s
agricultural sector. Specifically, the chapter will look at the likely threat that
may occur due to tariff concessions given to EU agricultural products. This
has important implications for negotiations and designing an appropriate
tariff structure to minimise the impact on domestic agricultural goods
producers.

Literature Review
There has been considerable debate in academic circles about the impact
of FTA on member countries and on the rest of the world through trade
creation and trade diversion that are explained using a partial equilibrium
approach. The trade creation effect of FTAs improves resource allocation
within a region and income for member countries by reducing trade barriers.
It makes consumers better off by giving them greater choice as they can buy
goods from the most efficient supplier at the lowest cost. The trade diversion
effect, on the other hand, means that the FTA would replace imports of
highly efficient non-member countries with imports from less efficient FTA
members. Trade creation results in an improvement in resource allocation
and economic welfare, while trade diversion worsens efficiency and resource
allocation. Besides, trade diversion has a negative impact on non-members
as they lose an exporting opportunity. Thus, while consumers in FTA
member countries may have increased welfare as the FTA enables them
to buy imports at lower prices, an FTA member country overall may face
a loss if the decline in government’s tariff revenue exceeds the consumer’s
gain. In general, an FTA would lead to some amount of trade creation and
trade diversion. If the trade diversion is sufficiently large relative to the trade
creation effects, the FTA could conceivably end up being harmful to the
non-member countries. Successful regional agreements might be expected
84 India’s Agriculture and Food Exports

to increase trade between partners relative to those countries’ trade with the
rest of the world. RTAs violate the MFN clause which is a building stone of
WTO. Article XXIV allows the formation of RTAs between WTO member
countries for substantially all trade causing minimal impact on non-member
countries, especially, in terms of trade and other conditions of trade.
In this study, the impact of FTA between India and the EU (28-nation
bloc) on the agricultural sector is analysed. The potential threat from EU
imports is ascertained by identifying the products which can be targeted
for tariff liberalisation by EU countries. A method has been devised first
to identify potential threat products. In the second stage, the extent of the
threat is estimated through partial equilibrium tariff simulations. As a result,
an idea about the likely import surge can be conceived. The results can then
give a direction to the negotiators about how to minimise the threat while
discussing tariff concessions in agricultural products.
Several studies done on this subject are mostly qualitative. They have
tried to analyse the possible impact of FTAs for the partners and the related
countries.
Ramesh Chand (1998) looks at the implications of removing QRs and
quotas on the trade of agricultural goods in India. The Indian policymakers
fear that liberalisation of agricultural imports would hit Indian producers
and impair the growth prospects of the farm sector. Further, price volatility
might increase to a great extent due to increased linkage to world commodity
markets. Price fluctuations may also result from the dumping of products
that are produced in excess by the exporting country or due to a shortage of
domestic supply in the home country (through exports without restrictions)
which can pose a major threat to food security. The paper (Chand 1998)
also suggests strategies and policies that India should follow to minimise the
adverse impact of QR removal on the agricultural sector.
Grain (2019) analyses the possible threat that the Indian dairy sector
could face from the opening of trade between India and the EU. It concludes
that developing countries like India can only protect their dairy sectors from
the ravages of this distorted global market by instituting high tariff and
non-tariff barriers. Without these measures, the small-scale dairies would
be rapidly wiped out and taken over by global dairy giants. India’s import
tariff on dairy products from the EU is relatively high. There is a chance
now that the signing of the FTA between these two partners will lead to the
elimination of tariffs or any other kind of trade barriers. Since the EU is a
major trading partner of India for dairy products as opposed to India being
one among the several suppliers to the EU market, the opening up of trade
can adversely affect the producers of the dairy sector at home by influencing
India-European Union Free Trade Agreements 85

the price. The import of dairy products from the EU at a lower cost thus can
put downward pressure on domestic prices.
Roy and Mathur (2016) attempts to analyse the effects of trade
liberalisation on the bilateral trade structure between India and the EU
and the consequent welfare effects. The paper considers both the United
Kingdom (UK) as a member of the EU and the situation when the country
exits the monetary union. The study found that when the UK is a member
of the EU, both India and the EU gain more from the situation when the UK
exits the EU due to Brexit. India is estimated to experience a decline in Gross
Domestic Product (GDP) growth rate from 1.1 to 0.5 per cent while the EU,
from 0.1 to -0.5 per cent.
Selim Raihan (2009) performs a detailed analysis in terms of welfare,
macroeconomic, and trade impacts on a number of low-income economies
as a result of the proposed bilateral FTA between the EU and India. A global
general equilibrium modelling technique was applied for analysing the
consequences. A scenario depicting a full FTA between India and the EU
was conducted. The results showed that the EU-India FTA would result in
welfare gains for both India and the EU. In absolute terms, the gains of the
EU would be much higher than those of India. However, in terms of share
in GDP, the gains of India would be much larger than that of the EU. India’s
welfare gain would mainly be driven by the gain in terms of trade, whereas
the EU’s welfare gain would primarily be due to a gain in allocative efficiency.
Most of the low-income countries under consideration in the analysis would
experience falls in exports, to both the EU and Indian markets, mainly
because of losses in preferences and diversion of trade.
Assessing the potential impact of an EU-India trade agreement, Navarra
(2020) provides an estimate of the potential effects of an FTA that partly
liberalises trade in goods and services between the EU and India. Effects are
measured both for the welfare and trade volumes. The model used belongs
to the group of new quantitative trade models, where the demand for goods
and services is defined by a ‘structural gravity equation’ that links trade
flows to country-specific characteristics and bilateral trade costs between
countries. The gains for both sides are estimated to be in the range of € 8 to
€ 8.5 billion. A reduction in tariffs by almost 90 per cent and a symmetric
reduction in non-tariff measures by around 3 per cent have been assumed to
estimate these gains.
Various studies have also examined the impact of FTAs on trade at
disaggregated sector levels, keeping in mind the difference in impact
depending on the products being traded. A study conducted by Shanping
(2014) on the trade effects of the Association of Southeast Asian Nations
(ASEAN)-China FTA revealed a significant amount of trade creation in
86 India’s Agriculture and Food Exports

agricultural and manufactured goods. Taguchi (2015) analyses the trade

effects of ASEAN-plus-one FTA with a sample of 14 countries for 20 years
and the results revealed that differences in general tariff rate and preferential
tariff rates are the reason for the variation in the degree of trade creation
in different agreements. Some agreements are recorded with significant
trade creation, while others with relatively less significant effects. Varma
and Abhyaratne (2016) examined the India Sri Lanka Free Trade Agreement
(ISLFTA) and found evidence of trade creation but no trade diversion.
Varma et al. (2017) examines the trade creation and trade diversion effects of
two regional agreements, namely, the Asia-Pacific Trade Agreement (APTA)
and the India-Singapore Comprehensive Economic Cooperation Agreement
(ISCECA) from the viewpoint of India as a participating country. The results
reveal that the agreements have not led to any trade creation, possibly due to
the presence of a cluster of smaller, economically less influential countries,
high cost of intraregional trade, and prominence of South-South integration.
Also, APTA’s structure is characterised by the limited scope of agreements,
overlapping memberships leading to confusion in objectives and rules of
origin which are anyhow stringent, acting as some of the reasons why the
Agreement has not been able to create substantial trade among the members.

India-European Union Trade

India has a keen interest in accessing the EU market, as the region is India’s
biggest market (the top export market for its 10 biggest export commodities).
EU-India trade rose from € 28 billion in 2003 to € 55 billion in 2007 (which
now stands at € 88.1 billion in 2021), pushing the two to start negotiations
on a bilateral trade agreement in 2007. Although the share of India’s exports
to the EU in its total exports had declined over time, its share remained well
above 20 per cent in 2007 (As of the year 2020 it stands at only 14%). Exports
from India to the EU increased quite considerably over time. In 1990, the
export value increased from US$ 6,252 million in 1990 to US$ 35,517 million
in 2007 to US$50,037 million in 2021. Also, the share of India’s exports to the
EU’s total imports increased as well during this period. In 1990, this share
was 0.4 per cent, which increased to 0.66 per cent in 2007 (Presently it stands
at 2.2%). On the other hand, an increasing trend is observed in the share
of EU exports to India in total EU exports. In 1990, the share was 0.06 per
cent which increased to 0.08 per cent in 2007 which increased to 1.9% in
2021. The EU’s exports to India increased substantially during the 2000s.
In 2000, they totalled US$ 10,690 million, increasing to US$ 44,020 million
in 2007 and further to US$ 45,686 million in 2021. Although the share of
imports from the EU in India’s total imports declined over time, in 2007 the
India-European Union Free Trade Agreements 87

share was still as high as 17.6 per cent. It stands at around 9% in 2021. There
are products from the agricultural sector where India’s imports from the EU
have been significantly increasing. Some of them include vegetable seeds,
fresh fruits, oils, beer, natural honey, and so on.
Market access for goods remains the core component of any FTA. In
the initial proposal, the EU’s exclusion list included 226 products, mostly
chemicals, petrochemicals, plastics, ceramics, and glassware. On the other
hand, India proposed an exclusion list of about 150 agricultural goods and
250 manufactured products. The agricultural goods included processed food,
dairy products, sugar, fruit and vegetables, meat products including poultry,
maize, honey, mushrooms, egg products, saffron, coriander seeds, vanaspati,
and cocoa powder. Trading relations since 2013, haven’t progressed much
between India and the EU, unless in the recent couple of years, where the two
have engaged in some initial round of discussions to start for a Bilateral Trade
and Investment Agreement (BTIA) including an Early Harvest Agreement.
A list of products has been identified and shared by the Department of
Commerce (DoC), wherein the EU has expressed its desire to explore
market access through a rapid reduction in the existing tariff rates. Such
products primarily include items from the Indian food processing sector
such as wines and spirits, apart from other minor food items like olive oil,
pasta, etc.
India has a trade surplus in the food processing as well as the agri-food
sector, with respect to the EU (excluding items such as meat and edible meat
offal, certain products of animal origin, vegetable plaiting materials, and
other vegetable products (n.e.s)). During 2019-20, India recorded a trade
surplus in the agri-food sector of US$ 2,118.9 million, with exports worth
US$ 2,994 million and imports of US$ 825.1 million. The food processing
sector too, witnessed a surplus of US$ 177.40 million during the same
period, with exports of US$ 728.20 million and imports worth US$ 550.8
million. However, the imports of processed food from the EU constituted a
higher share of 66.8 per cent of the total agri-food imports compared to the
exports of the same to the EU, which constituted a share of 24.7 per cent of
the total agri-food exports.
In this chapter, the import threat from the possible India-EU FTA is
analysed. Table 5.1 presents the top 10 import items in 2018. The growth rate
between 2011 and 2018 shows that turbo jet, liquified natural gas, and light
vessels have experienced the highest growth during this period. In terms of
the EU’s share in India’s imports from the world significant improvement
is observed for light vessels, liquified natural gas, silver, and parts and
accessories for tractors and motor vehicles.
88 India’s Agriculture and Food Exports

Table 5.1: Top Imports of India from EU

Growth Share of Share of
Product
Product Label Rate World World
Code
(2011-18) 2011 2018
71023100 Non-industrial diamonds unworked –33.06 66.63 35.24
or simply sawn, cleaved, or bruted
(excluding industrial diamonds)
71069100 Silver, including silver plated with 9.92 27.41 35.02
gold or platinum, unwrought
(excluding silver in powder form)
84111200 Turbojets of a thrust > 25 kN 1,976.93 39.29 29.20
87089900 Parts and accessories, for tractors, 49.74 25.00 34.49
motor vehicles for the transport of
ten or more persons,...
71081200 Gold, including gold plated with –62.60 3.22 1.90
platinum, unwrought, for non-
monetary purposes....
76020010 Waste and scrap, of aluminium 52.49 32.16 23.83
(excluding slags, scale, and the like
from iron and steel production) ...
89059090 Light vessels, fire-floats, floating 372.88 8.47 27.36
cranes and other vessels, the
navigability of which is subsidiary
to their main function (excl.
seagoing vessels, dredgers,
floating or submersible drilling or
production platforms; fishing vessels
and warships)
27111100 Natural gas, liquefied 1206.64 0.59 4.25
85238020 Media for the recording of sound or –58.25 68.78 48.58
other phenomena, whether or not
recorded, including matrices ...
Source: Created by the Authors
In the event of negotiation in the FTA between India and the EU, the
same products may have an ever increasing share in India’s imports with a
resultant threat to domestic producers of those items in India. In turn, it can
adversely affect the prices of domestically produced agricultural goods and
hence the export demand of India.

Motivation
The signing of this FTA between India and EU-28 can have both positive
and negative impacts for consumers as well as producers of India. Along
India-European Union Free Trade Agreements 89

with the welfare gain that this will bring there will also be some implications
of this on the livelihoods of several million people here. The focus will
mainly be on threats that this FTA can pose to the local producers producing
and exporting the same products which can be imported from the EU 28
at lower tariff rates after the signing of this Agreement. This kind of trade
liberalisation can also widen inequality as distributive effects between the
factors of production are ignored in measuring welfare because it assumes
that labour and capital shares of income as constant. Another channel
through which trade liberalisation can affect inequality is the relative change
in prices that have different effects on consumers and producers through
price volatility when there is dumping of goods from foreign countries at a
price lower than its market price.
A more severe impact of the FTA, though, would be on India’s
agricultural sector and on the livelihoods of some 600 million people who
are dependent on it. Yet farmers have woken up only recently to the threats
inherent in the proposed FTA. One sector alive to the near impossibility
of breaking into the EU market is the cooperative dairy farms. Gujarat
Co-operative Milk Marketing Federation (GCMMF), India’s largest food
products marketing organisation, has been writing repeatedly to the Prime
Minister and Commerce Minister about the vulnerability of the dairy sector.
Better known by its Amul brand, GCMMF is worried that the one-way trade
through the FTA is likely to kill the cooperative dairies, which are among
the top providers of livelihood. Rupinder Singh Sodhi, GCMMF Managing
Director, told Down To Earth1 in March 2014, that the EU is anticipating a
huge market opportunity in India once the FTA is ratified and New Delhi
needs to be cautious on this score. Dairy cooperatives generate employment
for 15 million families in rural India across 1,40,000 villages.
A significant threat to the growth of the dairy sector is the EU’s push
on Geographical Indications (GIs). This is a tag given to products whose
quality, reputation, or other characteristics are essentially attributable to
its geographical origin, such as Champagne from the eponymous region of
France, Scotch whiskey from Scotland, and Parma ham of Italy. The EU is
strong on these Intellectual Property (IP) rights and has registered close to
3,000 GIs, primarily wines and agri-products, in the trade bloc.
Thus, one needs to assess the potential threat for agricultural products
among others. Given the enormous importance of the sector in providing
livelihoods to teeming millions, an objective assessment would bring forth
the likely magnitude of impact. This can guide the negotiators to effectively

1
Down To Earth | Latest news, opinion, analysis on environment & science issues |
India, South Asia
90 India’s Agriculture and Food Exports

bargain and steal good deals. The chapter proposes to quantify the likely
impact of the FTA on imports of agricultural goods from the EU to India.

Methodology
To find the agricultural products which may potentially face threat from EU
imports, two steps are followed. At the first step, the initial set of products
that face threats from EU products if the FTA is signed is sought for. A
natural choice would be products that are being exported to India in high
volumes and tariffs are relatively higher on such products. The reason is
that given the elasticities of import demand a reduction in tariff has the
potential to significantly increase imports in such products. From the point
of the EU to maximise the gains from the trade deal such products may be
a natural choice among others. Further, the importance of such products in
the EU’s basket of agricultural commodities exported to India is considered.
The growth of exports into India has been considered between 2013 and
2018. Only those products which have consistently been exported above US$
1 million have been considered. Finally, the third filter of gain in market
share has been used by applying the Shift Share approach (SSA) (Chaudhuri,
2018). This method reveals the increase in market share of exports to India
from the EU compared to the total shift in the market (between 2013 and
2018). The intersection set of all these lists obtained from the different filters
applied gave us the initial set of products.
If India does not produce enough of these products to satisfy the
domestic needs the increase in imports might not be harmful per se. It is
difficult to estimate the domestic needs given the dearth of consumption
data at the product level. The second-best alternative in our view is to look
at exports of such products from India which at least shows that a significant
domestic production is happening. Hence, the share of exports data for such
products is used to determine the significant domestic production of the
products. The share was calculated by dividing the 8-digit HS figure with the
6-digit HS export figure to which it belongs. This set of products was then
matched with the products obtained from the earlier paragraph. Thus, we
obtained the potential list of forty-five products which can face the threat of
higher imports if the Agreement goes through (Table 5.2).
In the next stage, the likely import surge due to tariff reductions is
estimated. Partial equilibrium simulations were applied to estimate the likely
increase in imports. Five scenarios have been considered one of which is
full liberalisation (0 per cent). The others are tariff reduction by 5 per cent,
10 per cent, 15 per cent, and 20 per cent. The SMART module developed
and hosted by the World Bank has been used for this purpose. SMART is a
India-European Union Free Trade Agreements 91

Table 5.2: Selection of Potential Threat Agricultural Products

Share of
Exports
Product Growth Percentage Tariff
Product Label from India
Code Rate Net Shift (%)
to the
World 2018
07131000 Dried, shelled peas Pisum 339.11 14.83 15 100.00
sativum, whether or not
skinned or split
12099190 Vegetable seeds, for sowing: 479.62 7.75 5 67.60
Other
23099090 Preparations of a kind used in 93.56 5.74 15 57.97
animal feeding (excluding dog
or cat food put up for retail sale)
08081000 Fresh apples 1516.42 5.42 15 95.16
15200000 Glycerol, crude; glycerol 740.20 5.24 30 100.00
waters, and glycerol lyes
20098990 Juice of fruit or vegetables, 1764.65 5.04 50 46.33
unfermented, whether or not
containing added sugar or
other sweeteners.
17021190 Lactose in solid form and 126.31 4.31 25 85.27
lactose syrup, not containing
added flavouring or colouring
matter
15099010 Olive oil and fractions obtained 81.20 2.93 35 59.46
from the fruit of the olive tree
19011090 Food preparations for infant 369.89 2.87 50 99.34
use, put up for retail sale, of
flour, groats, meal, starch.
17019990 Cane or beet sugar and 625.33 2.53 100 98.69
chemically pure sucrose, in
solid form (excluding cane and
beet sugar)
04041020 Whey and modified whey, 173.21 2.40 40 93.72
whether or not concentrated
or containing added sugar or
other sweetening matter
24022090 Cigarettes, containing tobacco: 7947.83 1.96 30 88.98
Other
22030000 Beer made from malt 251.59 1.79 100 98.87
18031000 Cocoa paste (excluding 2993.52 1.72 30 100.00
defatted)
92 India’s Agriculture and Food Exports

Share of
Exports
Product Growth Percentage Tariff
Product Label from India
Code Rate Net Shift (%)
to the
World 2018
08013100 Fresh or dried cashew nuts, in 2742.86 1.52 2.5 96.36
shell
03061790 Frozen shrimps and prawns, 907.12 1.29 30 96.02
even smoked, whether in shell
or not, including shrimps and
prawns.
21061000 Protein concentrates and 169.71 1.27 40 99.83
textured protein substances
04090000 Natural honey 756.90 1.09 60 100.00
21021090 Active yeasts: Other 287.73 1.00 30 58.00
20057000 Olives, prepared or preserved 185.92 0.92 30 100.00
otherwise than by vinegar or
acetic acid (excluding frozen)
11071000 Malt (excluding roasted) 1051.92 0.84 30 99.36
12102000 Hop cones, ground, powdered 126.50 0.83 30 100.00
or in the form of pellets;
lupulin
15179090 Edible mixtures or 542.32 0.77 30 80.25
preparations of animal or
vegetable fats or oils and edible
fractions
01012990 Live horses (excluding pure- 240.97 0.71 30 100.00
bred for breeding)
11090000 Wheat gluten, whether or not 150.77 0.70 30 98.65
dried
20091900 Orange juice, unfermented, 4196.67 0.67 35 100.00
whether or not containing
added sugar or other
sweetening matter
24012010 Tobacco, partly or wholly 462.81 0.62 30 76.43
stemmed/stripped, otherwise
unmanufactured: Flue cured
virginia tobacco
10039000 Barley (excluding seed for 550.44 0.61 0 100.00
sowing)
09096139 Juniper berries and seeds of 346.23 0.60 0 92.39
anise, badian, caraway or fennel,
neither crushed nor ground.
India-European Union Free Trade Agreements 93

Share of
Exports
Product Growth Percentage Tariff
Product Label from India
Code Rate Net Shift (%)
to the
World 2018
22042190 Wine of fresh grapes, including 257.64 0.59 150 85.40
fortified wines, and grape must
whose fermentation has been
arrested.
12093000 Seeds of herbaceous plants 337.17 0.57 15 98.40
cultivated mainly for flowers,
for sowing
18010000 Cocoa beans, whole or broken, 132.08 0.56 30 100.00
raw or roasted
06029030 Live plants, including their 208.99 0.52 10 76.98
roots, and mushroom spawn
(excluding bulbs, tubers,
tuberous roots, corms)
12074090 Sesamum seeds, whether or 845.45 0.47 30 95.54
not broken: Other
22072000 Denatured ethyl alcohol and 353.95 0.46 30 100.00
other spirits of any strength
11081200 Maize starch 124.37 0.44 30 98.62
18062000 Chocolate and other food 88.77 0.42 30 99.13
preparations containing
cocoa, in blocks, slabs or bars
weighing >2kg
13022000 Pectic substances, pectinates, 78.09 0.25 15 99.68
and pectates
11072000 Roasted malt 135.81 0.24 30 100.00
02032900 Frozen meat of swine 135.59 0.24 30 100.00
(excluding carcases and half-
carcases, and hams, shoulders
and cuts thereof
11081300 Potato starch 77.17 0.19 30 100.00
13023900 Mucilages and thickeners 85.16 0.11 30 100.00
derived from vegetable
products, whether or not
modified
07112000 Olives, provisionally preserved, 75.39 0.06 30 100.00
e.g. by sulphur dioxide gas, in
brine, in sulphur water.
15050090 Wool grease and fatty 70.89 0.04 15 73.29
substances derived therefrom,
including lanolin: Other
94 India’s Agriculture and Food Exports

simulation model which has been used to measure the total trade creation
and trade diversion as a result of a preferential tariff reduction granted
by India to its partner (EU in this case). In measuring trade creation, one
will be requiring the elasticity of import demand to see how much more
demand will be created as a direct effect of a reduction in price (due to the
elimination of tariffs). On the other hand, the elasticity of substitution would
help to calculate how much of trade will be diverted from other partners to
the preferred partner (EU). Apart from import change due to tariff change,
SMART also calculates the change in welfare and import tariff revenue
change. The user-defined SMART module has been used to carry out the
analysis at the 8-digit HS level (not possible in SMART in-built module).
As far as our knowledge goes this has not been attempted in earlier studies.
Data for the analysis has been primarily obtained from Trade Map. The
tariff data at the 8-digit HS level has been collected from Market Access Map.

Results
The top ten agricultural products which according to the outlined method
face potential threat of import surge can be observed from Table 5.2. Dried,
shelled peas Pisum sativum, whether or not skinned or split (07131000),
vegetable seeds, for sowing: other (12099190), preparations of a kind
used in animal feeding (excluding dog or cat food put up for retail sale)
(23099090), fresh apples (08081000), glycerol, crude; glycerol waters and
glycerol (15200000), juice of fruit or vegetables, unfermented, whether or
not containing added sugar or other sweetening (20098990), lactose in solid
form and lactose syrup, not containing added flavouring or colouring matter
(17021190), olive oil and fractions obtained from the fruit of the olive tree
solely by mechanical or other (15099010), and food preparations for infant
use, put up for retail sale, of flour, groats, meal, and starch (19011090). These
products appear to be potential threats from the point of view of significant
domestic production reflected in high export share from India. Further,
their tariffs are relatively high and hence can be targeted for reduction by
EU authorities. A further reason for that is despite high tariffs the products
are being imported by India at a high level. Again, growth and increasing
share compared to other products make them possible threats for domestic
producers. Hence, demand for such products may be high within the domestic
economy causing problems for domestic substitutes. Agriculture being
highly labour-intensive can cause considerable loss of employment. This can
be damaging since in many cases these sector employs a vulnerable part of
the labour force. Caution needs to be exercised by the Indian negotiators
while agreeing upon the tariff reductions for such products. To look at
India-European Union Free Trade Agreements 95

possible import surges, partial equilibrium simulations were applied. Tariffs

were reduced and the impact was estimated on imports of such products.
Table 5.3 presents the results of partial equilibrium simulations. Beer
made from malt (22030000), natural honey (4090000), wine of fresh grapes,
including fortified wines, and grape must whose fermentation has been
arrested (22042190), frozen meat of swine (excluding carcases and half-
carcases, and hams, shoulders, and cuts thereof) (2032900) and maize
starch (11081200) are the top five agricultural products showing the highest
possibility of import surge. For beer, the range of import increase is 20.29
per cent to 405.88 per cent (for tariff reduction by 5 per cent to full tariff
liberalisation). Similar changes for natural honey are estimated to be between
30.31 per cent and 363.72 per cent. On average for the first five products in
terms of highest percentage import change the range is between 18.07 per
cent and 239.46 per cent. Thus, the analysis at the ex-ante level shows that
a substantial rise in imports in percentage terms for certain products is a
possibility.
Table 5.3: Changes in Imports of Potentially Threat Agricultural Products for India
Due to Tariff Concessions to EU
Full Partial Liberalisation
Product Liberalisation (Reduction in tariff %)
Product Name
Code Tariff Tariff Tariff Tariff
Tariff 0
20 15 10 5
22030000 Beer made from malt 405.88 81.18 60.88 40.59 20.29
04090000 Natural honey 363.72 121.24 90.93 60.62 30.31
22042190 Wine of fresh grapes, 181.81 24.24 18.18 12.12 6.06
including fortified wines,
and grape must whose
fermentation has been
arrested.
02032900 Frozen meat of swine 136.63 91.09 68.32 45.54 22.77
(excluding carcases
and half-carcases, and
hams, shoulders and cuts
thereof.
11081200 Maize starch 109.26 43.7 32.78 21.85 10.93
11081300 Potato starch 103.75 69.17 51.87 34.58 17.29
07112000 Olives, provisionally 101.51 67.67 50.75 33.84 16.92
preserved, e.g. by sulphur
dioxide gas, in brine, in
sulphur water.
11072000 Roasted malt 92.96 61.98 46.48 30.99 15.49
96 India’s Agriculture and Food Exports

Full Partial Liberalisation

Product Liberalisation (Reduction in tariff %)
Product Name
Code Tariff Tariff Tariff Tariff
Tariff 0
20 15 10 5
04041020 Whey and modified 86.88 57.92 43.44 28.96 14.48
whey, whether or
not concentrated or
containing added sugar or
other sweetening matter
19011090 Food preparations for 63.84 25.54 19.15 12.77 6.38
infant use, put up for
retail sale, of flour, groats,
meal, starch.
15179090 Edible mixtures or 58.7 39.13 29.35 19.57 9.78
preparations of animal or
vegetable fats or oils and
edible fractions.
17019990 Cane or beet sugar and 38.61 7.72 5.79 3.86 1.93
chemically pure sucrose,
in solid form (excluding
cane and beet sugar)
23099090 Preparations of a kind 31.11 20.74 15.56 10.37 5.19
used in animal feeding
(excluding dog or cat food
put up for retail sale)
11071000 Malt (excluding roasted) 28.79 19.19 14.39 9.6 4.8
20098990 Juice of fruit or vegetables, 26.46 10.59 7.94 5.29 2.65
unfermented, whether
or not containing added
sugar or other sweetening
matter
20091900 Orange juice, 25.47 16.98 12.73 8.49 4.24
unfermented, whether
or not containing added
sugar or other sweetening
matter
21021090 Active yeasts: Other 22.03 14.68 11.01 7.34 3.67
17021190 Lactose in solid form 21.65 17.32 12.99 8.66 0
and lactose syrup,
not containing added
flavouring or colouring
matter.
24022090 Cigarettes, containing 16.23 10.82 5.41 2.7 2.7
tobacco: Other
India-European Union Free Trade Agreements 97

Full Partial Liberalisation

Product Liberalisation (Reduction in tariff %)
Product Name
Code Tariff Tariff Tariff Tariff
Tariff 0
20 15 10 5
01012990 Live horses (excluding 13.51 9.01 6.76 4.5 2.25
pure-bred for breeding) +
detailed label not available
24012010 Tobacco, partly or 10.75 7.17 5.38 3.58 1.79
wholly stemmed/
stripped, otherwise
unmanufactured: Flue
cured virginia tobacco
13022000 Pectic substances, 9.61 6.4 4.8 3.2 1.6
pectinates, and pectates
06029030 Live plants, including 9.21 9.21 9.21 9.21 9.21
their roots, and
mushroom spawn
(excluding bulbs, tubers,
tuberous roots, corms)
18031000 Cocoa paste (excluding 5.35 3.57 2.67 1.78 0.89
defatted)
18062000 Chocolate and other food 4.87 3.25 2.43 1.62 0.81
preparations containing
cocoa, in blocks, slabs or
bars weighing > 2kg
07131000 Dried, shelled peas Pisum 4.66 1.86 1.4 0.93 0.47
sativum, whether or not
skinned or split
15200000 Glycerol, crude; glycerol 3.78 3.78 2.83 1.89 0.94
waters and glycerol lyes
15050090 Wool grease and fatty 2.4 2.4 2.4 1.6 0.8
substances derived
therefrom, including
lanolin: Other
11090000 Wheat gluten, whether or 2.24 1.49 1.12 0.75 0.37
not dried
09096139 Juniper berries and seeds 2.06 1.38 1.03 0.69 0.34
of anise, badian, caraway
or fennel, neither crushed
nor ground
13023900 Mucilages and thickeners 1.94 1.29 0.97 0.65 0.32
derived from vegetable
products, whether or not
modified
98 India’s Agriculture and Food Exports

Full Partial Liberalisation

Product Liberalisation (Reduction in tariff %)
Product Name
Code Tariff Tariff Tariff Tariff
Tariff 0
20 15 10 5
12102000 Hop cones, ground, 1.85 1.24 0.93 0.62 0.31
powdered or in the form
of pellets; lupulin
20057000 Olives, prepared or 1.73 1.15 0.86 0.58 0.29
preserved otherwise than
by vinegar or acetic acid
(excluding frozen)
12093000 Seeds of herbaceous 1.5 1.5 1.5 1.01 0.5
plants cultivated mainly
for flowers, for sowing
18010000 Cocoa beans, whole or 1.22 0.82 0.61 0.48 0.2
broken, raw or roasted
08081000 Fresh apples 1.13 0.45 0.34 0.23 0.11
21061000 Protein concentrates 1.09 0.73 0.55 0.36 0.18
and textured protein
substances
12099190 Vegetable seeds, for 0.94 0.94 0.94 0.99 0.94
sowing: Other
12074090 Sesamum seeds, whether 0.27 0.18 0.13 0.09 0.04
or not broken: Other
22072000 Denatured ethyl alcohol 0.15 0.1 0.08 0.05 0.03
and other spirits of any
strength
08013100 Fresh or dried cashew 0.04 0.03 0.02 0.01 0.01
nuts, in shell
Source: Authors’ own calculation

Implications
Making sense of the results outlined requires looking at the priorities and
realities in the Indian agricultural sector. The Agricultural Policy (2020)2
states that the import of products aiding in value-added exports (E.g.
horticulture, dairy, poultry and inland aqua-culture) would be encouraged.
Hence, further analysis of whether the identified products fall in such
categories must be explored. However, at an 8-digit HS level that is less likely.
A detailed analysis of employment and livelihood effects can throw light on
the potential damage in each product category. Report by a major trading

2
NTESCL636802085403925699_AGRI_EXPORT_POLICY.pdf (commerce.gov.in)
India-European Union Free Trade Agreements 99

partner country (Australia) show that due to demographic and other reasons
food demand in India may surpass supply by 2035. Again, a detailed product-
level analysis on this aspect can help understand our stance in signing trade
agreements. There are apprehensions that new Farm Laws3 may lead to high
import of agricultural products. The country thus needs to be cautious while
signing trade agreements given its potential to lead to import surges.
Results of the empirical analysis in this chapter show that even at an 8-digit
level there is a substantial number of products where the country needs to
be careful while negotiating with the EU. Further, for a number of products
the import may increase amply following tariff reductions. These results may
act as an initial reference point for starting discussions on this front. One
aspect which could not be considered for data limitations is the price. Unit
Value Index (UVI) could not be calculated at an 8-digit level for the dearth of
volume data. This could further show the quality differences between Indian
and EU varieties. If India is importing high-quality agricultural products
from EU than is domestically available then the negotiating stance may be
different depending on demand for such products. Comparing UVI values
across importers could also reveal the price competitiveness of EU products’,
vis-à-vis, other countries. A unilateral concession to the EU may cause a
lot of trade diversion which can attract commensurate retaliatory measures
from affected countries.

References
Amrita Roy and S.K. Mathur, ‘Brexit and India–EU Free Trade Agreement’,
Journal of Economic Integration, December 2016, 31(4): 740-73.
B.R. Chaudhuri, ‘Shift Share Analysis: An Application to Analysis of Indian
Exports’ in Biswajit Nag and Debashis Chakraborty (eds.) India’s Trade
Analytics Patterns and Opportunities’, SAGE India Pvt. Ltd., First Edition,
2018.
C. Navarra, ‘Assessing the Potential Impact of an EU-India Trade Agreement’,
European Parliamentary Research Service, 2020, available at EPRS_
STU(2020)642841_EN.pdf (europa.eu), accessed on 31.10.2021.

3
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill,
2020 (which allows farmers and traders to sell and purchase farmers’ produce through
alternate channels outside regulated APMC markets, without paying fees or levies to
the state government); The Farmers (Empowerment and Protection) Agreement on
Price Assurance and Farm Services Bill, 2020 (which draws up a national framework for
contract farming agreements with agri-business firms, processors, wholesalers, exporters
or large retailers for farm services and sale of future farming produce at a mutually agreed
remunerative price)
100 India’s Agriculture and Food Exports

Grain, ‘Indian Dairy Under Threat from New Trade Deals’, Report, 2019 available
at https://www.grain.org/system/articles/pdfs/000/006/257/original/India
dairy and FTAs.pdf?1560958839, accessed on 10.11.2021.
H. Taguchi, ‘Trade Creation and Diversion Effects of ASEAN-plus-one Free
Trade Agreements’, Economics Bulletin, 2015, 35(3): 1856-66.
R. Chand, ‘Removal of Import Restrictions and India’s Agriculture: The Challenge
and Strategy’, Economic and Political Weekly, 1998, 33(15): 850-54.
S. Raihan, ‘India’s PTAs and Their Economic Impacts: Quantitative Assessments
Using a Partial Equilibrium Modeling Framework’, MPRA Paper, University
Library of Munich, Germany, 2009.
S. Sun and M. R. Reed, ‘Trade Creation and Diversion of Free Trade Agreements’,
American Journal of Agriculture Economics, 2010, 92(5): 1351–63.
S. Varma and A. Abhayaratne, ‘Impact of Foreign Trade Agreements on Trade
Flows: A Study of the India-Sri Lanka Free Trade Agreement’, Journal of
Business Thought, 2016, Vol 4: 103-13.
S. Yang and I. Martínez-Zarzoso, ‘A Panel Data Analysis of Trade Creation and
Trade Diversion Effects: The Case of ASEAN-China Free Trade Area’, China
Economic Review, 2014, 29, (C), 138-51.
Sumati Varma, Vikas Madhukar, Anoma Abhyaratne, and Kanika Bankhad,
‘Trade Creation and Trade Diversion: India’s Experience in APTA and
ISCECA’, Paper submitted for the National Conference on Managing Indian
Economy: Challenges for Future, Deendayal Upadhayay College, Delhi
University, 11 February 2017.
CHAPTER 6

India-United Kingdom Trade in Agro-

Foods: Challenges and Opportunities
Arpita Mukherjee* and Angana Parashar Sarma**
* Professor, ICRIER, New Delhi. E-mail: [email protected]
** PhD scholar at BITS, Pilani. E-mail: [email protected]

Introduction
In the last decade, agriculture and food markets globally, have witnessed
a number of changes. An increase in incomes, urbanisation, changing
consumer preferences, the growth of organised retail, etc., have led to higher
integration of both national and global markets.1 Trade in agro-food products
has grown steadily with a reduction in tariffs.2 Most prominently, there has
been a significant rise in trade in agro-food products. From the US$ 0.97
trillion in 2010 to the US$ 1.37 trillion in 2020, exports of these products
have increased by 41.24 per cent.3
Given India’s endowment of arable land and favourable agro-climatic
regions, raw materials, cost competitiveness and location advantages, India is
amongst the world’s largest producers and exporters of agriculture and food
products. In the past, India exported mostly raw materials and intermediate
products but over time, the Indian food processing industry has been making
a significant contribution to the agro-food trade. The processed food sector
in India is one of the largest in the world, estimated to be worth US$ 535
billion by 2025-26.44 It accounts for 32 per cent of India’s total food market
and accounts for 6 per cent of total industrial investment in the country.

1
Available at https://www.fao.org/3/y4252e/y4252e12.htm, accessed on 16 October
2021.
2
Available at https://www.ers.usda.gov/amber-waves/2021/june/how-the-removal-
of-tariffs-would-impact-agricultural-trade/, accessed on 16 October 2021.
3
Trade in agro-food exports have been calculated from UNComtrade Trade Statistics
and ITC TradeMap. The HS codes used to refer to ‘agro-food’ products include 02, 03, 04,
07, 08, 09, 10, 11, 12, 15, 17, 18, 19, 20, 21, and 22.
4
Available at https://www.investindia.gov.in/sector/food-processing, accessed on 2
April 2022.
102 India’s Agriculture and Food Exports

The sector contributes roughly 9 per cent of Gross Domestic Product (GDP)
towards manufacturing and 11 per cent towards agriculture. In 2020-21, the
food processing sector accounted for a share of 10.4 per cent of India’s total
exports.5
The key exported food products from India include pulses, processed
fruits, vegetables and juices, groundnuts, guar gum, cereal preparations,
milled products, alcoholic beverages, and oil meals. Indian agri-food
products are exported to over 70 countries and the United Kingdom (UK)
is one of the key markets (Mukherjee and Bharti, 2021). With the world’s
second-most populous country after China, India has a large market with
growing demand for food products. The food and grocery market of India is
the sixth-largest in the world, with 70 per cent of the sales attributed to the
organised retail segment.6 Factors like the growing presence of the organised
retail sector, rise in disposable incomes with increased preferences for diverse
food products, expansion of food processing sector, the increasing role of the
private sector in food processing, marketing, branding, etc., have made India
an attractive market for global food exporters, including the UK companies.
The UK is a major importer of agro-food products from the world and
imports more than 50 per cent of its total consumption (Lang and McKee,
2018). Prior to Brexit, the majority of its trade was with the European Union
(EU). With Brexit, the UK is diversifying its trade markets away from the
EU focusing more on emerging economies, including India. Fruits and
vegetables are among the major agricultural produce imported by the UK; for
example, mangoes and grapes from India. The UK is also a net importer of
dairy products from the world, although it is a net exporter of some products
such as fresh milk and cream. Major production of the country includes milk
and milk products, meat (poultry, mutton, lamb, pig), vegetables (potatoes,
carrots, turnips, etc.), mushrooms, and oilseeds.7 Among crops, wheat is the
most widely grown. The UK produces a diverse range of products including
meat, seafood, baked goods, dairy, ready-made meals, soft drinks/non-
alcoholic beverages, and alcoholic beverages (such as malt, beer, and spirits)
which are/can be exported to India.
In agro-foods and beverages, India had a positive trade balance with the
UK in 2020 at US$ 0.55 billion and exports from India to the UK have grown

5
Available at https://www.investindia.gov.in/siru/indian-food-processing-sector-
untapped-growth-opportunity, accessed on 16 October 2021.
6
Available at https://www.ibef.org/industry/indian-food-industry.aspx, accessed on
16 October 2021.
7
Available at https://assets.publishing.service.gov.uk/government/uploads/system/
uploads/attachment_data/file/950618/AUK-2019-07jan21.pdf, accessed on 16 October
2021.
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 103

by 55.72 per cent during 2010-2020.8 While there is potential for enhancing
trade, there are trade barriers such as high tariffs in India for UK’s exports
and limited market access for select products like dairy on both sides. This
along with non-tariff measures like stringent food safety conditions or
labelling requirements can be a trade barrier, especially for the Small and
Medium Enterprises (SMEs) in the food and beverages sector. The Enhanced
Trade Partnership (ETP) signed between India and the UK in February 2021
can leverage the untapped trade potential between the two economies. Both
sides are exploring the priorities and challenges, and food and drinks have
been identified as a key sector of interest under the ETP.

Objective, Methodology, and Data Sources

Given this background, the objective of this chapter is to present an overview
of the food and drinks markets in both economies and identify the existing
and emerging trade patterns in the agro-food sector between India and the
UK, focusing on some key products which are currently exported or can
be exported in the future, if trade barriers are removed. The chapter then
presents the impact of tariff and non-tariff measures on exports and suggests
policy recommendations on three key areas, namely, (a) tariff rationalisation,
(b) removal of non-tariff barriers (NTB), and (c) sharing of knowledge
and cooperation, to address the barriers and strengthen the bilateral trade
through the ETP.
The chapter is based on secondary data and information analysis
and 20 Key Informant Interviews (KIIs). The trade data has been taken
from UNComtrade Trade Statistics and ITC Trade Map Database, while
production data has been taken from websites of various government
agencies/ministries such as the Ministry of Food Processing Industries
(MoFPI), Ministry of Agriculture and Farmers’ Welfare, Agricultural and
Processed Food Products Export Development Authority (APEDA), etc.
Tariff data have been accessed from World Tariff Profiles of the World Trade
Organization (WTO).

Layout of This Chapter

The layout of the chapter is as follows: Section 2 presents some recent trends
and developments in the agro-food sector of India and the UK. Section
3 presents an overview of India’s and UK’s trade with the world and their
bilateral trade in the agro-food sector. Given that India and the UK have
decided to launch a bilateral trade agreement and food and drinks have
been identified as a key sector for trade discussions, Section 4 presents the
8
Computed from UNComtrade Trade Statistics.
104 India’s Agriculture and Food Exports

engagement and discussions between the two countries on liberalising trade

in food and drinks. It also lists the areas of potential bilateral collaborations
and partnerships based on the KIIs. Section 5 presents the tariff and NTBs,
which are impeding the two countries to reach their export potential and
enhancing bilateral trade, investment, and collaboration.

Overview of India and the United Kingdom’s Agro-Food Sector:

Key Trends and Developments
This section gives a synopsis of the status of the agro-food sector in India
and the UK, highlighting the production of key agriculture and food
products, key exported and imported products, and development of the food
processing sector in both countries.

India’s Agro-Food Sector

India’s total food production in 2019-20 was recorded at 296.65 Million
Tonnes (MT), an increase of 4 per cent from the previous year.9 It is the
world’s largest producer of milk, pulses, and spices and the second-largest
producer of rice, wheat, and sugarcane. India is the largest milk producer in
the world, with production in 2020 amounting to around 146.31 MT, which
is over 50 per cent more than the United States (US).10 Exports of dairy and
dairy products from India in 2020-21 amounted to US$ 201.37 million and
54,762.31 MT. India is the second-largest fish-producing country in the
world, with exports in 2020-21 amounting to US$ 5.96 billion and 11,49,341
MT.11 Marine and seafood exports have seen significant growth in the past
couple of years, specifically during the pandemic. India ranks second in the
production of fruits and vegetables in the world, with major exported fruits
being grapes, pomegranates, mangoes, bananas, and oranges; while major
vegetables being onions, potatoes, tomatoes, and green chilli. While the
share of fruits and vegetables exported from India accounts for only around
1 per cent of global exports, there has been growth owing to the development
of cold-chain infrastructure. During 2020-21, fruits and vegetables worth
US$ 1.34 billion were exported from India.12

9
Available at https://pib.gov.in/PressReleseDetailm.aspx?PRID=1657225, accessed
on 16 October 2021.
10
Available at https://apeda.gov.in/apedawebsite/SubHead_Products/Dairy_
Products.htm, accessed on 16 October 2021.
11
Available at https://mpeda.gov.in/?page_id=5581, accessed on 16 October 2021.
12
Available at https://apeda.gov.in/apedawebsite/six_head_product/FFV.htm,
accessed on 16 October 2021.
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 105

In 2020-21, India produced a total of 121.46 MT of rice in volume

terms,13 and total rice exports were recorded at 17.7 MT, of which over 70 per
cent were non-Basmati rice. Out of the recorded 1,000 varieties of rice in the
world, the maximum number is produced in India.14 Total non-Basmati rice
exported by India in 2020-21 was worth US$ 4.79 billion. India is the world’s
largest exporter of Basmati rice and in 2020-21, the total exports recorded
US$ 4.01 billion.15 India’s overall cereal production and exports have
expanded, with a sharp spike in 2020-21 for wheat exports at about 774.17
per cent from the previous year, and of other cereals (millets, maize, and
other coarse grains) of about 238.28 per cent.16 In spices, India is the world’s
largest producer, consumer, as well exporter, producing around 75 of the
total 109 varieties recorded.17 India accounts for over half of the world’s trade
in spices, with exports in 2020-21 amounting to US$ 3.62 billion, despite
the COVID-19.18 India’s production has been growing in the organic food
segment, with major products being cereals, millets, spices, tea, condiments,
dry fruits, sugar, etc. Organic exports grew 51 per cent during 2020-21 over
2019-20, by an amount of US$ 1.04 billion.19
Overall, agriculture and allied products are among the top exported
commodities in India’s export basket, and India has been among the top 15
leading agri-food exporters globally since the last decade. In 2020, India was
among the top 10 agricultural produce exporters, with a global share of 2.2
per cent.20 India exports a wide range of products to over 70 countries and
the UK is among the top 15 markets. In 2020-21, commodities that recorded
significant positive growth in exports were wheat, other cereals, non-Basmati

13
Available at https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1721692,
accessed on 16 October 2021.
14
Available at https://apeda.gov.in/apedawebsite/SubHead_Products/Non_
Basmati_Rice.htm, accessed on 16 October 2021.
15
Available at http://apeda.gov.in/apedawebsite/SubHead_Products/Basmati_Rice.
htm, accessed on 16 October 2021.
16
Available at https://pib.gov.in/PressReleasePage.aspx?PRID=1729115#:~:text=
India’s%20overall%20exports%20of%20cereals,238.28%25%20to%20USD%20
694.14%20million, accessed on 16 October 2021.
17
Available at https://www.ibef.org/exports/spice-industry-indias.aspx, accessed on
16 October 2021.
18
Available at http://indianspices.com/export/major-itemwise-export.
html#:~:text=Despite%20the%20COVID%2D19%20Pandemic,12%2C08%2C400%20
tons%20valued%20Rs, accessed on 16 October 2021.
19
Available at https://apeda.gov.in/apedawebsite/organic/data.htm, accessed on 16
October 2021.
20
Table A-14, World Trade Statistical Review 2021, WTO.
106 India’s Agriculture and Food Exports

rice, soya meal, spices, sugar, fresh and processed vegetables, and alcoholic
beverages.
With respect to imports, the key imported commodities are vegetable
oils, fresh fruits, spices, and pulses. Over the years, both exports and imports
have increased, but India has consistently maintained a trade surplus in agro-
food produce. While exports have increased, India has lagged in the share of
foreign value-added content in its agriculture exports, which was recorded
at 3.8 per cent in 2019, mainly due to high tariffs on imports of raw material
and intermediate products to protect the domestic market (WTO, 2021b). In
terms of domestic consumption, per capita consumption of cereals, pulses,
and sugar is declining. Per capita consumption of other food products such
as oils, animal products, and fruits and vegetables is increasing (Pandey
et al., 2020).

United Kingdom’s Agro-Food Sector

The food and drink sector of the UK is the largest manufacturing sector
in the country, which employs over 4 million people, generates over US$
167.29 billion of value added each year to the economy and has a highly
integrated supply chain (Food and Drink Federation [FDF], 2020). The
sector accounts for almost 17 per cent of the total manufacturing value-added
in the economy and comprises majorly of SMEs. The major food products
include meat, seafood (such as Scottish salmon), ready-made meals, bakery
products and confectionery items, dairy products, beverages (both alcoholic
and non-alcoholic), etc. The UK has strengths in sub-sectors such as dairy,
alcoholic beverages such as Scotch Whisky, confectionery and health food
products (Mukherjee et al., 2019). Alcoholic beverages (mostly spirits) have
a huge share in the imports of India from the UK. The market for health
and well-being food products is on the rise among the consumers in the
UK, with ‘health and convenience foods’ among the driving forces in the UK
value-added food and drink sector (D’Angelo et al., 2020). Consumers are
diversifying their food tastes, and the health and convenience food segment
can be a potential sector for countries including India to export. However,
the food import standards in the UK are very strict with requirements
of high technical specifications, traceability, Minimum Residue Levels
(MRL), etc., which at times many countries, including India, are unable to
comply with.
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 107

Overview of India’s Agro-Food Trade and Bilateral Trade Between

India and the United Kingdom
In 2020, India was the 13th largest exporter of agro-food products with a
share of 2.40 per cent in global trade.21 Its share has remained almost the
same since 2015, when it was around 2.41 per cent, while it has improved
a lot from 2010 when it was around 1.58 per cent. Overall, trade in food
between India and the world has increased significantly between 2010 and
2020. Specifically, exports have surged since 2016 (Figure 6.1).

Figure 6.1: India’s Trade in Agro-Food Trade (2010-20)

Source: UNComtrade Trade Statistics
In 2010, the total agro-food exports from India to the world were valued
at US$ 15.39 billion, which doubled to US$ 33 billion in 2020. Imports have
also increased over the decade with a growth of 61 per cent. In 2017, India
became the 15th largest agro-food importer in the world with a share of 2.03
per cent globally. However, in spite of the growth in imports, India always
has had a trade surplus in this sector, with the trade balance increasing from
US$ 3.32 billion in 2010 to US$ 13 billion in 2019. Exports of agro-food from
India remained stable even during 2020, unaffected by pandemic disruptions.
The trade balance in 2020 in agro-food exports from India stood at US$
13.58 billion. Government interventions and expansion of products into new
markets (such as many African countries) have been some of the favourable
factors behind the positive trade balance in this sector in 2020.
21
While WTO’s data shows that India is among the top 10 global exporters of
agricultural products, it holds 13th rank when agro-foods exports (Footnote 3 for details
on the HS codes used) are considered as per UNComtrade Trade statistics. The difference
is based on the products considered for agro-foods in this study and agriculture products
in general used in the WTO report.
108 India’s Agriculture and Food Exports

India’s agro-food produce is exported to over 100 countries of the

world, with the major destinations being the Middle East countries, South-
East Asian nations, the South Asian Association of Regional Cooperation
(SAARC) nations, the EU, and the US. Of the total exports of agro-food
products in 2020, the top ten markets had a share of 55 per cent. The top
destinations were the US and the EU, with a share of 12.41 per cent and
7.91 per cent, respectively (Table 6.1). The other major export destinations
include China, the United Arab Emirates (UAE), Saudi Arabia, and Iran.
Table 6.1: Top Export Destinations of India in Agro-Food Products (2020)
Rank Countries Total Value (US$ Billion) Share (%)
1 US 4.09 12.41
2 EU 2.61 7.91
3 China 2.40 7.29
4 UAE 1.70 5.16
5 Saudi Arabia 1.61 4.89
6 Iran 1.50 4.57
7 Bangladesh 1.12 3.42
8 Malaysia 1.11 3.38
9 Vietnam 0.99 3.00
10 Nepal 0.98 2.97
13 United Kingdom 0.70 2.13
Source: UNComtrade Trade Statistics
In imports, Indonesia, Argentina, and Malaysia were India’s top agro-
food import partners in 2020, accounting for a share of 18.65 per cent,
11.60 per cent and 8.25 per cent, respectively. The top ten import sources
accounted for a total share of 69.44 per cent of India’s total imports of agro-
food produce from the world. Compared to exports, India’s share of imports
from the EU and the UK is very less, accounting for 3.20 per cent and 0.79
per cent, respectively (Table 6.2).
Table 6.2: Top Import Sources of India in Agro-Food Products (2020)
Rank Countries Total Value (US$ billion) Share (%)
1 Indonesia 3.62 18.65
2 Argentina 2.25 11.60
3 Malaysia 1.60 8.25
4 Ukraine 1.59 8.19
5 USA 1.35 6.97
6 Brazil 0.97 5.02
7 EU 0.62 3.20
8 Canada 0.53 2.74
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 109

Rank Countries Total Value (US$ billion) Share (%)

9 Myanmar 0.47 2.46
10 Russia 0.45 2.35
26 United Kingdom 0.15 0.79
Source: UNComtrade Trade Statistics

India-United Kingdom Bilateral Trade in Agro-Food Products

The UK is a major importer of agro-food products from the world. In
2020, the UK accounted for a share of 2.13 per cent (13th rank) in India’s
total exports of agro-food products to the world. This share has, however,
decreased over the decade, from 2.93 per cent in 2010 to 2.57 per cent in
2015 to 2.13 per cent in 2020.
In case of the UK, it was the 13th largest export destination of India in
agro-food products in 2020. Among India’s import sources, the UK ranked
26th in 2020, a drop of eight positions from its rank of 18th in 2017.
Focusing on exports, the UK is among the top 15 global exporters of
agro-food products with its total exports to the world increasing from US$
44 billion in 2010 to US$ 48.18 billion in 2020. Over the years, India’s share
in UK’s exports to the world has increased from 0.20 per cent in 2010 to
1.54 per cent in 2020, with a major increment noticeable from 2019 to 2020
(Figure 6.2). However, India’s share in the UK’s imports from the world has
decreased 0.66 per cent in 2010 to 0.02 per cent in 2020 and as per the KIIs,
this is a major concern for Indian exporters.

Figure 6.2: India’s Share in UK’s Agro-Food Trade

Source: UNComtrade Trade Statistics

Top Five Products: India’s Export to the United Kingdom

and the World
In terms of products exported, in 2020, the top five products exported by
India to the UK include tea, crustaceans, rice, frozen fish, and pepper (Table
110 India’s Agriculture and Food Exports

6.3). ‘Tea’ (HS 0902), ‘Crustaceans’ (HS 0306), and Rice (HS 1006) have been
consistently the top three exported products of India to the UK.
Table 6.3: Top Five Agro-Food Products Exported from India to the UK
(2010, 2015, and 2020)
HS Code Exports (US$ Share
Product Description
(4-Digit) million) (%)
2020
0902 Tea, whether or not flavoured 149.15 21.04
0306 Crustaceans, whether in a shell or not, live, fresh, 102.7 14.49
chilled, frozen, dried, salted, or in brine, flours,
meals and pellets, of crust
1006 Rice 40.3 5.69
0303 Frozen fish (excluding fish fillets and other fish 26.96 3.80
meat of heading 0304)
0904 Pepper of the genus Piper; dried or crushed or 25.84 3.65
ground fruits of the genus Capsicum or the of the
genus Pimenta
Total of the Five Products 344.95 48.67
Total of all the Food Products 708.85 100.00
2015
0902 Tea, whether or not flavoured 160.05 21.76
0306 Crustaceans, whether in a shell or not, live, fresh, 104.53 14.21
chilled, frozen, dried, salted, or in brine, flours,
meals and pellets, of crust
1006 Rice 64.13 8.72
0303 Frozen fish (excluding fish fillets and other fish 37.58 5.11
meat of heading 0304)
0904 Pepper of the genus Piper; dried or crushed or 31.08 4.22
ground fruits of the genus Capsicum or the of the
genus Pimenta
Total of the Five Products 397.37 54.01
Total of all the Food Products 735.70 100.00
2010
0902 Tea, whether or not flavoured 81.52 17.96
0306 Crustaceans, whether in a shell or not, live, fresh, 56.3 12.41
chilled, frozen, dried, salted, or in brine, flours,
meals and pellets, of crust
1006 Rice 46.36 5.55
1905 Bread, pastry, cakes, biscuits and other bakers’ 25.19 5.55
wares, whether or not containing cocoa;
communion wafers, empty cachets of a kind
suitable for pharmaceutical use, sealing wafers,
rice paper and similar products
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 111

HS Code Exports (US$ Share

Product Description
(4-Digit) million) (%)
0910 Ginger, saffron, turmeric ‘curcuma’, thyme, bay 24.19 5.33
leaves, curry, and other spices (excluding pepper)
Total of the Five Products 233.56 46.80
Total of all the Food Products 453.82 100.00
Source: UNComtrade Trade Statistics and ITC Trademap Statistics
If one compares the top items in India’s export basket to the world with
that to the UK, there are certain products like ‘meat of bovine animals, frozen’
(0202) which is among India’s top exports to the world but the share of this
product in India’s exports to the UK was only 0.19 per cent in 2010 (Tables
6.3 and 6.4). It had increased from 0.58 per cent in 2015 to 1 per cent in 2020.
Table 6.4: Top Five Agro-Food Products Exported from India to the World
(2010, 2015, and 2020)
HS Code Exports (US$ Share
Product Description
(4-Digit) million) (%)
2020
1006 Rice 7,980.02 24.06
0306 Crustaceans, whether in a shell or not, live, fresh, 3,884.3 11.71
chilled, frozen, dried, salted, or in brine, flours,
meals and pellets, of crust
0202 Meat of bovine animals, frozen 2,762.44 8.33
1701 Cane or beet sugar and chemically pure sucrose, 2,494.64 7.52
in solid form
0904 Pepper of the genus Piper; dried or crushed or 1,167.24 3.52
ground fruits of the genus Capsicum or the of
the genus Pimenta
Total of the Five Products 18,288.64 55
Total of all the Food Products 33,170.24 100.00
2015
1006 Rice 6,354.68 21.79
202 Meat of bovine animals, frozen 4,029.65 13.82
0306 Crustaceans, whether in a shell or not, live, fresh, 3,194.18 10.95
chilled, frozen, dried, salted, or in brine, flours,
meals and pellets, of crust
1701 Cane or beet sugar and chemically pure sucrose, 1,185.97 4.07
in solid form
1302 Vegetable saps and extracts; pectic substances, 1,030.52 3.53
pectinates, and pectates; agar-agar and other
other mucilages and thickeners, whether or
not modified, derived from vegetable products
Vegetable saps and extracts
Total of the Five Products 15,795 54.17
Total of all the Food Products 29,157.62 100.00
112 India’s Agriculture and Food Exports

HS Code Exports (US$ Share

Product Description
(4-Digit) million) (%)
2010
1006 Rice 2,295.81 14.50
202 Meat of bovine animals, frozen 1,676.47 10.59
0306 Crustaceans, whether in a shell or not, live, fresh, 1,058.55 6.69
chilled, frozen, dried, salted, or in brine, flours,
meals and pellets, of crust
1701 Cane or beet sugar and chemically pure sucrose, 857.78 5.42
in solid form
0902 Tea, whether or not flavoured 694.85 4.39
Total of the Five Products 6,583.46 41.59
Total of all the Food Products 15,828.66 100.00
Source: UNComtrade Trade Statistics and ITC Trademap Statistics

Top Five Products: The United Kingdom’s Export to India

and the World
A humongous share of UK’s exports to India includes alcoholic beverages
‘Undenatured ethyl alcohol of an alcoholic strength of < 80%; spirits, liqueurs
and other spirituous beverages’ (2208) with a share of 84.43 per cent in 2020.
It has increased over the decade from 73.52 per cent in 2010 to 84.16 per cent
in 2015 to 84.43 per cent in 2020. Apart from alcoholic beverages, the top
five products include mostly ready-made food preparations which in 2020,
had a share of 92.79 per cent (Table 6.5). Except alcoholic beverages (HS
2208), the top five products in the UK’s export basket to India have changed
over time as shown in Table 6.5.
Table 6.5: Top Five Agro-Food Products Exported from the United Kingdom to
India (2010, 2015, and 2020)
HS Code Exports (US$ Share
Product Description
(4-Digit) Million) (%)
2020
2208 Undenatured ethyl alcohol of an alcoholic 134.766 84.43
strength of < 80%; spirits, liqueurs, and other
spirituous beverages (excluding compound
alcoholic preparations of a kind used for the
manufacture of beverages)
2106 Food preparations, n.e.s. 5.589 3.50
1904 Prepared foods obtained by the swelling or 3.819 2.39
roasting of cereals or cereal products, e.g., corn
of the genus Pimenta
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 113

HS Code Exports (US$ Share

Product Description
(4-Digit) Million) (%)
2005 Other vegetables prepared or preserved 2.006 1.26
otherwise than by vinegar or acetic acid, not
frozen, other than products of heading 2006
1104 Cereal grains otherwise worked, e.g., hulled, 1.931 1.21
rolled, flaked, pearled, sliced or kibbled; germ
germ of cereals, whole, rolled, flaked or ground
Rolled or flaked grains
Total of the Five Products 148.111 92.79
Total of all the Food Products 159.626 100.00
2015
2208 Undenatured ethyl alcohol of an alcoholic 132.01 84.16
strength of < 80%; spirits, liqueurs, and other
spirituous beverages (excluding compound
alcoholic preparations of a kind used for the
manufacture of beverages)
0306 Crustaceans, whether in a shell or not, live, fresh, 4.753 3.03
chilled, frozen, dried, salted, or in brine, flours,
meals and pellets, of crust
2207 Undenatured ethyl alcohol of an alcoholic 1.852 1.18
strength of >= 80%; ethyl alcohol, and other
spirits, denatured, of any strength
0404 Whey, whether or not concentrated or containing 1.849 1.18
added sugar, or other sweetening matter;
products consisting of natural milk constituents,
whether or not containing added sugar or other
sweetening matter, not elsewhere specified or
included.
1104 Cereal grains otherwise worked, e.g., hulled, 1.729 1.10
rolled, flaked, pearled, sliced, or kibbled; germ
germ of cereals, whole, rolled, flaked or ground
Rolled or flaked grains
Total of the Five Products 142.193 90.65
Total of all the Food Products 156.860 100.00
2010
2208 Undenatured ethyl alcohol of an alcoholic 64.392 73.52
strength of < 80%; spirits, liqueurs, and other
spirituous beverages (excluding compound
alcoholic preparations of a kind used for the
manufacture of beverages)
1701 Cane or beet sugar and chemically pure sucrose, 3.847 4.39
in solid form
114 India’s Agriculture and Food Exports

HS Code Exports (US$ Share

Product Description
(4-Digit) Million) (%)
0404 Whey, whether or not concentrated or containing 2.293 2.62
added sugar or other sweetening matter; products
consisting of natural milk constituents, whether or
not containing added sugar or other sweetening
matter, not elsewhere specified or included
2005 Other vegetables prepared or preserved 2.131 2.43
otherwise than by vinegar or acetic acid, not
frozen other than products of heading 2006
2106 Food preparations, n.e.s. 1.810 2.07
Total of the Five Products 74.473 85.03
Total of all the Food Products 87.583 100.00
Source: UNComtrade Trade Statistics and ITC Trademap Statistics
Note: n.e.s. – not elsewhere specified
Comparing UK’s exports to India with its export to the world, the
top exported product remains the same throughout 2010 to 2020, i.e.
‘Undenatured ethyl alcohol of an alcoholic strength of < 80%; spirits, liqueurs
and other spirituous beverages’ (2208). However, the share has fallen from
29.35 per cent in 2015 to 25.24 per cent in 2020. Other items in the top
five products have remained more or less similar, with their shares slightly
changing over the years. For example, the share of ‘Food preparations, n.e.s.’
(2106) have changed from 4.17 per cent in 2010 to 5.92 per cent in 2015
to 7.33 per cent in 2020 (Table 6.6). Overall, alcoholic beverages are a key
item in the UK’s export basket, both in the context of its global trade and its
bilateral trade with India in the food and drink sector.
Table 6.6: Top Five Agro-Food Products Exported from the UK to World
(2010, 2015, and 2020)
HS Code Exports (US$
Product Description Share (%)
(4-Digit) Million)
2020
2208 Undenatured ethyl alcohol of an alcoholic 6,235.394 25.24
strength of < 80%; spirits, liqueurs and other
spirituous beverages (excluding compound
alcoholic preparations of a kind used for the
manufacture of beverages)
2106 Food preparations, n.e.s. 1,810.96 7.33
1905 Bread, pastry, cakes, biscuits and other 1,162.702 4.71
bakers’ wares, whether or not containing
cocoa; communion wafers, empty cachets of a
kind suitable for pharmaceutical use, sealing
wafers, rice paper and similar products
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 115

HS Code Exports (US$

Product Description Share (%)
(4-Digit) Million)
406 Cheese and curd 839.614 3.40
302 Fish, fresh or chilled (excluding fish fillets 824.347 3.34
and other fish meat of heading 0304)
Total of the Five Products 10,873.017 24,700.507
Total of all the Food Products 44.02% 100.00
2015
2208 Undenatured ethyl alcohol of an alcoholic 7,469.567 29.35
strength of < 80%; spirits, liqueurs, and
other spirituous beverages (excluding
compound alcoholic preparations of a kind
used for the manufacture of beverages)
2106 Food preparations, n.e.s. 1,506.132 5.92
1905 Bread, pastry, cakes, biscuits and other 1,266.977 4.98
bakers’ wares, whether or not containing
cocoa; communion wafers, empty cachets
of a kind suitable for pharmaceutical use,
sealing wafers, rice paper and similar
products
302 Fish, fresh or chilled (excluding fish fillets 781.619 3.07
and other fish meat of heading 0304)
2203 Beer made from malt 773.247 3.04
Total of the Five Products 11,797.542 46.36
Total of all the Food Products 25,448.57 100.00
2010
2208 Undenatured ethyl alcohol of an alcoholic 6,580.842 28.82
strength of < 80%; spirits, liqueurs, and
other spirituous beverages (excluding
compound alcoholic preparations of a kind
used for the manufacture of beverages)
1905 Bread, pastry, cakes, biscuits and other 1,004.086 4.40
bakers’ wares, whether or not containing
cocoa; communion wafers, empty cachets of a
kind suitable for pharmaceutical use, sealing
wafers, rice paper and similar products
2106 Food preparations, n.e.s. 953.196 4.17
2203 Beer made from malt 871.786 3.82
1001 Wheat and meslin 712.448 3.12
Total of the Five Products 10,122.358 44.33
Total of all the Food Products 22,834.801 100.00
Source: UNComtrade Trade Statistics and ITC Trademap Statistics
116 India’s Agriculture and Food Exports

India-United Kingdom Bilateral Engagement/Discussions in Agro-

Food Sector: Relevance for the Bilateral Trade Agreements
The agro-foods sector is one of the key areas of mutual interest for both India
and the UK. With Brexit, there is a renewed interest of the UK in expanding
its market share and investments in this sector in India. The ETP signed
between India and the UK in February 2021 is in tandem with leveraging
the untapped trade potential between the two economies, specifically in the
food and drinks sector. In this sector, India has a positive trade balance with
the UK, increasing from US$ 0.36 billion in 2010 to US$ 0.55 billion in 2020.
The ETP is expected to create opportunities for UK businesses, including
the food and drinks sector, where both parties are looking to address market
access barriers. Under the ETP, both India and the UK have decided to set
up three bilateral working groups, of which one is specifically for the food
and drinks sector to tackle sector-specific trade barriers. The functioning of
the working group would be led by the UK India Business Council (UKIBC),
the Confederation of Indian Industry (CII), and the Federation of Indian
Chambers of Commerce and Industry (FICCI). From the UK’s end, earlier
surveys by the UKIBC and others show that the businesses are looking for
improvement in India’s ease of doing business scenario, removal of trade
barriers, joint research to improve agriculture practices, and collaboration
in technology-related areas. The UK industry consultations have identified
certain products of the UK’s export interest to India such as apples and pears
in fresh fruits; fishery products like Scottish Salmon, Mackerel, Herring,
Langoustines (Norway lobster); animal products (poultry, the meat of lamb
and turkey, for example); alcoholic beverages; confectionaries and dairy
products like cream and cheese.
India’s Food Safety and Standards Authority of India (FSSAI) has
already partnered with the Foreign, Commonwealth & Development Office
(FCDO), UK, where the FCDO has engaged with the FSSAI on several
capacity building initiatives and facilitated collaboration with Food Standard
Agency (FSA), UK, plant and animal quarantine agencies, and other such
bodies. At the level of industry association and businesses, the KIIs have
confirmed that India and the UK have already collaborated on diverse areas
to enhance their partnership in the field of agriculture and food processing,
including investing in agriculture technology (agri-tech), plant sciences,
animal genetics and nutrition, aquaculture and precision agriculture, post-
harvest management, sustainable technology usage, among others. The UK
is one of the pioneers in the field of research and innovation in agri-tech and
food processing technology, across the supply chain. There are possibilities
for India to adopt tech-based agriculture and food processing practices,
thereby enhancing bilateral partnership and exports. The UK’s investment
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 117

in India’s food processing sector can be an ideal area for bilateral partnership
according to the KIIs. Such partnership will enable Indian businesses to
manufacture high-quality products, innovate, scale-up, and globalise. It will
also lead to an inflow of foreign direct investment in India, create jobs, and
help to link Indian farmers and processors to the global value chains. UK
businesses pointed out that India’s evolving, and dynamic food market is one
of the interest areas for the UK’s businesses to expand in terms of exports and
investment. They would also like to source more from India.
A number of large UK food businesses, for example, United Biscuits
Limited, Holland & Barret, Borders Biscuits, Tesco, Walkers, etc., already
have/had a presence in India. Companies such as United Biscuits Limited
have been in India for a long time and have successfully captured the Indian
market. The tea brand Typhoo have established its presence in India through
an acquisition in 2005. Diageo India, which is a subsidiary of Diageo UK,
established their presence in the Indian market by acquiring the Indian
alcohol beverage company United Spirits Limited. They have over 45 per
cent share of the total market for India Made Foreign Liquor (IMFL).
Holland & Barret, India (a subsidiary of Holland & Barret International) is
trying to establish its presence in India in the nutraceuticals/health foods
segment. They currently import all products from the UK and depend on
their partner, Apollo Pharmacy for retail sale in India.
Regarding the presence of Indian food businesses in the UK, companies
such as Chamong Tee Export Private Limited supply tea to Wessanen UK,
for brands such as Clippers Tea, which is sold through the retail outlets of
Waitrose in the UK. VeeTee Rice Limited, UK, sources Basmati rice from
India and sells it to retailers in the UK, including Waitrose.
While companies from India and the UK have established their presence
in each other’s countries in the food and drinks sector, the KIIs confirmed
that there is still a lot of scope to expand and enhance exports on both sides,
if barriers to trade are addressed.

Barriers to Trade in Agro-Food Products

The KIIs identified a number of challenges in the form of tariff and NTBs,
which are impeding the two countries to reach their export potential and in
enhancing bilateral trade, investment, and collaboration.

High Tariff Rates

Looking at tariffs imposed on agriculture and food products, the average
tariff rates are high in India as compared to the UK. For example, in 2020,
the Most Favoured Nation (MFN) applied average tariff rate on agriculture
118 India’s Agriculture and Food Exports

products was 34 per cent in India, while it was 11.2 per cent in the UK (WTO,
2021). However, in the case of some products such as dairy, the UK imposes
a higher average tariff rate (37.1 per cent) as compared to India (35.7 per
cent). According to the Department for International Trade (DIT), the UK,
the simple average tariff rate faced by Indian exports to the UK is around 4.2
per cent, while tariffs for the UK exports to India are higher at 14.6 per cent.
At the product level, the peak tariffs are quite high for both India and the UK,
especially for agriculture and food products. For example, in the UK, these
tariffs are estimated at around 242 per cent for prepared foods, 124 per cent
for vegetable products, and 103 per cent for animal and vegetable products.
In India, peak tariffs are within a broad range, for example, between 100 to
150 per cent for agro-food products (Raju, 2021).
As seen in Section 3, alcoholic beverages comprise the majority of the
agro-food exports of the UK to India (over 90 per cent), and high tariffs in
this segment [estimated around 150 per cent to 50 per cent Basic Customs
Duty (BCD) plus 100 per cent Agriculture Infrastructure Development Cess
(AIDC)] has a huge impact for both for UK’s exporters and India’s importers
(Box 6.1, for high tariffs case study for alcoholic beverages exports from the
UK to India).

Box 6.1: Case of High Tariffs for the United Kingdom’s Exports of
Alcoholic Beverages to India
In 2020, over 80 per cent of the UK’s exports of agro-food products to
India consisted of ‘Ethyl alcohol, undenatured; of an alcoholic strength by
volume of less than 80 per cent volume; spirits, liqueurs and other spirituous
beverages’ (HS 2208), which mainly consists of the alcoholic beverage called
Scotch Whisky. The customs tariff rate in 2020 for this product (bottled in
‘country of origin’) in India was 150 per cent. The same rate was applicable
for bulk Scotch Whisky imported from the UK, for bottling in India. With
major exporters such as the EU and the UK concerned with such high
tariffs, the BCD on these products was brought down to 50 per cent in
the Indian Union Budget of 2021-22. However, the Indian government
introduced a new cess called the Agriculture Infrastructure Development
Cess (AIDC) at 100 per cent, which eventually kept the applicable tariff
rates for exporters at 150 per cent.
Source: Mukherjee et.al. (2021)

Non-Tariff Barriers
The exports from India to the UK, suffer from a high incidence of NTBs,
mostly in the form of stringent technical standards; for example, high
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 119

Maximum Residue Limits (MRLs) in Basmati rice, spices, etc.), that Indian
exporters, especially the SMEs, are unable to comply with. There are also
issues related to product certifications (in the case of organic food exports),
and inefficient testing processes as well as quality production (in the case of
dairy products). UK’s exports to India face NTBs in the form of changes in
labelling requirements, tedious labelling requirements for products such as
alcoholic beverages. Some examples of issues are listed as under:
Issue of Tedious Labelling Requirements
In the case of labelling requirements in India for products such as alcoholic
beverages, exporters have to adhere to producing a tangible justification for
the use of words such as ‘premium’, ‘spirit’, or ‘rare’ for different liquors/whisky
on the label although this is a common global practice. Such conditions are
difficult to be accommodated on the already limited space left on the labels.
This acts as a major NTB, and many international players find it hard to
comprehend the rationale behind such regulation. The exporters are also
required to comply with labelling requirements of a number of regulatory
bodies such as the FSSAI, Legal Metrology, etc., and of 25+ state excise
departments (as alcohol is under the state subject), which disincentivises
exports from countries such as the UK. Unlike other countries such as the
UK, where the majority of agriculture and food products are rejected on
grounds of food safety, in India, exports are rejected majorly on grounds of
failure to comply with labelling requirements.
Stringent Food Safety Requirements
Indian exporters have been facing difficulties in exporting agriculture and
food products to the UK, on the grounds of inability to meet food safety
requirements. Data extracted from the Rapid Alert System for Food and
Feed (RASFF) portal shows that between January 2020 and June 2021, a total
of 29 notifications were made by the UK on food and food contact products
originating from India.22 Out of these, 16 were marked under the ‘serious
category’, 7 were marked under the ‘not serious’ category, 3 each under the
‘no risk’ and ‘undecided’ categories.
The issues affect various products and are multi-dimensional in
nature. For example, rice exports (specifically Basmati rice) of India to the
EU (including the UK) in 2018-19 fell by around 40 per cent over non-
compliance with MRLs with respect to pesticides. Due to such failure to
comply, additional mandatory checks (mandatory certification of inspection)
have been put up by the EU and now the UK government (after Brexit).
India’s exports of Basmati rice have faced rejections due to exceeding
MRL limits of pesticides such as ‘Thiamethoxam’. The UK has also banned
120 India’s Agriculture and Food Exports

the use of Tricyclazole, which has impacted India’s rice exports. Apart from
non-adherence to MRL limits, India’s exports were found to be contaminated
with respect to aflatoxin in spices (majorly in the case of whole red dried
chillies), ethylene oxide in nuts and seeds, and pesticides residues in fruits
and vegetables. These products were rejected and labelled as ‘serious risk’
consignments. Under non-serious risk rejections, certain food products
such as spices, fruits, vegetables, and nuts were found to be exported without
health certificates.
Product Specific Bans
While India is the world’s largest producer of milk in terms of absolute
volume, the UK has imposed a ban on dairy product imports from India.
India too has restricted exports from the UK. This is an area where both sides
have export potential, but one Indian company is lobbying hard to keep the
market closed as it is unable to implement a scientific milking process and
product traceability across its cooperative members according to the KIIs.
The current processes of quality control, testing, and monitoring in India
are not adequate to meet the global standard requirements. These issues
deter India from getting market access for dairy products into the UK, which
already has surplus production in dairy products utilising sophisticated
high-end technology. In India, dairy and dairy products are handled by
multiple small and mid-sized farmers and the lack of efficient supply chain/
direct sourcing in some states impedes the creation of direct links between
exporters, processors, and farmers. This hampers the establishment of
product traceability and enhances high-quality exports. There is also high
domestic consumption, which leaves limited stock available for exports.
Some Indian companies, therefore, want the market to be closed and fear
that opening up the sector to trade may lead to price reduction.
Issues with Organic Product Certification for Exports
India’s exports of organic products are witnessing growth over the last couple
of years, owing to increased demand from overseas, specifically developed
countries such as the US, the EU, and the UK.
In India, organic producers are often not aware of certification
requirements, especially for export. It acts as an obstacle towards enhancing
exports in this area, where the UK is a prominent importer of organic foods.
The UK regulation is similar to the EU regulation, and the APEDA’s organic
certification for exports is compliant with the EU/UK regulation. For organic
trade to be competitive, there is a need for mutual recognition of standards,
and India and the UK have not mutually recognised each other’s standards
for processed organic products.
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 121

The Way Forward

Apart from the barriers listed earlier, new trade challenges have evolved in the
post-COVID-19 world, which includes supply chain disruptions, growing
protectionism, and rising trade costs. Agro-food has perishable products
and therefore, efficient logistics networks and fast track cargo clearances
are important for trade to flourish. The pandemic has accentuated the need
to replace the physical process of cargo clearance with robust technology
driven risk management systems. According to the survey participants,
there is scope for collaboration among the food safety agencies of the two
countries on an efficient and technology driven risk management systems
for food clearances.
The success of any trade agreement depends on its coverage and depth
of commitments. Most modern trade agreements are comprehensive, while
they focus on tariff reduction, they also try to address non-tariff measures
through various means like mutual recognition agreements. There is scope
for improvement of trade facilitation through commitments in trade
agreements. Trade agreements are used to address issues like the removal
of market access barriers for Geographical Indication (GI) products. In the
case of India, 75 per cent of alcoholic beverages are procured through the
government route at the centre and state levels. Accessing this government
procurement market can be a key issue for discussion. Some key areas
which can be discussed under the trade agreement are given next with some
examples.

Tariff Rationalisation
High tariffs are more of a concern for the UK than for India, especially in
key export items such as alcoholic beverages (specifically, Scotch Whisky
and intermediate spirits). In this regard, bringing down tariff rates for the
alcoholic beverage sector will be in the key ask a list of the UK. India has also
expressed interest to phase out the tariff to zero. There can be a minimum
threshold level imposed for tariff reduction to minimise competition with
domestic producers and ensure that only high-quality products are imported.
At the same time, India needs to reduce tariffs on intermediate products as
that will lead to value addition within the country. India also needs to give
market access to GI products.
While India is the largest producer of milk/milk products in the world,
much of these are consumed domestically. But with increased demand for
dairy products such as skimmed milk, curd, cheese, etc., a reduction in tariffs
by the UK on these products would be beneficial for India. At the same time,
this is more of an issue of standards and processes rather than high tariffs.
122 India’s Agriculture and Food Exports

With the implementation of the UK Global Tariff (UKGT) from January 2021
(which replaced EU’s Common External Tariff) post-Brexit, MFN rates on
the number of products have been reduced.22 However, further reduction in
tariffs in agro-food products through the MFN route or a preferential trade
agreement of the UK with India will help in increasing India’s exports to the
UK in these product categories.

Removal of Non-tariff Barriers

To enhance trade discussions between India and the UK, while tariff
reduction is important, a key concern from both sides with respect to the
agro-foods sector would be the removal of NTBs. For India, for example,
removal of NTBs in the form of less stringent Sanitary and Phytosanitary
Requirements (SPS) with respect to limits of pesticide residues, while for
the UK, removal of NTBs in the form of easier labelling and registration
procedures, customs requirements, etc., would be beneficial.
Addressing Sanitary and Phytosanitary Requirements Barriers
To enhance greater market access from India to the UK, Indian exporters
have to try to adopt better agriculture practices with respect to the usage of
pesticides and fungicides. The main reason for the usage of select pesticides
in India which are often banned in developed markets such as the UK and
the EU is their relatively low cost and easy access. To circumvent this, the
government should take proactive steps to aid the producers in adopting
Good Agriculture Practices (GAP) and help in enhancing exports from
India. These products (such as rice, spices, etc.), which often get rejected
on the grounds of high pesticide residue, are key imported products of the
UK and their rejection cost a lot to India’s exporters. To prevent it, there is a
need for scientific research in India to find out methods to address country-
specific issues faced by such products in the UK. In this regard, government
and stakeholders in India can work with importers in the UK through
industry associations/business councils to have joint capacity-building
programmes for Indian exporters, SMEs, and farmers. Once they are aware
of the standards, all agents in the supply chain from farmers to exporters
said during the KIIs that they would like to meet them. In case stringent
requirements have to be met, certain relaxation in time may be given to the
exporters for implementation.

22
Available at https://www.gov.uk/guidance/tariffs-on-goods-imported-into-the-
uk, accessed on 20 October, 2021.
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 123

Improving Testing and Production Methods

To conform to standards of developed markets such as the UK and increase
exports, there is a need for prompt action on the part of Indian exporters to
adopt mechanised methods of production and product traceability across
the value chain of food products. This is especially important for products
such as rice and dairy, which have immense potential for expansion. While
efforts have been taken in the right direction to ensure that products such as
dairy have good quality checks and inspection processes before exporting,
further improvement is required in overall testing and pre-inspection
procedures. Exporters should be encouraged to adopt the General Principles
of Food Hygiene (GPH) based on the Hazard Analysis and Critical Control
Points (HACCP) system for production and processing across the supply
chain. Further, to produce exportable quality products (for example, in the
dairy sector), the supporting farm level infrastructure has to be strengthened
through developing model dairy farms or specific dairy export zones.
Government bodies such as the FSSAI and APEDA through these zones,
have to identify/prioritise producers who are ready to export and provide
them with the necessary training and capacity building. In this way, a
number of small and mid-sized producers and co-operatives can be roped
in to enhance exports, through better access to infrastructure facilities and
training. To keep facilitating exports, there is a need for continuous research
in developing efficient testing procedures and learning from global best
practices.
Easing Labelling and Registration Processes
A significant NTB faced by the UK exporters in India is the cumbersome
labelling, registration, and customs procedures. While India’s consignments
to the UK majorly get rejected on the basis of food safety concerns, the
majority of consignments in India (including those from the UK) get rejected
at the visual inspection stage due to labelling issues. The government agencies
responsible for enforcing labelling specifications should come together and
co-ordinate to simplify the requirements. This would help foreign businesses
to adhere to labelling and other registration related requirements and
promote overall ease of doing business in India. Most often, information on
labels is for two main users, namely, consumers and the regulating bodies. In
most countries, while consumer information is printed on the labels, others
are bar-coded. A similar approach can be taken in India, where information
relevant for consumers like the product category, manufacturing date, etc.,
can be displayed on the label, while the other information may be bar-coded.
The state-excise-related varied requirements should be discussed at a Pan-
India level to ease regulatory complexities for foreign exporters.
124 India’s Agriculture and Food Exports

Expand Knowledge Sharing and Collaboration

India’s consistent positive trade balance with the UK in the agro-foods sector
exhibits potential for India to expand and diversify exports. Specifically,
in products such as fruits and vegetables, organic products, etc., India has
untapped potential to increase exports to the UK, where current export
volumes are minimal owing to the lack of modern processing and low-value
chain integration. However, to realise this potential, there is a need to adopt
modern agriculture processing techniques and certification requirements,
where both India and the UK can collaborate. The UK is known for its
expertise in scientific research and innovation with respect to advanced
agriculture and food processing technologies, where knowledge sharing
through government bodies such as FSSAI, APEDA, or the MoFPI will be
beneficial for India’s producers/exporters to move up in the value chain.
Initiatives can be taken for joint research between institutes of India and the
UK to improve agriculture practices, adopt advanced mechanised methods
of processing, and address country-specific SPS barriers. Such cooperation
between institutes can help support the transfer of the UK’s innovations in
these areas to India.
The UK’s investment in India’s food processing sector can also be an
ideal area for bilateral partnership, which can enable Indian businesses to
produce high-quality products, innovate, scale-up, and globalise. India’s
evolving and dynamic food market is one of the interest areas for the UK’s
businesses to expand in terms of exports and investment. In areas such as
conforming to global export certification requirements including that of
the UK in areas such as organic products, Indian government agencies such
as FSSAI, APEDA, Spices Board, etc., can collaborate with UK’s agencies
such as the FSA to ensure that Indian exporters can meet the export
specifications. Additionally, to recognise both the countries’ conformity
assessment systems based on international standards, the governments can
sign Mutual Recognition Agreements (MRAs), equivalence agreements, or
sector-specific Memorandum of Understanding (MoU). Such MRA already
exist between India and the UK in the dairy sub-sector, but it has not yielded
any results for exporters of the two countries. This needs to be reviewed.
Mutual recognition of qualifications/certifications can help to address trade
barriers and reduce costs as these agreements help in preventing duplication
of inspection and testing which can increase the cost of exports and help in
ensuring health and safety concerns.
To conclude, agri-food is a core area in India-UK’s bilateral trade talks
and there is a need to have a comprehensive and multi-dimensional approach
to remove tariff, non-tariff, and other barriers to India-UK bilateral trade in
India-United Kingdom Trade in Agro-Foods: Challenges and Opportunities 125

agri-food products. The bilateral trade agreement should facilitate the same.
Signing a low ambitious trade agreement will not benefit the exporters and
manufacturers on either side.

References
A. Mukherjee, D. Satija, A.P. Sarma, S. Sinha, B. Chauhan, and R. Shahi,
Streamlining Food Imports for Trade Facilitation and Ease of Doing Business
in India, New Delhi: Academic Foundation, 2019.
A. Mukherjee, A.P. Rao, A.P. Sarma, N. Bharti, and P. Dugar. Developing
Principles for Regulation of Alcoholic Beverages Sector in India, New Delhi:
Academic Foundation, 2021.
B. Mukherjee and N. Bharti, ‘India-UK Enhancing Collaboration in Food
Products: Status, Issues and Way Forward. Trade Promotion Council of
India Blogs’, 2021, available at https://www.tpci.in/indiabusinesstrade/
blogs/india-uk-enhancing-collaboration-in-food-products-status-issues-
and-way-forward/?fbclid=IwAR1hxiEZnVy7jo7OdXpCmw5uiSd3I0rEDxr
I6AJKTCmSOVMffAu_MlaKcT8, accessed on 20 October 2021.
C. D’Angelo, E.R. Gloinson, A. Draper, and S. Guthrie, ‘Food Consumption in
the UK’, RAND Europe, 2020, available at https://www.rand.org/content/
dam/rand/pubs/research_reports/RR4300/RR4379/RAND_RR4379.pdf,
accessed on 20 October 2021.
C. Pandey, M. Reba, P.K. Joshi, and K.C. Seto, ‘Urbanization and Food
Consumption in India’, Sci Rep, 2020, 10, 17241, available at https://doi.
org/10.1038/s41598-020-73313-8, accessed on 20 October 2021.
Food and Drink Federation (FDF), ‘Food and Drink Industry Report’, 2020,
available at https://www.fdf.org.uk/globalassets/resources/publications/fdf-
industry-report-2020.pdf, accessed on 20 October 2021.
S. Raju, ‘India-UK FTA: Not a zero-sum game, but give and take’, Economic
Times, 2021. Available at https://economictimes.indiatimes.com/small-biz/
trade/exports/insights/india-uk-fta-not-a-zero-sum-game-but-give-and-
take/articleshow/86056381.cm, accessed on 2 April, 2022.
T. Lang and M. McKee, Brexit Poses Serious Threat to the Availability and
Affordability of Food in the United Kingdom, London School of Hygiene and
Tropical Medicine, 2018, available at https://researchonline.lshtm.ac.uk/id/
eprint/4647521/1/Brexit-food.pdf, accessed on 20 October 2021.
World Trade Organization (WTO), World Trade Statistical Review 2021,
Statistical Tables, Chapter 5, 2021a, available at https://www.wto.org/
english/res_e/statis_e/wts2021_e/wts2021chapter05_e.pdf, accessed on 20
October 2021.
World Trade Organization (WTO), World Tariff Profiles, WTO, ITC and
UNCTAD, 2021b, available at https://www.wto.org/english/res_e/booksp_e/
tariff_profiles21_e.pdf, accessed on 20 October 2021.
CHAPTER 7

Behind the Border Measures:

Examination of Sanitary and
Phytosanitary Barriers Faced in the
Case of Food Export from India
Tanu M. Goyal* and Arpita Mukherjee**
* Consultant, ICRIER, New Delhi. E-mail: [email protected]
** Professor, ICRIER, New Delhi. E-mail: [email protected]

Introduction
Globally, India is one of the largest producers of several agricultural
commodities. According to the Food and Agriculture Organization (FAO),
India is the top-most producer of pulses, milk, and jute and the second-
largest producer of rice, wheat, groundnut, cotton, and fruits and vegetables
in the world.1 In 2018, around 60 per cent of India’s total land was used for
agricultural purposes, which is much higher than the global average (36.9 per
cent in 2018).2 Domestically, the agricultural sector in India is a significant
employer, engaging more than 50 per cent of the workforce and accounting
for 17.8 per cent of the gross value added.3
The large production base bestows the country with a sizeable base for
the export of agricultural commodities. India is emerging as an important
supplier of food to the world and in 2019, India made to the list of top ten
exporters of agricultural products.4 It is worth mentioning that despite
the Covid-19 situation in 2020-21, India’s export of agricultural products

1
Available at http://www.fao.org/india/fao-in-india/india-at-a-glance/en/, accessed
on 21 September 2021.
2
World Bank Statistics, available at https://data.worldbank.org/indicator/AG.LND.
AGRI.ZS, accessed on 28 September 2021.
3
Economic Survey of India, 2020-21.
4
According to the World Trade Organization’s (WTO’s) international trade and
tariff statistics, accessible at https://www.wto.org/english/res_e/statis_e/statis_e.htm
accessed on 1 April 2022.
Behind the Border Measures 127

(excluding marine and plantation products) increased by 28.3 per cent as

compared to 2019-20, to reach around US$ 30 billion.5
Both domestic and international policies have contributed to the rise of
India’s trade in agricultural products. India’s agriculture policy, for the longest
time, was focused on addressing domestic food demand and shortages and
ensuring food security. In December 2018, the Ministry of Commerce
and Industry released the first Agriculture Export Policy (AEP), which
aimed to double agricultural exports to reach over US$ 60 billion by 2022
and US$ 100 billion in the next few years thereafter. The Policy laid down
several measures for export promotion. Since agriculture is a state subject,
state-specific action plans, monitoring committees, and nodal agencies
responsible for the implementation of the Policy have been identified. Apart
from this, various cluster development measures have been undertaken by
the central government in collaboration with the Agricultural and Processed
Food Products Export Development Authority (APEDA), one of the nodal
agencies for agri-food exports. Thus, at a country level, there is a strong
Policy commitment to enhancing exports.
The commitments made by member countries of the World Trade
Organization (WTO) to give tariff concessions on agricultural products
and the proliferation of bilateral/regional agreements, which facilitates
tariff reduction has gradually liberalised agriculture trade. The other factor
that led to trade liberalisation which emerged in 2007-08 after the food
crisis, is linked to the issue of food security—a narrative championed by
global governance institutions such as the FAO—encouraging countries
to facilitate well-functioning food supply chains. Despite the Coronavirus
disease situation, India undertook measures to ensure uninterrupted exports
of food products. Consequently, India’s export of agriculture products
registered a growth of 28.36 per cent during 2020-21.6 World exports of
agricultural products increased by 0.9 per cent in 2020 as many countries
across the world are dependent on food export.7 Focusing on India’s exports,
the European Union (EU) is among the top five export markets for India.
It is also the largest importer of agriculture products, globally. In 2020, the
EU’s total agriculture importers were valued at US$ 597 billion, and extra-
EU imports were US$ 178 billion.8 India is among the largest exporters of
5
As reported by Press Information Bureau (PIB), available at https://pib.gov.in/
PressReleasePage.aspx?PRID=1725891, accessed on 28 September 2021.
6
Information released by the Ministry of Commerce and Industry and reported
by the Press Information Bureau (PIB), available at https://pib.gov.in/PressReleasePage.
aspx?PRID=1725891, accessed on 28 September 2021.
7
World Trade Statistical Review, 2021.
8
Extracted from World Trade Statistical Review, 2021, Table A14, p. 69.
128 India’s Agriculture and Food Exports

agricultural products, globally. In 2020, with a share of 2.2 per cent in world
total export (valued at US$ 39 billion), India was ranked the ninth-largest
exporter of agricultural products.9 India’s exports of agricultural products
to the EU were valued at US$ 2.66 billion, growing at an annual average
growth of 1.5 per cent.10 With a trade surplus in agricultural products, India
is a net exporter of agricultural products to the EU. Despite the significant
potential to export, India’s exports are below the target laid down in the
AEP 2018. Exports of agri-food products, continue to face barriers, which
became glaring during the Covid-19 situation as countries are becoming
more cautious on food safety and health-related standards. According to the
WTO, while tariff barriers are gradually coming down, non-tariff barriers
especially those related to food safety and health are on a rise. In 2020, the
average Most-Favoured Nations (MFN) applied rates of the top ten importers
of agricultural products were around or less than 15 per cent.11 However,
non-tariff barriers, applied in the form of Sanitary and Phytosanitary (SPS)
restrictions and Technical Barriers to Trade (TBT) are on a rise. The range
of the barriers varies from the specification of the minimum residue level
to labelling and packaging requirements. To address the non-tariff barriers,
export promotion councils in India like APEDA have become export
control bodies laying out the requirements and food safety standards of the
importing countries. During the Covid-19 pandemic, export promotion
councils in India extended recognition certificates, accreditation facilities,
and provided online services, among other things to facilitate trade. Most of
these measures were adopted on a temporary basis, specifically to address
the Covid-19 situation. It is widely acknowledged that these barriers exist,
and they continue to restrict trade in agricultural products.
With this background, this chapter examines the non-tariff barriers to
trade in agriculture products, specifically in the context of India’s export to
the EU. In doing so, the chapter analyses the information from Rapid Alert
System for Food and Feed (RASFF) and European Union Notification System
for Plant Health Interceptions (EUROPHYT) portals. It then examines
the impact of the rejection. Given the importance of trade in agriculture
9
Extracted from World Trade Statistical Review, 2021, Table A14, p. 69.
10
Europa database. The original figure is reported in Euro. It is converted using
XE Converter accessible rate available at https://www.xe.com/currencyconverter/
convert/?Amount=2.3&From=EUR&To=USD. The rate as of 6 October 2020 was EUR
1 = USD 1.15.
11
Except the Republic of Korea (henceforth, Korea) and India for which the simple
average of MFN applied rate on agriculture products was 56.8 per cent and 34 per cent,
respectively. For details see World Tariff Profiles, 2020 compiled by the WTO, available
at https://www.wto.org/english/res_e/publications_e/world_tariff_profiles21_e.htm,
accessed on 28 September 2021.
Behind the Border Measures 129

products to address the issue of food shortages and at the same time, the
role of responsible production and consumption for ensuring sustainable
development, the chapter makes recommendations on the following:
(a) What needs to be done in the entire export value chain from farmers to
producers and exporters to reduce rejections;
(b) Improve the quality of output; and
(c) Role of the government.
Before dwelling further, it is first important to investigate the scope of
Sanitary and Phytosanitary (SPS) measures in a multilateral trading system.
The layout of this Chapter is as follows: The next section, Section 2, presents
the scope of SPS measures in international agreements, including the WTO.
Section 3 presents and analyses the cases and reasons for export interceptions
and rejections. The reasons and impact of the rejections on Indian farmers,
processors, and exporters are presented in Section 4. Based on the analyses
and previous surveys conducted by the authors, Section 5 makes policy
recommendations and Section 6 draws broad conclusions.

Sanitary and Phytosanitary Measures and Technical Standards in

the World Trade Organization and Other Trade Agreements
The Agreement on the Application of SPS (known as the ‘SPS Agreement’)
was entered into force with the establishment of the WTO on 1 January 1995.
The Agreement sets out the basic rules for food safety and animal and plant
health standards. It allows countries to set their standards and also mentions
that regulations must be based on scientific analysis. It states that the
regulations should be applied only to the extent necessary to protect human,
animal or plant life or health and they should not arbitrarily or unjustifiably
discriminate between countries where identical or similar conditions prevail.
According to the WTO, domestic policies related to food quality, health,
and food safety are among the most common non-tariff barriers. The SPS
measures are imposed by most countries to ‘limit the damage caused by
or to protect the health of individuals from risks arising from the entry,
establishment or spread of pests, diseases, disease-carrying organisms or
disease-causing organisms, additives, contaminants, toxins or disease-
causing organisms in foods, beverages or feedstuffs; diseases carried by
animals, plants or products.’12

12
Annex A on Definitions of the WTO Agreement on the Application of Sanitary
and Phytosanitary Measures (called the SPS Agreement) available at https://www.wto.
org/english/tratop_e/sps_e/spsagr_e.htm, accessed on 2 October 2021.
130 India’s Agriculture and Food Exports

Under the WTO’s SPS Agreement, SPS measures are defined as any
measure applied to protect animal or plant life or health from risks arising
from the following:
• The entry, establishment, or spread of pests, diseases, disease-carrying
organisms, or disease-causing organisms;
• Additives, contaminants, toxins, or disease-causing organisms in food,
beverages, or feedstuff;
• Diseases carried by animals, plants, or products thereof, or from the
entry, establishment, or spread of pests.
Sanitary and Phytosanitary Measures include all relevant laws, decrees,
regulations, requirements, and procedures including, inter alia, end product
criteria; processes and production methods; testing, inspection, certification,
and approval procedures; quarantine treatments including relevant
requirements associated with the transport of animals or plants, or with the
materials necessary for their survival during transport; provisions on relevant
statistical methods, sampling procedures and methods of risk assessment;
and packaging and labelling requirements directly related to food safety. The
SPS Agreement also encompasses measures to prevent or limit other damage
within the territory of a country from the entry, establishment or spread of
pests.
Further, the WTO member countries are encouraged to use international
standards, guidelines, and recommendations, where they exist. Specifically,
the Agreement encourages harmonisation on the basis of standards,
guidelines, and recommendations set by three international organisations,
including the Codex Alimentarius Commission, the International Office of
Epizootics (OIE), and the relevant international and regional organisations
operating within the framework of the International Plant Protection
Convention (see the text of the WTO SPS Agreement). Article 12 of the SPS
Agreement established the Committee on SPS Measures to provide a regular
forum for consultation, implement the provisions of the Agreement, and
further the objective of harmonisation of standards across countries.
It is important to note that globally acceptable standards such as the
Codex Alimentarius can be higher than the national requirements of many
countries, especially developing countries, but the SPS Agreement explicitly
permits governments to choose not to use international standards. However,
if countries align themselves to globally acceptable standards such as the
Codex Alimentarius standards, then it is likely that a majority of the SPS
issues in international trade could be resolved. The bigger concern is that,
time and again, many countries, especially developed countries, impose more
stringent standards than international standards with a view to protecting
Behind the Border Measures 131

their nations against potential health threats arising from the consumption of
certain types of food products originating in developing countries (Nielsen
and Anderson, 2001), which can act as a major non-tariff barrier to exports
from developing countries (Henson and Loader, 2000). Many developing
countries, including India, have small farm sizes, and poor farmers. While
these farmers are keen to export, they may not have the right technology and
training or access to the right inputs, including seeds and fertilisers, which
could enable them to meet the conditions imposed by importing countries.
In such cases, there is a need for collaboration, sharing of information, and
sometimes support for upgrading food safety standards. Some countries
have, therefore, entered into capacity-building initiatives with developed
countries, like the one between Cambodia and the EU on rice production.
While the WTO acknowledges that some trade restrictions may be
necessary to ensure food safety and animal and plant health protection,
SPS restrictions can be used by member countries to protect their domestic
producers from economic competition. To reduce possible arbitrariness
in decisions and encourage consistent decision-making, the Agreement
clarifies which factors should be taken into account in the assessment of the
risk involved. It points out that measures to ensure food safety and protect
the health of animals and plants should be based as far as possible on the
analysis and assessment of objective and accurate scientific data. Therefore,
there is a need to collect and collate the data for challenging an SPS measure.
One key issue that needs consideration here is that due to differences
in climate, existing pests or diseases, or food safety conditions, it is not
always appropriate to impose the same SPS requirements on food, animal
or plant products coming from different countries. Therefore, SPS measures
sometimes vary, depending on the country of origin of the food, animal or
plant product concerned. This is taken into account in the SPS Agreement
and thus, using this provision, an importing country/region such as the EU,
can consider an exporting country like India more risky than other trading
partners such as the United States (US). For example, India has been identified
as one of the third countries with the risk of Foot and Mouth Disease (FMD).
This implies that the dairy products from India have to undergo various heat
treatments before being exported to the EU.13
The WTO member countries are required to notify other countries of any
new or changed SPS requirements that can affect trade. They have to set up
offices (called Enquiry Points) to respond to requests for more information
on new or existing measures. They also have to share information on how
13
For details see Commission Regulation (EU) No 605/2010, available at http://
eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:175:0001:0024:EN:PDF,
accessed on 6 October 2021.
132 India’s Agriculture and Food Exports

they apply their food safety and animal and plant health regulations. This
enables member countries to understand the national standards of their
trading partners. The information about SPS measures undertaken by the
EU is available to Indian policymakers and industry through this route.
Apart from SPS issues, there are also technical barriers to trade, which
are imposed in the form of technical regulations, standards, and conformity
assessment procedures that may be discriminatory and impose unnecessary
obstacles to trade. These are covered under the TBT Agreement of the WTO.
Often countries also impose labelling and packaging requirements that need
to be met by exporters, which can act as barriers to trade.
In the case of food products, standards for organic products are
considered as a technical standard rather than a food safety standard, as
conventional food is also safe for human consumption. There are mutual
recognition agreements for organic standards, which can be part of trade
agreements (for example, the EU and the Republic of Korea) or these can be
signed outside the trade agreements, like the EU has unilaterally approved
the organic standards laid down by APEDA for exports of fresh products
from India.
Most of the trade agreements have provisions for chapters on SPS
and TBT. Some trade agreements merely reflect the WTO requirements
while others, especially the agreements of developed countries like the US
and the EU, are WTO plus and have provision for mutual recognition of
standards and other regulatory cooperation.

Analysis of Rejections
The issue of food safety became prominent in the EU in the late 1990s
after a series of food incidents took place in the member countries. The
European Commission released a White Paper on Food Safety,14 which
recommended the establishment of the European Food Authority and
bringing about a Food Safety Legislation and Food Safety Controls. The
larger objective was to have a more coordinated and integrated approach
towards food safety. Following this, the General Food Law Regulation15 was
adopted by the European Parliament and Council in 2002, which lays down
general principles, requirements, and procedures that underpin decision-
making in matters of food and feed safety, covering all stages of food and
feed production and distribution.16 It created a European food safety system

14
Available at https://op.europa.eu/en/publication-detail/-/publication/6d4b523b-
dad8-4449-b2b4-9fa9b0d6e2be, accessed on 30 September 2021.
15
Available at https://ec.europa.eu/food/horizontal-topics/general-food-law_en,
accessed on 1 October 2021.
Behind the Border Measures 133

in which responsibility for risk assessment (science) and risk management

(policy) are kept separate. The Food Law is based on three inter-related
components of risk analysis as presented in Figure 7.1.
For risk communication with its trading partners, the EU has created
two portals, namely, RASFF and EUROPHYT, to immediately notify the
member countries and partner countries like Norway, Liechtenstein, Iceland,
and Switzerland of risk arising from food safety issues or pest infestations.
First, an alert is raised and once it is confirmed it is notified to the exporting
country.

Figure 7.1: Components of Risk Analysis

Source: Compiled by the authors.
The RASFF notifies when risks are detected in the food supply chain
and the EUROPHYT is a notification and alert system for risks related to
plant health. The European Food Safety Authority (EFSA) deals with risk
assessment and communicates its scientific findings to the public. It is
funded by the EU and operates independently of the European legislative
and executive institutions (Commission, Council, and Parliament) and EU
member states.16 As the risk manager, the Directorate-General for Health
and Food Safety (DG SANTE), is responsible for the implementation of
EU laws on the safety of food and other products, consumers’ rights, and
the protection of people’s health.17 The counterpart of RASFF will be the
rejection by the Food Safety and Standards Authority of India (FSSAI) and
that of EUROPHYT is the Plant Quarantine in the case of India.
Given this institutional background, this Section analyses the
notifications pertaining to food exports from India to the EU member states
as reported by the RASFF and the EUROPHYT portals of the EU.
16
Available at https://www.efsa.europa.eu/en/aboutefsa, accessed on 2 October 2021.
17
Available at https://ec.europa.eu/info/departments/health-and-food-safety_en,
accessed on 2 October 2021).
134 India’s Agriculture and Food Exports

The RASFF portal18 gives public access to summary information about

the most recently transmitted RASFF notifications. Data is available from
2020 through 2021 and the information for products originating from India
is extracted from the database. The risk is classified as: (a) serious, (b) not
serious, (c) undecided, and (d) no risk. Additionally, the data presents the
type of notification made, namely, border rejection, alert, information for
attention, or information for follow-up.

Notifications Against Food and Feed from India

Between January 2020 and June 2021, 563 notifications were made on
food and food contact material and 15 notifications were made for feed for
products originating from India. Out of the total notifications made, around
86 per cent of the notification made with respect to food and food contact
material were marked under the serious category while about 73 per cent of
the notifications with respect to feeding were marked as serious (Table 7.1).
Table 7.1: Distribution of Notification by Risk Decision
(From January 2020 to June 2021)
Type Serious Not Serious No Risk Undecided Total
Food 489 18 3 53 563
Feed 11 2 0 2 15
Source: Rapid Alert System for Food and Feed (RASFF) portal
Note: Food includes Food Contact Material
The notifications are classified into four categories, namely, alert,
rejection, information for follow-up and information for attention.
Alert notifications are sent when food or feed presenting a serious health
risk is on the market and rapid action is required. However, this does not
necessarily mean that for all serious notifications ‘serious’ risk decisions are
taken. The RASFF member/the EU member state that identifies the problem
and takes the relevant actions (e.g., withdrawal of the product) triggers the
alert. A few risks may remain undecided or may be considered not serious
after a thorough check.
Border rejections concern food and feed consignments that have been
tested and rejected at the external borders of the EU [and the European
Economic Area (EEA)] when a health risk has been found. The notifications
are sent to all EEA border posts to reinforce controls and ensure that the
rejected product does not re-enter the EU through another border post.
Information notifications are used when a risk has been identified about
food or feed placed on the market, but the other members do not have to
18
The portal is accessible at https://webgate.ec.europa.eu/rasff-window/screen/
search (accessed on 2 October 2021).
Behind the Border Measures 135

take rapid action. This is because the product has not reached its market
or is no longer present on its market or because the nature of the risk does
not require rapid action. Any information related to the safety of food and
feed products that has not been communicated as an alert or an information
notification, but which is judged interesting for the control authorities, is
transmitted to the members under the heading ‘News’.
Between January 2020 and June 2021, around 333 alert notifications
were sent for food and food contact material originating from India while
one alert notification pertained to feed. In total 115 border rejections were
made for food and food contact material originating from India while 9
border rejections were made for feed (Table 7.2).
Table 7.2: Distribution of Notification by Classification
(From January 2020 to June 2021)
Type Alert Rejection For Follow Up For Attention Total
Food 333 115 13 102 563
Feed 1 9 0 5 15
Source: Rapid Alert System for Food and Feed (RASFF) portal
Note: Food includes Food Contact Material
A majority of the rejections in food-related notifications were made
by the Netherlands (40 per cent), primarily because of the high volume of
export traffic directed towards the Rotterdam and Antwerp ports in the
Netherlands (Table 7.3). This is followed by Germany (13 per cent). Post-
Brexit, a majority of the food products enter the EU market through the
Netherlands’ Rotterdam port, and thus the number of interceptions is higher
for the Netherlands.
Table 7.3: Distribution of Food-related Notifications by Notifying Country in the
EU, Switzerland, and the UK (From January 2020 to June 2021)
Country Serious Not Serious No Risk Undecided Total
Austria 7 2 9
Belgium 19 5 24
Bulgaria 1 1
Croatia 3 1 2 6
Cyprus 3 1 4
Czech Republic 9 1 10
Denmark 6 3 9
European Commission 1 1
Finland 7 3 10
France 13 1 4 18
Germany 63 10 73
136 India’s Agriculture and Food Exports

Country Serious Not Serious No Risk Undecided Total

Greece 18 18
Ireland 1 1
Italy 25 3 3 31
Latvia 1 1 2
Luxembourg 3 2 5
Malta 1 1
The Netherlands 225 2 227
Norway 6 3 9
Poland 10 1 2 13
Portugal 5 2 7
Romania 5 5
Slovenia 7 3 10
Spain 17 1 3 21
Sweden 8 1 9
Switzerland 10 10
United Kingdom 16 7 3 3 29
Total 489 18 3 53 563
Source: Rapid Alert System for Food and Feed (RASFF) portal
Note: Food includes Food Contact Material
As regards feed-related notifications, a majority of the notifications are
made by Germany (4), followed by the Netherlands (3), the UK (3), Finland
(2), and Belgium, Spain, and Sweden (1 each).19
In terms of the category-wise notifications, Table 7.4 shows that a
majority of the notifications were made with respect to nuts, nut products,
and seeds (66.7 per cent). These largely pertained to the export of sesame
seeds from India to the EU members states, Switzerland, and the UK.
Table 7.4: Category-wise Distribution of Notifications Made for Food and Food
Contact Material (From January 2020 to June 2021)
Category Serious Undecided Not Serious No Risk Total
Cephalopods and products 9 9
thereof
Cereals and bakery products 18 10 2 2 32
Cocoa and cocoa preparations, 2 1 3
coffee and tea
Crustaceans and products 6 2 1 9
thereof

19
Rapid Alert System for Food and Feed (RASFF) portal
Behind the Border Measures 137

Category Serious Undecided Not Serious No Risk Total

Dietetic foods, food 12 2 1 15
supplements, and fortified
foods
Fats and oils 1 1
Fish and products thereof 4 1 2 7
Food additives and flavourings 5 1 6
Food contact materials 1 1 2
Fruits and vegetables 18 7 3 1 29
Herbs and spices 37 12 5 54
Ices and desserts 1 1
Nuts, nut products, and seeds 361 12 3 376
Other food products/mixed 14 3 17
Prepared dishes and snacks 2 2
Total 489 53 18 3 563
Source: Rapid Alert System for Food and Feed (RASFF) portal
The analysis reflects that over an 18 month-period starting January
2020, nearly 600 notifications are made with respect to food and feed
originating from India and most of these are alert notifications of serious risk
category.
While the RASFF provides risk data on food and feed, the risks related
to plant health are reported by EUROPHYT. The tables are presented in the
following paragraphs.

Interceptions Made by the European Union and Switzerland for

Products From India for Risks Related to Plant Health
The data on annual interceptions made by the EU and Switzerland of harmful
organisms in imported plants and other objects from India is collected from
the EUROPHYT portal.20 The import of most plants and plant products from
non-EU countries is allowed, subject to certain conditions. Some plants are
prohibited or subject to very strict requirements if a risk assessment indicates
that this is necessary due to the pests they may host. An implementing
regulation sets out the precise rules with the lists of regulated pests, regulated
commodities, import prohibitions, and requirements for import and internal
movement, reinforcing the Union’s phytosanitary protection. All living plant
material (entire plants, fruits, vegetables, cut flowers, seeds, tubers, etc.) and
some plant products (wood of certain tree species, etc.) can only be imported

20
Available at https://ec.europa.eu/food/plants/plant-health-and-biosecurity/
europhyt/interceptions_en, accessed on 2 October 2021.
138 India’s Agriculture and Food Exports

into the EU if accompanied by a phytosanitary certificate confirming their

compliance with the EU legislation. The only exceptions relate to five fruit
species, namely, bananas, coconuts, dates, pineapples, and durians do not
need a phytosanitary certificate for import into the Union.21
Between 2015 and 2020, around 866 interceptions were made with
respect to the import of plants and produce and 893 interceptions were
made with respect to objects. The annual break-up of these interceptions is
presented in Table 7.5.
Table 7.5: Annual Interceptions of Harmful Organisms in Commodities
(Objects, Plants, and Produce) Imported from India into the EU Member
States, Switzerland, and the UK (2015–20)
Total Number of Interceptions: Total Number of Total Number of
Year
Plants and Produce Interceptions – Objects Interceptions
2015 103 261 364
2016 91 161 252
2017 228 162 390
2018 214 136 350
2019 94 128 222
2020 136 45 181
Source: EUROPHYT database, available at https://ec.europa.eu/food/plants/plant-
health-and-biosecurity/europhyt/interceptions_en#annual_interceptions, accessed
13 September 2021.
The interceptions on plants and products pertain to the threats found on
products intended for planting, other living plants, fruits or vegetables, seeds,
etc. The object-related interceptions are made due to harmful organisms
found on packing materials, wooden crates, pallets, and other materials.

Reasons for Rejections and its Impact

The data provided by the RASFF is further analysed to investigate the reasons
for rejections. Between January 2020 to June 2021, broadly, the issues listed
in Table 7.6 were found in food imported from India.
Table 7.6: Issues Detected in Food Products Originating From India
Issue Explanation
Aflatoxin These are a family of toxins produced by certain fungi
that are found on crops such as maize (corn), peanuts,
cottonseed, and tree nuts.
Aluminium Residue In food additives, aluminium compounds are used as
preservatives, for colour or leavening bread.

21
Available at https://ec.europa.eu/food/system/files/2020-07/ph_biosec_qandas.
pdf, accessed on 12 October 2021.
Behind the Border Measures 139

Issue Explanation
Azo Dye These are used as food colouring ingredients.
Cadmium It is a heavy metal found as an environmental contaminant,
both through natural occurrence and from industrial and
agricultural sources.
Chlorpyrifos It is an organophosphate insecticide, acaricide, and
miticide used to control foliage and soil-borne insect pests
on a variety of food and feed.
Ciguatoxins This is a group of poisons that can accumulate in certain
fish.
Dinitrophenol It is an anti-obesity therapy/supplement however studies
show that DNP causes toxicity by the uncoupling of
oxidative phosphorylation in the mitochondria of cells
throughout the body.
Ethylene Oxide It is used in or as fumigants/insecticides to combat fungi
and bacteria.
Excessive Lead and/or Contamination beyond the level of tolerance.
Mercury
Glycidyl Esters These are processing-induced contaminants primarily
found in refined fats and oils, and foods containing fats
and oils.
Histamine It is a biogenic amine which is a naturally occurring
substance in the human body. Histamine is derived from
the breakdown (decarboxylation) of the amino acid
histidine.
Irradiation Food irradiation (the application of ionising radiation
to food) is a technology that improves the safety and
extends the shelf life of foods by reducing or eliminating
microorganisms and insects. Unauthorised irradiation is
considered harmful.
Mycotoxins There are toxic compounds that are naturally produced by
certain types of moulds (fungi). Moulds that can produce
mycotoxins grow on numerous foodstuffs such as cereals,
dried fruits, nuts, and spices.
Nitrofuran These are antimicrobial agents and are rapidly metabolised,
occurring in animal tissues as protein-bound metabolites.
Ochratoxins This is a naturally occurring foodborne mycotoxin found
in a wide variety of agricultural commodities worldwide.
Pesticide Residue Any substance or mixture of substances in food for man
or animals resulting from the use of a pesticide and
includes any specified derivatives, such as degradation
and conversion products, metabolites, reaction products,
and impurities that are considered to be of toxicological
significance.
140 India’s Agriculture and Food Exports

Issue Explanation
Salmonella It is a bacteria that can result in food poisoning.
Tricyclazole It is a specialty systemic fungicide. The product is rapidly
absorbed by rice plants and translocated towards leaf tips.
Undeclared Ingredient/ Could include allergens or materials not disclosed on
Incorrect Labelling labels.
VTEC: E. Coli It is a germ (bacterium).
Other Issues Absence of certification, use of unauthorised substance,
poor temperature control, and undefined hazard, among
others.
Source: Compiled by authors from information available on the RASFF portal.
Table 7.6 highlights that most of the issues arise due to the poor quality
of soil and water, excessive use of certain pesticides or fumigants or banned
ingredients, and cross-contamination of food. These result in contamination
or food toxification. Some persistent issues are summarised next.

Ethylene Oxide in Sesame Seeds

Almost 70 per cent of the RASFF notification for food and food contact
material imported from India pertained to excessive ethylene oxide in some
food products. One of the most recurring issues during the period was
related to high levels of ethylene oxide being found in sesame seeds imported
from India. According to the EU regulations, sesame seeds may only be
placed on the market in the EU when they comply with the Maximum
Residual Limits (MRL) of 0.05 mg/kg, set at the limit of quantification.
In October 2020, the EU Member States called for short-term measures
on sesame seeds imported from India, including prior testing by India of
sesame seeds intended for exports to the EU for compliance with the MRL
for ethylene oxide, confirmed by an official certificate that would accompany
the consignments, and imposing increased controls on sesame seeds coming
from India at border control posts checking 50 per cent of consignments
presented at the EU border.

Aflatoxin in Peanuts and Spices

Around 7 per cent of the notification during the period22 were issued
due to the presence of aflatoxins, mostly in peanuts. According to the EU
regulations, the level of aflatoxin B1 in groundnuts intended for direct
human consumption must not exceed 2 μg/kg and the total aflatoxin content
(B1, B2, G1, and G2) must not exceed 4 μg/kg. However, a higher aflatoxin

22
January 2020 to June 2021
Behind the Border Measures 141

content for groundnuts is allowed if the products are not intended for direct
human consumption. In such cases, the groundnuts must be sorted or treated
before they are placed on the market.23 In April 2021, the EU tightened the
checks on peanut imports from India, due to the presence of Aflatoxins.
The frequency of identity and physical checks on peanuts from India was
increased from 10 per cent to 50 per cent.24

Pesticide Residue in Rice

Around 4.6 per cent of the notifications were made due to the presence of
pesticide residues, most of which were found in rice exported from India to
the EU. It is worth mentioning since 2017, to ensure compliance with EU
MRLs for Basmati rice exported to the EU is based almost exclusively on
mandatory pre-shipment residue analysis conducted by exporters. According
to an Audit Report of the European Commission, evaluating control of
pesticides in food exported to the EU from India, it is found that the issue
persists due to the poor practices in the use of plant protection products are
widespread, with 50 per cent of all residue findings in rice being for active
substances not approved on the crop.25

Salmonella in Sesame Seeds and Spices, etc.

Problems with salmonella in sesame seeds are not just limited to India.
Due to the high volume of imports from India, in February 2017, a new
EU-Regulation was implemented requiring that a health certificate, as well
as a laboratory report verifying the absence of salmonella, shall accompany
each consignment of sesame seeds. Since salmonella cases have occurred
repeatedly, the EU has stipulated that every fifth delivery of sesame from
India must be tested for the pathogen. In India, ethylene oxide is essentially
used to stop the growth of salmonella in sesame seeds and other spices, like
ginger or previously, fruit flies in mangoes. This may have led to Indian
exporters increasingly disinfecting their goods with ethylene oxide, resulting
in a high incidence of ethylene oxide residues in sesame seeds.26

23
Available at https://www.cbi.eu/market-information/processed-fruit-vegetables-
edible-nuts/groundnuts/market-entry, accessed on 14 October 2021.
24
Available at https://www.foodsafetynews.com/2021/04/eu-gets-stricter-on-black-
pepper-from-brazil-and-peanuts-from-india/, accessed on 15 October 2021.
25
Available at https://ec.europa.eu/food/audits-analysis/act_getPDF.cfm?PDF_
ID=14220, accessed on 12 October 2021.
26
Available at https://organic-market.info/news-in-brief-and-reports-article/
pesticide-findings-in-organic-sesame-from-india.html, accessed on 13 October 2021.
142 India’s Agriculture and Food Exports

While these are some of the recurring issues, there are other issues
such as the presence of tricyclazole in rice, ciguatoxins and nitrofurans in
seafood, the presence of azo dye in food products, etc., that have resulted in
notifications by the EU member states.
Most of the notifications result in mandatory testing and certification
requirements, from Indian authorities, followed by testing at the landing
port in the EU. With increased sampling sizes, these testing and certification
requirements turn out to be costly and time-consuming. For some product
categories such as peanuts, for instance, the EU has higher food safety
standards than not only those set by international organisations such as
Codex Alimentarius Commission, but the standards are higher than those
set by other developed countries such as the US.
Moreover, as pointed out during the Key Informant Interviews (KIIs),
often products can get contaminated in the supply chain due to poor storage
conditions or incorrect processing technologies, among others. The RASFF
data reflects that in a few cases, notifications were issued due to poor
temperature control in the case of certain products. The case of sesame is
unique by itself. The use of ethylene oxide to control bacterial growth, itself
led to a high incidence of notifications and another round of mandatory
checks on Indian food products. One core issue that came up during the
industry interaction was that there are information gaps and information
sharing with the exporters and farmers. This is a major issue leading to
export rejections. Often the exporters are not aware of frequent changes in
standards and requirements, despite being members of export promotion
councils and bodies.
It is worth mentioning that in times of emergencies, like the recent
Pandemic, some of the mandatory certification requirements were relaxed
by the EU. For instance, as a measure to facilitate trade, due to the Covid-19
situation, mandatory pre-shipment residue analysis for rice was relaxed for
export to select EU member states.
Focusing on the issue and its impact, KIIs confirmed that a core issue for
India is that despite there being export control agencies, we are unable to meet
the importing countries’ requirements. There seem to be gaps in information
sharing, knowledge, and the export control process in general. Multiple
overlapping bodies often depend on each other to do the due diligence, while
the entire process can be more efficient through a technology-based risk
management system. There are structural issues in the Indian agricultural
sector, which is dominated by smallholders, like the lack of knowledge, the
lack of quality inputs, subsidies given to fertilisers that are banned in the
EU, the use of wrong pesticides, the lack of traceability due to limited use of
digital technology, etc.
Behind the Border Measures 143

The impact of the rejection has been diverse. Often there are periodic
product bans like for mangoes due to the fruit flies and so on. This led to a
drastic fall in prices of mangoes and the loss to the farmers. Dairy products
imports are banned by the EU and the UK, leading to a huge loss of revenue
for many of our manufacturers. Second, if the product is destroyed then
the exporters face a total loss. The product may be allowed to be shipped
to a third country or back to India. In this case, too, the exporters face a
huge cost. Perishable products have a short shelf-life, and they get spoiled in
the process. In case of issues like the presence of tricyclazole in rice, almost
60 per cent of the consignment in the year of implementation of the ban
on tricyclazole by the EU, were rejected by the EU companies and Indian
companies lost their market share to Vietnam and Cambodia. In the case of
vegetables and fresh fruits, many African countries are taking away India’s
market share, and exports are now reducing in key markets like the US and
the EU.

Recommendations
India wants to become a key exporter of agricultural products and therefore
it is in the interest of the country to address the export rejection and ensure
its export competitiveness. Based on the KIIs, five key areas of interventions
have been recommended in this section, which will help to reduce the
chances of export rejection and enhance our export competitiveness.
• Implement and Strengthen Traceability Using Digital Technologies:
One of the most successful ways of resolving the SPS issues in recent
years has been the establishment of technology-based traceability to the
farms in products. Export promotion agencies including APEDA have
established traceability procedures for export-oriented products such as
grapes. There is an urgent need to implement product traceability for
all exported products. However, due to the fragmented nature of India’s
agriculture sector, large-scale adoption is often difficult and costly. There
is evidence on the use of block-chain technology for building supply
chain traceability and improving transparency for products that have
high chances of rejection. Technological solutions can be explored at an
institutional level and through a public-private partnership. Innovative
start-ups can be roped in for such technology solutions. Technology will
not only help to manage the risk better but it will also help to identify
where the product is getting contaminated in the supply chain.
• Implement Good Agricultural Practices and Global Best Practices:
Most developing countries address the SPS issues faced in developed
country markets by implementing Good Agricultural Practices (GAP)
144 India’s Agriculture and Food Exports

and reducing the use of chemicals and pesticides. As a first step, chemicals
and fertilisers that are banned in other countries, especially key markets
of developed countries like the US and the EU, should also be banned in
India. Moreover, realising the importance of export markets, farmers in
India are willing to switch to the use of bio-fertilisers and green inputs,
but most of them do not have the knowledge and financial means to
make the switch. There is a significant push from the Indian Central and
state governments to promote organic farming and nutritious food but
there is a severe shortage of organic inputs, technology, knowledge, and
most importantly, funding. Chemical fertilisers are highly subsidised
and available in plenty; in contrast, the availability of bio-chemicals and
green inputs is limited and organic inputs for exports have little (or no)
subsidies. Therefore, it is important to re-examine the subsidy regime
and subsidise the right type of inputs and farm practices.
• Review the Export Control Process: If a product goes through the
export control process domestically and is then rejected in key markets,
it is important to review and undertake a third-party audit to examine
the efficiency of the control process that has been carried out in India.
Further, there should be a single agency for export control, traceability,
and laboratory testing. Different nodal agencies for export control
(such as APEDA for organic spices and Spices Board India for spices)
create confusion as it leads to the incidence of multiple laboratory test
requirements. Registration with multiple agencies also adds to the cost
while, on their part, agencies lack accountability. A single nodal agency
for export will reduce the cost for exporters and increase accountability.
It will also reduce the cost of governance related to running multiple
organisations with overlapping responsibilities.
• Implement Food Safety Regulations in the Domestic Market: While
India may have adopted international standards for the domestic
market, there are gaps in the adoption and implementation of standards,
especially for fresh produce sold through unorganised markets in India.
In the case of products such as milk, the quality of processing plants
varies widely and, in many cases, they are below international standards.
It is, therefore, important to focus on quality and standards in the
domestic market so that products are produced and processed adhering
to international food safety requirements. Poor quality food can be
equally harmful to consumers in India and hence, the Department of
Consumer Affairs under the Ministry of Consumer Affairs, Food &
Public Distribution, and FSSAI should work together on this issue.
• Establish World-Class Export Infrastructure: India has been
increasingly implementing food safety assurance and management
Behind the Border Measures 145

systems such as Hazard Analysis and Critical Control Points (HACCP)

and the FSSAI has mandated its implementation for all food business
operators. For the treatment and processing of certain products, different
importing countries prescribe different treatments that require the
installation of specific infrastructure, for example, mechanised methods
of milking for dairy exports are a requirement of the EU, which may be
possible for private dairies to abide by but may be difficult for milk co-
operatives to implement, given a large number of small farms. In this
context, it is important to identify and prioritise companies that are ready
to export and those that need further training and capacity building prior
to the export. Similarly, some countries require hot water treatment or
vapour heat treatment for mangoes before export while others require
gamma irradiation. At present, the infrastructure available is limited to
a few states and it is not evenly spread across the country. For export
products such as mangoes, Basmati rice, and grapes, investments should
be made in setting-up relevant infrastructure for export.

Conclusions
It is important to note that while food standard is a public policy issue when
products cross borders, it becomes a trade policy issue. Consumers across
the world have become more health-conscious and are aware of food safety
standards. Food demand patterns are changing in both the domestic and
export markets. As India is moving towards the exports of semi-processed,
processed, and specialised food products (such as halal meat or organic
spices), more value addition will happen in the country leading to more
employment creation and the growth of the food processing sector. Such
products also earn a premium price, but they will require the implementation
of proper certification and standards. Further, wide differences in domestic
and export standards will make it difficult for India to become a food
processing hub as a processor in India will need to source local ingredients
to process for exports and the domestic market. If domestic standards
are aligned to international standards, there is less likelihood of product
rejections, and it is easier to earn a premium price for certified products
such as organic food products. Rejection and bans of products can tarnish
the image of India as an exporting country. There is an urgent need to
first implement strict quality standard and focus on brand building based
on that quality standards. Overall, it is recommended that all government
departments may work together to design a comprehensive policy on safe
agriculture practices. There is a need to use technology for food safety
compliance and risk management. To counter rejection by a partner country
146 India’s Agriculture and Food Exports

in forums like the WTO’s SPS committee or TBT committee, there is a need
for data collection and scientific evidence-based reports. At the same time,
it is important to build the capacity of our small and medium farmers and
processors and inform them about the export market requirements.

References
Chantal Nielsen and Kym Anderson, ‘GMOs, Trade Policy and Welfare in
Rice and Poor Countries’, In K. Maskus and J. Wilson (eds.) Quantifying
the Impact of Technical Barriers to Trade: Can it be Done?, University of
Michigan Press, 2001.
S. Henson and Rupert Loader, ‘Barriers to Agricultural Exports From Developing
Countries: The Role of Sanitary and Phytosanitary Requirements’, World
Development, 2000, Vol. 29, No. 1, pp. 85-102.
CHAPTER 8

Promoting Agricultural Exports: Need

for National Level Policy on Food Loss
Management
D.S. Chauhan*
* Chief General Manager (Retd.), NABARD. (Email ID: [email protected] )

Introduction
India is home to 1.38 billion people. Agriculture continues to be at the
country’s centre stage as it provides direct livelihood avenues to almost
half of the country’s population and supports significant industries in the
agro sector by providing raw materials. It will not be out of context if it is
stated that agriculture, including horticulture and vegetable cultivation, and
related activities such as animal husbandry, poultry, and fish-culture are the
backbone of the Indian economy. Besides providing economic resilience,
the sector is also essential for political and social stability and is directly
responsible for providing food security to the country.

Food Security
It has been illustrated and defined from time to time by various agencies
and authors. The Food and Agriculture Organization (FAO) has defined
food security as ‘ensuring that all people at all times have both physical
and economic access to the basic food that they need.’ (FAO, 1983). A more
comprehensive definition can be ‘Food security exists when all people, at
all times, have physical, social and economic access to sufficient, safe, and
nutritious food which meets their dietary needs and food preferences for
active and healthy life (FAO, 2016). Household food security applies this
concept to the family level, with individuals within households as the focus
of concern. Food security, in its broader term, may have been achieved by
India, but the country continues to lag behind most of the other countries on
the FAO’s Hunger Index, which measures the index of hunger on the indices
of under-nourishment, child wasting, child stunting, and child mortality.
148 India’s Agriculture and Food Exports

The FAO has placed India at 101 rank among 116 countries on the Global
Hunger Index, 2021 (FAO, 2021).

The Status
Despite the overall importance of the sector, the fact remains that agriculture
and the Indian farmer continue to struggle with the ever-growing problem
of long-term sustainability and viability of its economics. The levels of farm
efficiency index reflected in farm production levels continue to be a cause
of concern. The major reasons, as attributed by many a report, which can be
cited for this anomaly are as follows (Dalwai, 2017):
• Fragmented and small size of per capita land holdings
• Issues related to soil and water management
• Unavailability of quality and cost-effective farm inputs such as seeds and
fertilisers
• Low level of public and private investments
• Lower levels of technology infusion
• Weak Research and Development (R&D) back-up
• Weak extension and training services
• Pre-harvest, harvest, and post-harvest gaps
• Weak value chains and market linkages
• Food loss and food wastageLow levels of farm income generation lead to
inequitable wealth distribution in rural areas compared to urban India.

India’s Food Growth Trajectory

Nevertheless, the sector has not bellied the nation’s hopes, and it has made
India from a self-deficient nation to a self-sufficient nation in so far as
foodgrain production is concerned and has provided food self-sufficiency
to the nation despite its ever-increasing population. Where foodgrain
production is concerned, various policy measures along with the thrust
provided by the ‘Green Revolution’ and increased availability of irrigation and
fertiliser, the country has seen remarkable strides in foodgrain production.
Table 8.1 depicts the decadal average foodgrain production since 1951.
It is estimated that in the FY 2021-22, the nation will be producing
foodgrains in the vicinity of 300 Million Metric Tonnes (MMT) and an equal
quantity of fruits and vegetables. Deaths on account of food starvation have
become far and remote, and the availability of free and subsidised foodgrains
to resource-less people has been ensured on account of augmented food
production and increased efficiency of public distribution systems. Over
the years, India has made rapid progress in food production. The annual
growth rate of food production, including non-cereal food, increased from
Promoting Agricultural Exports 149

Table 8.1: Average Food Grain Production

Decadal Period Average Production Per Year in Million Metric Tonnes
1950-51 to 1959-60 65.47
1960-61 to 1969-70 85.00
1970-71 to 1979-80 111.53
1980-81 to 1989-90 146.55
1990-91 to 1999-2000 188.44
2000-01 to 2009-10 210.52
2010-11 to 2019-20 267.24
Source: Directorate of Economics and Statistics, Department of Agriculture,
Cooperation and Farmers Welfare, Ministry of Agriculture, Government of India.
2.1 per cent during the 1960s to 3.0 per cent in the subsequent decade and
further to 3.8 per cent during the 1980s. Between 1960 and 1980, food
production barely kept pace with the population, but in the 1980s, per capita
food production increased at a satisfactory rate of 1.6 per cent per annum
(Radhakrishna and Reddy, 2004). Table 8.2 depicts the annualised growth
rates of foodgrain production and growth in population.
Table 8.2: Annualised Compound Growth Rates of Food Production and
Population Growth
Food Production
Year Population Growth Rate
Aggregate Per capita
1961-63 to 1971-73 2.11 (−) 0.10 2.24
1971-73 to 1981-83 3.00 0.84 2.23
1981-83 to 1991-93 3.77 1.62 2.02
1991-93 to 1997-99 2.72 0.90 1.84
(Per cent per annum)
Sources: FAO, State of Food and Agriculture
Though there has been a steady growth in foodgrain production, the per
capita foodgrain availability almost remains static. It was only in 2020 that
Table 8.3: Foodgrain Availability in India
Decadal Period Net Availability of Foodgrains in Grams per day per Capita
1950-51 to 1959-60 429.8
1960-61 to 1969-70 447.5
1970-71 to 1979-80 442.2
1980-81 to 1989-90 464.2
1990-91 to 1999-2000 475.5
2000-01 to 2009-10 443.5
2010-11 to 2019-20 485.5
Source: Agricultural Statistics at a Glance (2020)
150 India’s Agriculture and Food Exports

India was able to break the barrier of 500 grams of foodgrain per person per
day, with the availability of foodgrain touching 513 grams per person per
day. Table 8.3 indicates the foodgrain availability in India.

Food Loss and Food Waste

It is of paramount importance and is a globally recognised fact that reducing
food loss and waste is a solution to reduce food and nutrition insecurity and
reduce Greenhouse Gas (GHG) emissions without impinging on activities
related to core economic development. The EAT-Lancet Commissions’ report,
indicates that reductions in food loss and food waste can play a pivotal role
in evolving sustainable food systems to provide healthy diets for 10 billion
people by 2050 (EAT-Lancet Commission, 2019). The role of reducing food
loss and waste in improving social, economic, and environmental outcomes
is also underlined in Target 12.3 of the Sustainable Development Goals
(SDGs), which calls for reducing food loss and halving food waste by 2030.
Thus, effective strategies have been developed to minimise food loss and
waste globally. It is estimated that half of the world’s population now lives in
countries that have set an explicit public target aligned with the Sustainable
Development Goal (SDG) 12.3 (Flanagan et al., 2019). However, as per NITI
Aayog (2019), India has not set such a target despite having national-level
surveys on post-harvest losses. Therefore, a policy vacuum remains in the
country in so far as reducing food loss is concerned.

Differentiating Food Loss From Food Wastage

In contemporary times, the two terms are often being used interchangeably,
and a little differentiation is made between the two. However, there is a
vast difference between ‘Food Loss’ and ‘Food Waste’ on account of their
occurrence and cause (see Box 8.1).
Food Loss is defined as a ‘Decrease in quality and quantity of the food
as a result of decisions or actions in the food supply chain.’ (World Health
Organization, 2019). Thus, food loss occurs due to on-farm activities
encompassing harvesting, threshing, winnowing, storage, packaging, and
transportation. On the contrary, Food Waste is defined as a ‘Decrease in
quality and quantity of the food as a result of decisions or actions by retailers,
food service providers, and consumers.’ (Ibid.) PM
According to the UN Environment Program (UNEP) Report, the world,
annually, wastes an average of 121 kilogram (kg) of food per person (UNEP,
2021). The share of food wasted in domestic households is 74 kg. India,
where about 14 per cent of the population (about 169.4 million people as per
the 2011 Census) is malnourished, has also been annually wasting 50 kg of
Promoting Agricultural Exports 151

cooked food per person. Table 8.4 depicts the country-wise position on food
wastage in Southern Asia.

Box 8.1: Food Loss from Food Wastage

Food refers to any substance, whether processed, semi-processed or raw,
intended for human consumption.
The food supply chain consists of the following segments: agricultural
production and harvest, slaughter, or catch; post-harvest, slaughter, and
catch operations; storage; transportation; processing; wholesale and retail;
and consumption by households and food services.
Food loss is the decrease in the quantity or quality of food resulting
from decisions and actions by food suppliers in the segments of the chain
excluding retail, food service providers, and consumers. It is also known
as post-harvest losses.
Food waste is the decrease in the quantity or quality of food resulting
from decisions and actions by retailers, food services, and consumers.
Quantitative food loss and waste is the amount or the mass of food destined
for human consumption removed from the food supply chain.
Qualitative food loss and waste is the decrease in food attributes
that reduces its value in terms of intended use. It can result in reduced
nutritional value (e.g., smaller amounts of vitamin C in bruised fruits)
and/or the economic value of food because of noncompliance with quality
standards.
Source: Adapted from FAO (2019)
Box 8.2: Food Loss vs. Food Waste

Source: Adapted from http://onethird.io> food-Loss-Food-Waste-difference,

accessed on 31 January 2022
152 India’s Agriculture and Food Exports

Table 8.4: Household Food Waste in Southern Asia

Household Food Waste Household Food Waste
Country
Estimate (Kg/Capita/Year) Estimate (Tonnes/Year)
Afghanistan 82 31,09,153
Bangladesh 65 1,06,18,233
Bhutan 79 60,000
India 50 6,87,60,163
Islamic Republic of Iran 71 58,84,242
Maldives 71 37,688
Nepal 79 22,49,412
Pakistan 74 1,59,47,645
Sri Lanka 76 16,17,738
Source: UNEP (2021)
The Government of India, to check this alarming trend, has introduced
‘The Compulsory Food Waste Reduction Bill 2018’ in the Parliament which
underlined a legislative system “to constitute a Committee for Food Waste
Reduction which shall publish a Food Waste Reduction Strategy to reduce food
wastage and make it mandatory for supermarkets and food manufacturers to
donate food and beverage products and for matters connected in addition to
that or incidental to that”. However, any such specific legislation on food loss
is still awaited.

Magnitude of Food Loss

A study conducted in 2021 indicates that India is one of the world’s leading
food producers. The land, water, and carbon footprint of food loss and waste
are very high for the country (Agarwal et al., 2021). The Indian Council of
Agricultural Research (ICAR), 2006, devised a formula and methodology
to comprehensively establish how much is lost by India of what it produces.
Accordingly, ICAR’s Central Institute of Post-Harvest Engineering and
Technology (CIPHET) mounted and completed two studies—the first
one in 2013-14 devolving around the pre- and post-harvest food loss and
the other one in 2015-16, involving a survey of storage and supply chains
(Srivastava, 2021 Vishwakarma et al., 2019). The study calculated the
economic value of harvest and post-harvest losses of primary agricultural
and livestock produce (using production data of 2012-13 and wholesale
prices of 2014 and results of the 2016 study). The estimated annual value of
the losses was pegged approximately at INR 9,26,510 million, while the total
food security expenditure of the nation per annum is INR 15,00,000 million.
The study findings were presented in the Parliament, and the Government
Promoting Agricultural Exports 153

Table 8.5: Food Production and Food Loss of Major Crops

Estimated Share %age of Approximate
Food Food Loss in
Production (2021- Food Loss of Loss Value in
Produce MMT (2021-22)
22) in MMT Total Produce (Rs Million)*
Cereals 240 4.65 to 5.99 12 2,40,000
Pulses 30 6.36 to 8.41 02 1,40,000
Oilseeds 30 3.08 to 9.96 02 1,40,000
Fruits and 300 4.58 to 15.88 30 2,90,000
Vegetables
Milk 150 0.92 1.5 50,000
Meat 5 2.71 0.14 40,000
Poultry 7 6.74 0.46 50,000
Source: PIB, ICAR/CIPHET
Note: *Valuation on the basis of MSP/Farm gate price available to a farmer.
Table 8.6: Magnitude of Food loss and Export Potential (Rs in Million)
Realisable Realisable Realisable
Quantum
Per Unit Value of Value of Value of
of Export Value of Quantum
Export Export Export Export
Commodity in MMT Export* of Loss in
Value if Loss is if Loss is if Loss is
in 2019- (b) MMT
(b)/(a) Reduced by Reduced by Reduced by
20* (a)
10% 25% 50%
Cereals 10.23 4,73,250 46,261 12 55,513 1,38,783 2,77,566
Pulses 0.23 15,120 65,739 02 13,148 32,870 65,739
Oilseeds 1.05 93,630 89,171 02 17,834 44,586 89,171
Fruits and 2.77 1,01,140 36,513 30 1,09,539 2,73,848 5,47,695
Vegetables
(Fresh)
Meat 1.30 2,33,000 1,79,231 0.14 2,509 6,273 12,546
Total 9,92,717
Source: Directorate General of Commercial Intelligence & Statistics, D/o Commerce,
Kolkata.
* Provisional figures

of India (GoI) acknowledged that ‘Food wastage in India is driven by the lag
in many stages of the supply chain in the country.’ Cold chain and storage
facilities, exports, transportation, processing facilities, and marketing need
to be upgraded (GoI, 2016). The United Nations Food and Agriculture
Organization (FAO) estimates that more than 40 per cent of food produced
is wasted in India, and its costs could be as high as US$ 14 billion (12.42
billion euros) every year (FAO, 2018). Table 8.5 illustrates the quantum share
of food loss of major crops and food production.
The comparison of the estimated value for food loss with respect to
major commodities with that of their export value indicates the absolute
154 India’s Agriculture and Food Exports

magnitude of loss and the export potential which can be generated on

account of reducing the food loss is depicted in Table 8.6 (GoI, 2020).

The Critical Loss Points and Low Loss Points

Food loss can be broadly categorised into two types of losses, namely, the
loss in quantity and the loss in quality. Various studies have tried to map the
stages where these losses take place. Accordingly, based on the magnitude of
the loss at which the loss may be occurring, the Critical Loss Points (CLP)
and Low Loss Points (LLP) are identified in the value chain.
Quantitative food loss and waste which is also referred to as physical
food loss and waste results in the decrease in the mass of food that could
have been used for human consumption, and this loss results in the removal

Box 8.3

On Farm Activities
• Land and Soil Development
• Seeds, irrigation, fertilisers, pesticides, weedicides
• Pruning, removing weeds
• Crop cutting/harvesting: Mechanised or manual

Post-Harvest Activities
• Threshing, drying, and winnowing
• Sorting, grading, and packaging
• Storage at farmers level

Marketing
• Transportation
• Mandi or procurement agency>
• Storage at Mandi/procurement agency
• Wholesaler Processing Industry

Retailor

Consumer
Promoting Agricultural Exports 155

of food from the value chain itself. As such, quantitative food loss refers to
the decrease in the mass of food destined for human consumption from
decisions and actions by food suppliers in the chain (Agarwal, 2021).
In comparison to quantitative loss, qualitative food loss and waste
lead to a reduction in food ingredients, resulting in a decrease in nutritional
value and non-compliance with quality standards. A below-par quality food
item may result in unsafe food, presenting risks to consumer health. Thus,
qualitative food loss refers to the decrease in food attributes that reduces the
value of food in terms of its intended use, and it also results from decisions
and actions by food suppliers in the chain (Agarwal et al, 2021).
A typical value chain for an agro-commodity will have the following
value broad contents (Box 8.3).
Based on this flow chart, a detailed activity-wise and component wise
value chain for an agriculture commodity is diagrammatically represented
in Box 8.4 (Matopoulos, 2007).

Box 8.4

Various studies have identified broad categories of CLPs and LLPs in the
value chains of an agro commodity (Agarwal et al., 2021).
Table 8.7: Quantitative and Qualitative Loss in Foodgrain
Quantity Quality
Stage Reasons
(%) (%)
Harvesting CLP 6 LLP <1 Gaps in technical know-how on the use
and Threshing, of machines and lack of timely availability
Winnowing of machines leading to early or delayed
harvesting
Drying LLP < 1 Open and manual drying exposes the grains
to feeding birds and admixture of dust or
stones contributes to grain breakage during
milling.
156 India’s Agriculture and Food Exports

Transportation LLP < 1 Losses occur as a result of pilferage during

loading or unloading
Storage LLP < 1 CLP 3 S Unscientific and inadequate storage
infrastructure
Distribution. LLP < 1 Pilferage at the time of distribution has been
observed
Source: Agarwal et al., 2021
It is evident from Table 8.7 that the CLP regarding quantitative loss in a
foodgrain is at the level of harvesting, threshing, and winnowing. It happens
because of a lack of awareness among farmers, machine operators, and
the low level of R&D on this front. Similarly, the CLP regarding the loss
in quality of the foodgrain is at the level of storage. The low level of public
and private investment creates the state-of-the-art storage infrastructure,
especially at the farm gate level, so that the grains produced by small and
marginal farmers get access to proper storage before the market procures it.
According to ICAR/CIPHET study, the loss at CLP in respect of some of
the major agro commodities is provided in Table 8.8.
Table 8.8: Critical Loss in Agro-Commodities
Critical Loss During Farm Critical Loss During
Commodity Total Loss (%)
Operations* (%) Storage (%)
Paddy 3.9 1.3 5.2
Wheat 4.7 1.3 6.0
Maize 2.8 1.3 4.1
Cabbage 4.6 2.3 6.9
Cauliflower 4.8 2.0 6.8
Green Pea 8.6 1.7 10.3
Mushroom 11.0 1.5 12.5
Onion 5.2 2.3 7.5
Potato 6.7 2.3 9.0
Tomato 9.9 2.5 12.4
Tapioca 7.5 2.3 9.8
*Harvesting, threshing, winnowing, etc.
Source: ICAR-CIPHET

Conclusion and Suggestions

It is high time that the GoI puts in place a comprehensive national policy on
‘Achieving SDG 12.3 Targets by Minimising Food Loss’. The Policy has to
focus not only on minimising food loss but also on leveraging the potential to
increase agro-based exports, resulting in augmented farm level income. The
suggestions are based on the identified CLPs and the available infrastructure,
Promoting Agricultural Exports 157

vis-à-vis, the required infrastructure. The major components of the Policy

should encompass the following:

Addressing Farm Level Operations to Reduce the Food Loss

India needs to strengthen its farm-related extension services. The Indian
farmer needs to be made aware of the economic implications of food loss,
and topical training may be imparted on this aspect. The task is enormous,
keeping in view the number of farmers in India. NABARD All India Rural
Financial Inclusion Survey, 2016-17 estimated the country’s ‘agricultural
households’ at 100.7 million. The Pradhan Mantri Kisan Samman Nidhi
(PM-KISAN) has around 111.5 million enrolled beneficiaries, with an
average of 102 million-plus getting payments for 2020-21. The primary
extension work in the agriculture sector is carried out by government-owned
and managed 724 Krishi Vigyan Kendras (KVKs), which are under the
jurisdiction of 11 Agricultural Technology Application Research Institutes
(ATARIs), which, in turn, are governed by ICAR.1 The country has 748
districts with 0.25 million gram panchayats which cover 0.6 million villages
having almost 100 million farmers. Thus, the Policy should entail enlisting
public-private partnerships to create awareness and provide concurrent
training inputs to farmers. Deployment of extension workers on the lines
of health workers (Asha workers) will provide a fillip to the extension work.
The unavailability of farm labourers, increased minimum labour wages,
and aspects related to farm-level efficiency have seen an increasing trend
towards farm machinery in harvesting, threshing, and winnowing of farm
produce. The combined harvesters were introduced at the advent of the
Green Revolution in India and their numbers grew from 800 in 1971-72
to over 40,000 in 2016 (Damodaran, 2016). In most cases, the harvesters
performed shallow cutting, resulting in residual grains being wasted. The
system’s introduction of advanced combined harvesters would enable deep
cutting and help minimise losses during harvesting and threshing. More
so, most of the combined harvesters are operated by untrained persons.
Although National Skill Development Corporation (NSDC) has introduced
a qualification pack (code AGR/Q1102), the skill course requires to include
good practices in harvesting to minimise food loss. Moreover, it should be
made mandatory for the manufacturing units and dealers to provide NSDC
approved training to the operator when selling the unit itself. As a result
of untimely harvesting at high moisture content, the grains need excessive
drying before processing, leading to higher storage losses. Thus, skill up-

1
‘ICAR KVK Info’ and ‘KVK Dashboard’, Agricultural Extension Division, available
at Icar.org.in, accessed on 31 January 2022.
158 India’s Agriculture and Food Exports

gradation and capacity-development programmes will ensure sensitising

machine operators and farmers about harvesting at the appropriate maturity
period, specific moisture content required for harvesting, and strict
monitoring of mechanical harvesting.

Addressing Storage Level Operations to Reduce Food Loss

The storage capacity for foodgrain has not grown commensurately to the
foodgrain production, and it puts the central procurement agency, the Food
Corporation of India (FCI), under stress. Though wheat can be stored safely
under good storage practices for 4-5 years, the FCI decided to lower the bar
for storage to 3 years for wheat and 2 years for rice due to lack of storage
capacity. As of 2020, the total covered storage capacity of FCI stood at 38.31
Million Tonnes (MT), and that of state-level agencies was pegged at 23.80
MT. In addition to this, 62.04 MT capacity, FCI and states have an additional
13.20 MT Cover and Plinth (CAP) storage for wheat only as rice can be
stored in covered storage. Thus, the Policy has to look to provide workable
solutions for creating storage capacities at the farmers’ level, procurement
agencies’ level, and wholesalers’ level. The Policy should entail increased
coverage byways of schemes like the Private Entrepreneurs Guarantee
(PEG) and Pradhan Mantri Kisan Sampada Yojana (PMKSY). In addition,
the Policy intervention is required to provide hermetic storage (Superbugs:
50 kg), steel silos, and commercial cocoons with a capacity of 5 to 1,000
tonnes at farmer and warehouse levels. It is a viable solution as either can
provide air-tight conditions for stored grains. A policy decision to inbuilt a
one-time component on the Kisan Credit Cards (KCCs) for providing bank
credit to build storage infrastructure by each farmer will go a long way in
reducing food loss at farm gates. Further, creating scientific storage systems
at the Primary Agricultural Credit Society (PACS) level can also mitigate
the difficulty at ground level. The newly formed (2021) GoI Ministry for
cooperatives can devise and formulate a national-level plan. Further, the
Policy intervention is required to:
• Shifting to an end-to-end cold chain and not just storage
• Modernisation of existing stores
• Better and more sophisticated machinery and equipment
• Setting up of multipurpose cold storage rather than conventional single
commodity storage
• Modern pack houses
• Ripening facilities
• Farm-gate or source point cold storage
• Energy-efficient technology and new storage technology
Promoting Agricultural Exports 159

• Integrated cargo complexes at major airports and sea ports to handle all
kinds of goods, including perishables.

Promoting Farmer Producer Organisations (FPOs)

It is suggested that economically viable, democratic, and self-governing
Farmer Producer Organisations (FPOs) be created and promoted. The FPOs
would provide end-to-end links between farmers and their markets and will
allow them to improve their productivity through efficient, cost-effective,
and sustainable use of resources. Farmers will also be able to obtain higher
returns for their produce through improved access to markets. This can be
achieved through fruitful collaboration with academia, research agencies,
government, civil society, and the private sector. These FPO can function on
a five-point agenda:
• Capacity-building: To strengthen farmers’ abilities through the
communication of agricultural best practices to enhance productivity.
• Quality inputs: To ensure access to and use of quality inputs, credit, and
other services at affordable prices for enhanced production.
• Storage: To invest in and operate community storage and drying
facilities.
• Value addition: To facilitate links to processors for value-addition of the
produce.
• Market linkage: To facilitate access to fair and remunerative markets
including linking farmers to marketing opportunities through market
aggregators.
Though GoI has launched the Centrally Sponsored Scheme (CSS) to
promote 10,000 FPOs in the country over the next 3 to 5 years, a separate
department should be created in the Ministry of Agriculture for formulating,
implementing, and monitoring FPO related policy interventions in the
country.

References
A. Dalwai, Report of the Committee on Doubling Farmers’ Income, Committee on
Doubling Farmers’ Income, Department of Agriculture, Cooperation and
Farmers’ Welfare, Ministry of Agriculture & Farmers’ Welfare, GoI, 2017,
Vol. II, p. 174.
A. Matopoulos, M. Vlachopoulou, V. Manthou, and B. Manos, ‘A Conceptual
Framework for Supply Chain Collaboration: Empirical Evidence From the
Agri‐food Industry’, Supply Chain Management: An International Journal,
2007.
160 India’s Agriculture and Food Exports

EAT-Lancet Commission, ‘The EAT-Lancet Commission on Food, Planet,

Health– Can we feed a future population of 10 billion people a healthy diet
within planetary Boundaries?’, EAT, 2019, available at https://eatforum. org/
eat-lancet-commission, accessed on 15 January 2022.
FAO, World Food Security: A Reappraisal of the Concepts and Approaches,
Director General’s Report, 1983.
FAO, ‘Global Initiative on Food Loss and Waste Reduction. Key Facts on Food
Loss and Waste You Should Know’, 2016.
FAO, ‘Food Loss Analysis: Causes and Solutions; Case Study on the Rice Value
Chain in the Republic of India’, Rome, 2018, p. 54.
FAO, The Global Hunger Index Report, October 2021.
Government of India, ‘Statement in Parliament of India: Shri Rameshwar Teli’,
Minister of State for Agriculture, GoI, New Delhi, 2016.
GoI, Pocket Book of Agricultural Statistics, Department of Agriculture,
Cooperation & Farmers Welfare, Directorate of Economics & Statistics,
Ministry of Agriculture & Farmers Welfare, GoI, 2020.
H. Damodaran, ‘Migrant Machines: How Combine Harvesters Have Transformed
Face of Agri Operations, Labour Markets’, The Indian Express, 18 August
2016.
K. Flanagan, K.A.I. Robertson, C. Hanson, and A.J.M. Timmermans, Reducing
Food Loss and Waste: Setting a Global Action Agenda, World Resources
Institute (WRI), 2019, available at https://wriorg.s3.amazonaws.com/s3fs-
public/reducing-food-loss-waste-globalaction-agenda_0.pdf, accessed on
15 January 2022.
M. Agarwal, S. Agarwal, S. Ahmad, R. Singh, and K. M. Jayahari, Food Loss and
Waste in India: The Knowns and The Unknowns, 2021, available at http://
www.wri.org/publication/food-loss-and-waste-in-india, accessed on 15
January 2022.
R. Radhakrishna and K.V. Reddy, Food Security and Nutrition: Vision 2020.
Indira Gandhi Institute of Development Research, 2004, available at http://
niti.gov.in, accessed on 15 January 2022.
R. Srivastava ‘India Grows More Food, Wastes More, While More Go Hungry’,
India Today 22 December 2020 (Updated 21 January 2021).
R.K. Vishwakarma, S.N. Jha, A.K. Dixit, A. Kaur, A. Rai, and T. Ahmed,
‘Assessment of Harvest and Post-harvest Losses of Major Pulses in India’,
Agricultural Economics Research Review, 2019, 32(2), pp.247-258
United Nations Environment Programme (UNEP), UN Food Waste Index
Report, 2021.
World Health Organization, The State of Food Security and Nutrition in the World
2019: Safeguarding Against Economic Slowdowns and Downturns, Vol. 2019.
CHAPTER 9

Financing India’s Agricultural Exports:

Current Scenario and Way Ahead
S. Prahalathan Iyer* and Jahanwi Singh**
* Chief General Manager, Export-Import Bank of India.
E-mail: [email protected]
** Chief Manager, Export-Import Bank of India.
E-mail: [email protected]

Introduction
International trade entails considerable risk, necessitating an enabling
environment for producers and firms to manage the risks to engage in trade.
One of the chief concerns in international trade is the uncertainty over the
timing of payments made by the importer to the exporter. There are five
key methods of payment for international transactions. These are cash-in-
advance, consignment, Letter of Credit (LC), Documentary Collections
(D/C), and open account—each with a different associated risks for the
buyer and the seller (Box 9.1).

Box 9.1: Payment Terms in International Transactions

There are five major methods of payment for international transactions.
Depending on the bargaining power, nature of the commodity, transaction
size, among other factors, the exporters and importers decide on a mutually
desirable payment term.

Source: United States, International Trade Administration, Trade Finance

Guide: A Quick Reference for U.S. Exporters, U.S. Department of Commerce,
International Trade Administration, 2008.
162 India’s Agriculture and Food Exports

1. Cash in Advance: Under this, payment is received by the exporters

before the transfer in ownership of the goods. This is the most secure
payment option for exporters, where they can avoid any credit risk.
However, this is the least attractive option for the importer, as it creates
unfavourable cash flow, along with concerns that the goods may not be
sent if payment is made in advance.
2. Letters of Credit (LC): An LC is one of the most secure instruments.
It is a contractual agreement whereby the issuing bank (importer's
bank), acting on behalf of the importer, promises to make payment to
the beneficiary or exporter against the receipt of stipulated documents.
The issuing bank typically uses intermediary banks to facilitate the
transaction and make payment to the exporter.
3. Documentary Collections: In a D/C, the exporter entrusts the
collection of the payment to its bank (remitting bank), which sends
the documents that its buyer needs to the importer’s bank (collecting
bank), with instructions to release the documents to the buyer for
payment. Funds are received from the importer and remitted to the
exporter through the banks involved in the collection in exchange for
the documents.
4. Open Account: An open account transaction is a sale where the
goods are shipped and delivered before the payment is due, which in
international sales is typically in 30, 60, or 90 days. This is advantageous
to the importer in terms of cash flow and cost, but it is consequently
one of the highest risk options for an exporter.
5. Consignment: Consignment in international trade is a variation of an
open account in which payment is sent to the exporter only after the
goods have been sold by the foreign distributor to the end customer.
According to Niepmann and Schmidt-Eisenlohr (2015), of the major
payment terms, cash-in-advance or open accounts are preferred for very
small transactions, as is the case for agricultural exports. Buyers often
prefer open account payments over cash-in-advance due to lesser risk for
buyers in case of open account transactions. As a result, the ability of the
exporters to offer their goods on open account terms greatly enhances their
export competitiveness. However, these payment terms also increase the
requirement for working capital finance for the exporters. Exporters need
access to finance for completing production for exports, as also for business
continuity while awaiting payment from the buyers. An efficient system for
extending financing to enterprises at the pre-shipment and post-shipment
stages of exports is, therefore, important for improving the competitiveness
of exports.
Financing India’s Agricultural Exports: Current Scenario and Way Ahead 163

Export Finance for Agricultural Exports in India

Traditionally, the Indian economy has been a bank-dominated system and
banks are the primary source of export finance. Financing is available to
exporters before the shipment of goods (pre-shipment), as also after the
shipment (post-shipment). Pre-shipment financing is needed to support
pre-export activities prior to the shipment of goods and is used for meeting
wages and other overhead costs during this period. Post-shipment financing
provides adequate liquidity to the exporter till the time purchaser receives
the product and initiates payment. Commercial banks also provide other
financing products such as working capital loans, LCs, bills of exchange, etc.,
which helps the firms in fulfilling their export orders.
Given the significance of banks in financing agricultural exports, it is a
matter of concern that the outstanding export credit to the agriculture and
allied sector has witnessed a decline in recent times. As of end-March 2021,
outstanding export credit extended by Scheduled Commercial Banks (SCBs)
to the agriculture and allied sector stood at (INR) 27,331 crore, registering a
Year-on-Year (y-o-y) increase of 3.4 per cent. Prior to this increase, there was
a nearly consistent decline in outstanding export credit to the agriculture
and allied sector over the past few years, registering a negative Compound
Annual Growth Rate (CAGR) of (−) 1.7 per cent from end-March 2016 to
end-March 2021. However, it may be noted that the decline in outstanding
export credit to the agriculture and allied sectors have been relatively less
than the decline in outstanding overall export credit extended by the banks.
Overall outstanding export credit by the SCBs witnessed a much steeper
CAGR of (−) 3.3 per cent from end-March 2016 to end-March 2021. The
agriculture and allied sectors have, therefore, been less affected by the dip in
outstanding export credit extended by the SCBs.
One of the major reasons for a steady flow of export credit to the
agriculture sector has been the policy-level push on the sector. The
significance of policy-level changes on export credit flows is evinced by the
strong growth in export credit to the agriculture sector during periods of
policy intervention or announcement. A case in point is the record y-o-y
growth in outstanding export credit to the agricultural sector during 2010-
11. The Reserve Bank of India (RBI), vide its circular dated 15 June 2010
had clarified that all export credit granted to agriculture and allied activities
would be eligible to be classified as priority sector loans, and advised the
banks to report such loans under a separate heading. Following the circular,
there was a significant increase in the level of export credit to the agriculture
and allied sectors, and the outstanding export credit to the sector recorded
a y-o-y growth of 73.0 per cent as of end-March 2011 (Figure 9.1). The
164 India’s Agriculture and Food Exports

Government of India (GoI) and the regulator have played an important role
in creating a robust environment for financing agricultural exports from the
country. In particular, priority sector lending to the agriculture sector has
ensured the healthy flow of credit to the sector.

Figure 9.1: Trends in Outstanding Export Credit to Agriculture and

Allied Sector by SCBs
Note: Data pertains to the end-March figure of the respective financial year.
Source: Compiled from Basic Statistical Returns of SCBs, RBI,
India Exim Bank Research
In spite of the significant flow of export credit to the agricultural sector,
not more than 40-57 per cent of agricultural exports each year are supported
by the export credit from the SCBs (Figure 9.2). This is broadly in line with
the level of overall merchandise exports (including agriculture) supported
by the export credit extended by the SCBs. In the recent period, however, the
export credit extended to the agriculture and allied sector is estimated to have
marginally greater coverage of the agricultural exports from the country, as
compared to the coverage in the case of overall merchandise exports from the
country. The maximum estimated share of agricultural exports supported
by export credit from the SCBs was higher than the maximum estimated
share of overall merchandise exports (including agriculture) supported by
these institutions from 2017-18 to 2019-20. In 2019-20, SCBs are estimated
to have supported at most 42.5 per cent of agricultural exports from India,
as compared to 35.7 per cent of the overall merchandise exports (including
agriculture) from the country (Figure 9.2). In 2020-21, however, the trend
was reversed with maximum estimated share of overall merchandise
exports (including agriculture) supported by SCBs being 38.2 percent, and
the maximum estimated share of agricultural exports supported by these
institutions dipping to 35.8 percent.
Financing India’s Agricultural Exports: Current Scenario and Way Ahead 165

Figure 9.2: Maximum Estimated Share of Exports supported by Export Credit

Extended by SCBs (Agriculture, vis-à-vis, Overall)
Notes: *Export credit estimates are based on data sourced from RBI and the business
cycle under short-term exports is around 90 days. Accordingly, the outstanding
export credit is multiplied by a factor of four.
**Overall merchandise exports include agriculture. It also includes project exports
(~ 1.4-3.0 per cent of merchandise exports), which require medium- to long-term
export credit.
Source: Compiled from Basic Statistical Returns of SCBs, RBI, India Exim Bank
Research
While processed food accounts for nearly 16 per cent of India’s
agricultural exports, it has a much higher share in the export credit extended
by the banking sector to the agricultural sector (High Level Expert Group
on Agriculture, 2020). As of end-March 2021, nearly 81 per cent of the
outstanding export credit extended by SCBs to the agriculture and allied
sector was directed towards the food manufacturing and processing segment,
while agriculture (primary or with low processing) accounted for 18 per
cent, and beverages and tobacco the remaining 1 per cent. Within food
manufacturing and processing, rice and dal mills as well as flour received the
largest share of export credit from SCBs, accounting for nearly 22 per cent of
the outstanding export credit as of end-March 2021 (Figure 9.3).
The low share of unprocessed segments in the outstanding export credit
by the SCBs could partly be due to errors in the classification of such export
credit. Moreover, with the inclusion of loans to food and agro-processing
units under the priority-sector lending, the focus on financing these activities
has increased as these units are also considered relatively more creditworthy.
166 India’s Agriculture and Food Exports

Figure 9.3: Category-wise Outstanding Export Credit extended by SCBs to the

Agriculture Sector (As of end-March 2021)
Source: Compiled from Basic Statistical Returns of SCBs, RBI,
India Exim Bank Research
According to a National Sample Survey Office (NSSO) survey, more than
46 per cent of farm households in India sell approximately 58 per cent of
what they produce, but the bulk of it to the wholesalers and retailers (80 per
cent) (Government of India, 2014). The farm households, on their own, have
limited linkages with the international markets. Further, farm households
also have limited access to institutional finance for exports, due to a variety of
reasons including weak linkages with international buyers, lack of collateral,
and high-risk perception by banks, among others.

Impact of Export Financing on Agricultural Exports

An attempt has been made in this section to analyse the impact of export
finance on agricultural exports. This analysis is important to understand
the significance of financing in placing the agricultural exports on a high
growth trajectory and achievement of the ambitious target of US$ 100 billion
of agricultural exports set by the GoI.
In this section, the impact of export financing, agricultural production,
and global import demand on agricultural exports from India is investigated
through an Autoregressive Distributed Lag (ARDL) model. The ARDL model
has advantages over other co-integration tests in non-stationary variables,
such as the one developed by Engle and Granger (1987), Phillips and Hansen
(1990) and Johansen (1991), as also over the traditional vector autoregressive
(VAR) models. According to Pesaran (1999), the ARDL model applied to
co-integration is more efficient in capturing long-term relationship data in
Financing India’s Agricultural Exports: Current Scenario and Way Ahead 167

small samples, and they perform well irrespective of whether the variables
are stationary, i.e. I(0), non-stationary I(1), or even mutually co-integrated.
Since our sample size is relatively small, and we expect some of the variables
in our analysis to be non-stationary, the ARDL model is preferred.

Figure 9.4: Model Selection Criteria in Time Series Models

Source: Adaptation based on literature survey.

Data Sources
The data set consists of yearly observations on the volume of agricultural
exports from India, export finance to the Indian agriculture sector, the
volume of agricultural production in India, and volume of global import
demand. Data on volume of agricultural exports from India, volume of
agricultural production in India, and volume of global import demand have
been sourced from the Food and Agriculture Organization. Data on export
finance is sourced from the RBI. The time taken into consideration is from
1990 to 2019.

Equations for the Autoregressive Distributed Lag Model

The ARDL model of the following form has been taken for analysing the
impact of export finance on exports from the agricultural sector:
∆log X = ∑q(i=1) a1 ∆log X + ∑m(i=1) a2 ∆log C + ∑n(i=1) a3 ∆ log Prod + ∑p(i=1)
a4 ∆ log I + a5 log X + a6 log C + a7 log Prod + a8 log I + ϵ …Equation 9.1
Where X represents the volume of India’s agricultural exports; C is the
export finance to the agricultural sector; Prod is the volume of agricultural
168 India’s Agriculture and Food Exports

production in India; I is the volume of global import demand of agricultural

products; i is the number of lag terms and q, m, n, and p are the lag lengths;
∆ denotes a first difference operation; a1, a2, a3 and a4 show the short-run
dynamic structure; a5, a6, a7 and a8 are the long-run coefficients; and denotes
the white noise error term.
The first step in the ARDL bounds testing approach is the estimation
of the aforementioned equation to test for the existence of a long-run
relationship among the variables by conducting an F-test for the joint
significance of coefficients of lagged level variables. Two sets of critical
bounds for F-statistics are generated by Pesaran et al. (2001). If the computed
F-statistic is above the higher bound level, the null hypothesis of no co-
integration cannot be rejected, implying the presence of a long-run co-
integration relationship among the variables taken into consideration.
Once co-integration is established, the long-run model function can be
written as follows:

…Equation 9.2
The orders of the ARDL model would be selected using the Akaike
Information Criteria (AIC). Finally, the short-run dynamic parameters
would be selected by estimating an error correction model associated with
the long-run estimates. This is specified as follows:

…Equation 9.3

where δ1, δ2, δ3, and δ4 are the short-run dynamic coefficients of the Model’s
convergence to equilibrium and ϕ is the error correction coefficient and
measures the speed of adjustment parameter. ECM is the error correction
term that is derived from the estimated equilibrium relationship of Equation
9.1. A negative and significant coefficient of ECM will be an indication of
cointegration.

Unit Root Test

Both the Augmented Dickey Fuller (ADF) and Phillips Perron (PP) tests
are used to check the presence of unit roots and determine the order
of integration of the variables. The unit root test results indicate that the
variables under consideration are I(1) (Table 9.1). The ARDL process can
be used for estimation as the variables meet the requirement of the Model.
Financing India’s Agricultural Exports: Current Scenario and Way Ahead 169

Table 9.1: Results of Unit Root Test

Augmented Dickey Fuller (ADF) Phillips Perron (PP)
At Levels
Intercept Intercept and Trend Intercept Intercept and Trend
LogX −1.802578 −3.203551 −2.099917 −2.075986
(0) (1) [25] [9]
LogC −2.609343 −3.605309* −2.333988 −1.918127
(0) (5) [3] [3]
LogProd 0.052720 −2.481295 0.723132 −2.481295
(0) (0) [13] [0]
LogI 0.077119 −2.421459 0.370648 −2.192865
(0) (0) [11] [5]
At First Difference
Intercept Intercept and Trend Intercept Intercept and Trend
LogX −3.416026** −3.660384** −6.584194*** −8.358434***
(7) (7) [27] [27]
LogC −3.928850*** −4.263749** −3.881772*** −4.249860**
(0) (0) [3] [3]
LogProd −7.163188*** −7.083114*** −7.361223*** −7.552295***
(0) (0) [4] [5]
LogI −6.162346*** −6.867107*** −5.888228*** −6.059300***
(1) (1) [1] [1]
Notes: ***, ** and * denote significant at 1 per cent, 5 per cent and 10 per cent
significance levels, respectively. The figure in parenthesis (…) represents the
optimum lag length selected based on Akaike Info Criterion. The figure in bracket
[…] represents the Bandwidth used in the KPSS test selected based on the Newey-
West Bandwidth criterion.
Source: RBI, FAOstat, Computed using Eviews 9.5, India Exim Bank Research

Autoregressive Distributed Lag Bounds Test: Establishment of

Co-integration Relationship
For implementing the bound test for co-integration, a conditional ARDL
error correction model as specified in Equation 9.1 is estimated in the
statistical package, Eviews with log of agricultural exports from India as the
dependent variable, and log of export finance for the agricultural sector in
India, log of the volume of agricultural production in India, and log of the
volume of global import demand for agricultural products as the dynamic
regressors. The appropriate lag has been automatically selected based on
AIC, with the maximum lag set at 4. As seen in Figure 9.5, the AIC was
lowest for ARDL (4, 0, 3, 2).
Table 9.2 presents the results of the ARDL Bounds F-test for co-
integration based on Equation 9.1. As per the results, the computed F-statistics
170 India’s Agriculture and Food Exports

Figure 9.5: ARDL Lag Length Selection

Source: Computed using Eviews 9.5, India Exim Bank Research
of 4.586351 is greater than the upper bound critical value at a 5 per cent
level of significance. Therefore, the null hypothesis of no co-integration is
rejected, indicative of a stable long-run co-integration relationship among
the variables taken into consideration.
Table 9.2: Results of Bounds Test Approach to Co-Integration
Null Hypothesis: No long-run relationships exist
Test Statistic Value k
F-statistic 4.586351 3
Critical Value Bounds
Significance (%) I0 Bound I1 Bound
10 2.01 3.1
5 2.45 3.63
2.5 2.87 4.16
1 3.42 4.84
Source: Computed using Eviews 9.5, India Exim Bank Research
Analysis indicates that the variables are co-integrated among themselves
and the series cannot move too far away from each other or cannot move
independently of each other. Moreover, the co-integration of variables also
Financing India’s Agricultural Exports: Current Scenario and Way Ahead 171

implies that there is some adjustment in the short run which prevents the
errors in the long-run relationship from becoming larger.

Estimation of Long-Run and Short-Run Coefficients

Upon establishment of the existence of a co-integration relationship among
variables, Equation 9.2 is estimated for long-run coefficients of the selected
ARDL (4, 0, 3, 2) based on AIC. The results of estimation presented in Table
9.3, indicate that the impact of all the three variables—export finance, the
volume of agricultural production, and the volume of global import demand
of agricultural products, on agricultural exports from India is significant at a
5 per cent level of significance (Table 9.3).
The results indicate that a 1 per cent increase in the financing for
agricultural exports leads to a 0.5 per cent increase in the agricultural
exports from India. Import demand elasticity of India’s agricultural exports
is also estimated and is significant at a 5 per cent level of significance. A 1
per cent increase in global demand, leads to a nearly 1.7 per cent increase in
agricultural exports. As far as agricultural production is concerned, although
the relationship with agricultural exports from India is significant at a 5
per cent level of significance, the coefficient is negative. This finding could
intuitively indicate that any fluctuations in agricultural production in India
are in response to domestic consumption rather than exports. An increase
in agricultural production in India is in response to favourable domestic
demand conditions, and better domestic demand conditions could, in fact,
lead to a diversion of production away from exports towards the domestic
market. Greater investigation on this aspect could be a possible area of future
research.
Table 9.3: Long-Run Coefficients
Variable Coefficient Std. Error t-Statistic Prob.   
LOGC 0.479578 0.081581 5.878575 0.0000
LOGPROD −2.032835 0.234485 −8.669362 0.0000
LOGI 1.683746 0.380610 4.423805 0.0006
Source: Computed using Eviews 9.5, India Exim Bank Research
The results of short-run dynamic coefficients associated with the long-
run relationships obtained from Equation 9.3 are presented in Table 9.4. The
negative and highly significant error correction term further confirms the
presence of a stable long-run relationship. The Model indicates a moderately
quick adjustment back towards equilibrium following a disturbance.
Following a shock, nearly 63.5 per cent of the adjustment back to the
long-run equilibrium is completed after a year. In the short run, growth
in agricultural production, growth in global import demand, and growth
172 India’s Agriculture and Food Exports

in export financing for the agricultural sector have a positive impact on

agricultural exports.
Table 9.4: Error Correction Representation for the Selected ARDL (4, 0, 3, 2)
Cointegrating Form
Variable Coefficient Std. Error t-Statistic Prob.   
D(LOGX(-1)) 0.800180 0.155567 5.143639 0.0001
D(LOGX(-2)) 0.609817 0.159866 3.814540 0.0019
D(LOGX(-3)) 0.391057 0.156191 2.503708 0.0253
D(LOGC) 0.872113 0.207946 4.193933 0.0009
D(LOGPROD) 0.018619 0.809354 0.023005 0.9820
D(LOGPROD(-1)) 3.904919 1.011261 3.861434 0.0017
D(LOGPROD(-2)) 2.826949 0.852596 3.315696 0.0051
D(LOGI) 3.332843 1.249752 2.666804 0.0184
D(LOGI(-1)) 2.443260 0.993647 2.458883 0.0276
CointEq(-1) -0.635067 0.244993 -6.673919 0.0000
Cointeq = log X – (0.4796* log C – 2.0328* log Prod + 1.6837* log I)
Source: Computed using Eviews 9.5, India Exim Bank Research
To further determine the direction of causality, pair-wise Granger
causality tests are conducted for the variables taken into consideration.
Results indicate that export credit to the agricultural sector has a significant
impact on agricultural exports, as the one-way causality is significant at the
5 per cent level of significance (Table 9.5). There is also a one-way causality
between the global import demand for agricultural products and agricultural
exports from India (Table 9.5), with an increase in global import demand
leading to an increase in agricultural exports.
Table 9.5: Pair-wise Granger Causality Tests
Pairwise Granger Causality Tests
Null Hypothesis: Obs F-Statistic Prob.
Log C does not Granger Cause Log X 27 3.65511 0.0300
Log X does not Granger Cause Log C 0.20224 0.8936
Log Prod does not Granger Cause Log X 27 0.96649 0.4279
Log X does not Granger Cause Log Prod 1.36661 0.2816
Log I does not Granger Cause Log X 27 3.88381 0.0245
Log X does not Granger Cause Log I 1.19372 0.3375
Source: Computed using Eviews 9.5, India Exim Bank Research

Performance on Diagnostic Tests

The Model passes all diagnostic tests for usual econometric problems.
The Breush-Godfrey Serial Correlation LM test was used to verify that the
Financing India’s Agricultural Exports: Current Scenario and Way Ahead 173

residuals from the Model are serially uncorrelated. The residuals were also
found to be homoscedastic. The Ramsey RESET test also indicates that the
Model is correctly specified.
The stability of long-run coefficients together with the short-run
dynamics is also examined by applying the Cumulative Sum of Recursive
Residuals (CUSUM) and Cumulative Sum of Squares of Recursive Residuals
(CUSUMSQ) plots. As evident from Figure 9.6, the plots of CUSUM and
CUSUMSQ are within the critical bounds of the 5 per cent significance level,
and therefore the null hypothesis of all coefficients in the given regression
being stable cannot be rejected. The short-run and long-run coefficients of
the estimated model are stable.

Figure 9.6: Plot of Cumulative Sum of Recursive Residuals and Cumulative

Sum of Squares of Recursive Residuals
Source: Computed using Eviews 9.5, India Exim Bank Research

Strategies for Strengthening Financing for Agricultural Exports

Analysis in the previous section highlights the significance of export
financing for agricultural exports from the country. The results emphasize
the need to enhance the availability of financing to boost agricultural exports
from the country. Agriculture in India is often considered a high-risk and
low-profit activity for bank lending, and in spite of the priority sector lending
norms, the sector continues to remain locked into a cycle of low investment
and low returns. Exports present an opportunity for agricultural producers
to gain greater value for their produce, and exit the cycle of subdued
investments. For achieving a greater export-orientation, there is a need for
a more integrated approach to financing agricultural exports. Strengthening
the financing framework for agricultural exports would be a sine qua non for
boosting agricultural exports from the country.

Farmer Collectives/Cooperatives for Value Chain Financing

Indian agriculture is characterised by small landholding, with 63 per cent of
landholdings being less than 1 hectares (NSSO, 2014). On their own, these
174 India’s Agriculture and Food Exports

small farmers would be unable to get export orders, avail financing to fulfil
the export orders, and meet the transaction costs involved with exports. It
is in this context that cooperatives or farmer organisations gain significance.
Collective action by cooperatives or farmer organisations upstream of
the value chain is essential to overcome scale limitations for accessing
export markets and availing export finance. Setting up of these collectives
usually requires intermediation or facilitation from Non-governmental
Organisations (NGOs), governments, or lead firms.
Recognising the importance of such collectives in the Indian context,
the GoI is actively promoting Farmers Producer Organisation (FPO). FPOs
provide end-to-end support and services to small farmers, including supply
of seed, machinery, market linkages and fertiliser, training, networking, and
financial and technical advice. According to estimates by NABARD, there are
nearly 10,000 FPOs in the country. These FPOs benefit from several schemes
of the GoI, such as the Equity Grant Fund Scheme under which equity grant
support is provided to eligible Farmer Producer Companies (FPCs) on
a matching basis, the Credit Guarantee Fund Scheme under which credit
guarantee cover is provided to eligible lending institutions to enable them
to provide collateral-free credit to FPCs, and the scheme for ‘Formation and
Promotion of FPOs’ to set up 10,000 new FPOs, among others. NABARD has
also launched several initiatives to promote FPOs.
In spite of the initiatives to bolster FPOs, their success remains limited
on account of several challenges, such as a small number of shareholders,
low procurement volumes, sub-scale operations, limited value addition
capabilities, poor marketing linkages, inability to attract talent, and lack
of strategic thinking and planning, among others (NABARD, 2019). These
are factors that also impact the foray of FPOs into the international market.
Even if the FPOs can secure export orders, affordable financing is difficult
to obtain. According to a recent report, only a few banks have ventured into
lending to FPOs (Murray et. al., 2019). Unlike co-operatives which benefit
from joint ownership of the institution along with the Government, FPOs
only depend on members/shareholders for access to equity, which impacts
their creditworthiness. Access to debt is also constrained as banks consider
the business models of FPOs unviable and not bankable. Arccording to
estimates in several studies, close to 90 per cent of the lending to FPOs is
by Non-Banking Financial Companies (NBFCs). Banks have not ventured
into lending to FPOs due to a lack of clear policy directives from RBI, small
and scattered markets, and information asymmetry on FPOs’ operations and
business potential (Murray, 2019). Institutional lending from banks could
substantially enhance access and reduce the cost of borrowing by FPOs.
Financing India’s Agricultural Exports: Current Scenario and Way Ahead 175

There is a need for a concerted effort from APEDA and the missions
abroad to create market linkages for FPOs by financial institutions, banks,
and the RBI to help meet the financing requirements for fulfilling the export
orders. The financing requirements in the case of FPOs may not only be
limited to a typical pre-shipment/post-shipment credit type facility, but
structured financing, often referred to as ‘value chain financing’, which
caters to various levels of the value chain including crop loans, term loans,
warehousing finance, financing for processing, and export financing.
Value chain financing can be defined as ‘a flow of funds to different links
of the value chain, or among these links, in order to improve efficiency and
competitiveness, to reduce risk within the chain, and also to promote and
develop the chain’ (Shwedel, 2010). The value chain approach allows greater
access to finance without much emphasis on collateral, and also reduces the
costs and risks associated with the lending. Value chain instruments can be
tailored to help increase the competitiveness of smallholders and allow them
to compete in the international markets.
One important instrument used in value chain financing is warehouse
financing. There are, however, issues with the successful implementation of
warehouse financing in India. FPOs in India face challenges in availing of
warehouse financing as bank guidelines typically state that the warehouse
used by the FPO must be near the bank branch, which limits the options
available to FPOs operating in relatively remote locations (Shwedel, 2010).
There is a need for an assessment of the challenges to the development of
value chain financing in the country and the adoption of a cohesive, all-
encompassing approach to address the issues.
The role of the Government in strengthening the value chain framework
would be crucial. In this context, not only is it important to formulate new
tools, guidelines, and policies for strengthening the financial framework for
value chain financing, but also to regularly review the performance of various
initiatives undertaken by the GoI and take corrective actions to improve the
efficacy of these measures. For example, the GoI has been extending Kisan
Credit Card (KCC) to livestock and dairy farmers from 2018 onwards.
However, the KCC for dairy farmers has not been able to gain much traction
as banks are hesitant to provide the KCC loans in the absence of collateral.
Undertaking by the milk cooperatives that the farmers supply milk to
them is insufficient collateral for the banks. Lack of collateral is therefore
hindering access to finance for dairy farmers in spite of their inclusion in the
KCC scheme. In some developing countries such as China, some provincial
governments facilitate the financing of smallholder farmers associated with
value chains through a tripartite agreement among lead firms, commercial
banks, and farmers using ‘contracts as collateral’ (Chen, 2015). As the banks
176 India’s Agriculture and Food Exports

are not comfortable extending KCC loans to dairy farmers on the back of
undertaking by the milk cooperatives that the farmers supply milk to them,
the state governments could consider providing the necessary guarantee as
in the case of the Chinese model.

Factoring for Agricultural Exports

Agriculture is considered a high-risk area, that can be effectively served by
factoring solutions. Factoring is based on a company/individual selling its
account receivables to a factoring company at a discount. It differs from the
value chain approach explained earlier as the financing is only available once
the goods have been delivered but payment for exports is not yet received.
The company/individual selling the account receivables can utilise the cash
received for its working capital needs.
The Factoring Regulation (Amendment) Act 2021 would help enhance
the scope, reach, and affordability of factoring services for agricultural
exports. Currently, several NBFCs are engaged in factoring services on
the back of the strength of their balance sheets. However, the cost for such
factoring services is prohibitive. With the change in regulations, instead of
lending against the risk of sellers, NBFCs/banks would now be able to lend
against the risk of the buyer/or the banks issuing LCs, which are typically
larger and more creditworthy. This change, along with the reduction in entry
barriers in factoring, is likely to lower the cost of factoring services.
The Government provides interest subsidies for pre and post-shipment
Rupee export credit which helps exporters avail financing at competitive
rates. The subsidy may also be crucial for export factoring to decrease the
cost of such financing. This would be essential till the time the factoring
market is sufficiently mature and able to service the requirement of exporters
at a lower cost.

Exchange Facilitated Financing in India

Commodity exchanges are important trade facilitating institutions, which
allow price discovery, price-risk management, facilitate commodity trade,
facilitate financing to the agricultural sector, and also play a role in market
development. In India, commodity exchange has exhibited proven results in
the case of exports of cardamom and Mentha oil. Exporters have reported
easier availability of premium quality cardamom at the exchange, and
better discovery of prices for negotiating export contracts. The commodity
exchanges have also led to ancillary benefits, such as the development of
testing infrastructure, which are critical for exports. Mentha arvensis, the
exchange-approved variety of Mentha oil required testing in a Gas-Liquid
Financing India’s Agricultural Exports: Current Scenario and Way Ahead 177

Chromatography (GLC) machine, which was a more advanced method of

Mentha oil testing, as compared to the previously prevalent capillary column
method. Since the launch of the Mentha oil futures contract, the number of
GLC machines used for testing increased substantially, as farmers were keen
on getting more volumes of oil tested due to higher prices for oil that met the
GLC standards (UNCTAD, 2009). There is scope for further strengthening
of the commodity exchanges. One particular way, which is being considered
by the Securities and Exchange Board of India, is to let foreign portfolio
investors trade commodity futures listed on local exchanges. This would
help Indian commodity exchanges become a true world reference exchange
in the way that Bursa Malaysia has become for the palm oil industry.
In the context of financing as well, the commodity exchange can play
a crucial role in India. International evidence indicates that services of
commodity exchanges can help reduce risks of financiers, and thereby lead to
lower costs of financing for the agricultural sector. There are several models
for such commodity financing as explained in UNCTAD (2009). These are
as follows:
• The most straightforward model for this is inventory financing, using
warehousing receipts as collateral. Exchanges provide the financier with
a mechanism for valuation of the collateral, hedging against change in
the value, and also for liquidating collateral in case of default.
• Another mechanism is where the exchange itself can facilitate producers’
access to finance directly from capital market investors. The instrument
is exchange-traded repurchase agreements, or ‘repos’. These could be
structured on inventories, as well as on future receivables. Under this,
the warehouse receipt could be transferred to an exchange broker, and
the owner of the commodities signs an agreement to buy it back at a
given price after a certain period. The broker posts this ‘package’ on the
exchange network, and investors can bid on it. Investors know that after
the defined period, they will receive the price as defined in the agreement.
The higher the bid, the lower the effective interest rate they will receive.
In cases where repos are structured around future receivables, a higher
degree of structuring is required to mitigate financial and physical risk.
In either case, the exchange disintermediates banks, increasing access
and reducing the cost of finance for the borrower.
• There are several other possibilities for creating linkages between
finance and price-risk management in financing agreements and also
in the contract for a physical transaction. One option is the linking of a
producer’s loan repayment conditionality to the price of the underlying
commodity using derivatives instruments—if prices fall, the producer
178 India’s Agriculture and Food Exports

pays less interest, and vice versa. The second variety is where an exporter
and a buyer agree on a fixed price for a certain volume of a commodity.
The buyer then provides a line of credit to the exporter, which is drawn
down as exports are made. In turn, the buyer sells the commodity for
future delivery or hedges the price risk on the options market.
Exchange supported-commodity financing arrangements have been
beneficial for smallholders in countries such as Brazil and South Africa.
In Brazil and South Africa, the models have differed, to suit the different
market conditions in the countries, but have led to the achievement of the
same goalpost of enhancing credit flow to the sector.
In South Africa, the South African Futures Exchange (SAFEX) was
established as a financial future exchange in 1988. In August 2001, it was
acquired by the JSE Securities Exchanges, but the brand name of SAFEX was
continued as it was recognised as an efficient and transparent price-discovery
mechanism for South Africa and the region. The delivery mechanism of
JSE/SAFEX was explicitly developed to integrate the commodity and the
finance. The larger banks played a role in designing the JSE/SAFEX silo
receipt system, in collaboration with the exchange, collateral managers, silo
operators, and other interested parties. This lowered the risk of lending to
producers as silo receipts became widely accepted as collateral by the banks.
In Brazil, the development of the exchange facilitated financing system
was led by the Banco do Brasil in 1994, which launched the Cédula de
Produto Rural (CPR) rural financing instrument. The CPR is a bond
issued by rural producers, farmers’ associations, and cooperatives to obtain
financing for production. Over time, the Bolsa de Mercadorias e Futuros (the
Brazilian Mercantile and Futures Exchange) has established mechanisms to
enhance the functionality and liquidity of CPRs through exchange trading
mechanisms, particularly through its Brazilian Commodity Exchange
subsidiary (UNCTAD, 2009).
Financialisation is nearly absent in the Indian commodities markets.
The aforementioned models can be explored for adoption in India given
their possible effect on exports and farmers’ income. Engagement of the
commercial banking sector, improvement in the processes, and institutional
strengthening as well as support from the legal and regulatory framework
would be prerequisites for the development of the model. For instance, banks
are currently prohibited from taking proprietary positions in commodity
derivatives, and are unable to hedge their exposure to price risks arising from
their loan portfolio (George, 2021). Another issue is that several warehouses
are unwilling to register with the Warehousing Development and Regulatory
Authority (WRDA) as this would make them liable to regular audits and
inspection. Private warehouses feel that such inspections may hamper their
Financing India’s Agricultural Exports: Current Scenario and Way Ahead 179

operations and affect their income from collateral management fees paid by
the banks. These challenges, if suitably alleviated, could pave the way for
exchange facilitated financing for agriculture in India.

Conclusions
The analysis in this Chapter finds a strong impact of export financing on
agricultural exports. While the Government has taken several initiatives to
improve credit flow to the agriculture sector, there remains further scope
for strengthening the financial framework for supporting exports from the
sector. Availability and affordability of export credit through lesser-explored
mechanisms such as factoring, commodity exchange-facilitated financing,
and value chain financing, would be critical for the achievement of the
ambitious targets of the GoI for agricultural exports.

References
D.B. Deepti George, De-risking Lenders, Safeguarding Borrowers: A Case for
Commodity Derivatives, Dvara Research, 2021.
E. V. Murray, Guidebook on Lending to Farmer Producer Organisations, NABARD,
2019.
Friederike Niepmann and Tim Schmidt-Eisenlohr, International Trade Risk and
the Role of Banks, International Finance Discussion, 2015, Paper No. 1151.
Government of India, Key Indicators of Situation of Agricultural Households in
India, KI (70/33) Report, National Sample Survey Organization, 2014.
High Level Expert Group on Agriculture, Growing India’s Agricultural Exports
Through Crop-specific, State-led Plans, Submission to the XV Finance
Commission, 2020.
K. Shwedel, Agricultural Value Chain Finance, Paper presented at the Conference
on Agricultural Value Chain Finance in Costa Rica, 2010.
K.P. Chen, ‘Innovations in Financing of Agri-food Value Chains in China and
India: Lessons and Policies for Inclusive Financing’ China Agricultural
Economic Review, 2015, 7(4), 1-27.
M.A. Pesaran, ‘An Autoregressive Distributed Lag Modelling Approach to
Cointegration Analysis’ In Econometrics and Economic Theory in the 20th
Century: The Ragnar Frisch Centennial Symposium, Strom, Cambridge
University Press, 1999.
NABARD, Farmer Producers’ Organisations (FPOs): Status, Issues and Suggested
Policy Reforms, 2019.
NSSO, Situational Report on Agricultural Households, NSS 70th Round, 2014.
Peter C.B. Phillips, and Bruce E. Hansen. ‘Statistical Inference in Instrumental
Variables Regression with I(1) Processes.’ The Review of Economic Studies,
vol. 57, no. 1, 1990, pp. 99–125.
180 India’s Agriculture and Food Exports

Robert F. Engle, and C.W.J. Granger. ‘Co-Integration and Error Correction:

Representation, Estimation, and Testing.’ Econometrica, vol. 55, no. 2, 1987,
pp. 251–76.
S. Johansen, ‘Estimation and Hypothesis Testing of Cointegration Vectors in
Gaussian Vector Autoregressive Models.’ Econometrica, vol. 59, no. 6, 1991,
pp. 1551–80.
UNCTAD, Development Impacts of Commodity Exchange in Emerging Markets,
2009.
CHAPTER 10

Modelling Agriculture Exports in

Emerging Economy Through Cluster
Based Approach
Sneha Kumari*, Nisha Bharti** and Hema Yadav***
* Symbiosis School of Economics, Symbiosis International (Deemed University),
Pune. E-mail: [email protected]
** Symbiosis Institute of International Business, Symbiosis International (Deemed
University), Pune.
*** Director, Vaikunth Mehta National Institute of Cooperative Management, Pune.

Introduction
India has a diverse agriculture sector which includes the prior production of
fruits and vegetables. Consistent improvements in innovation have resulted
in good productivity and a better export system. India is currently second in
the production of fruits and vegetables in the world after China. According to
the report on second advanced estimates by the National Horticulture Board
published in 2019-20, India produced 99.07 million Metric Tonnes (MT) of
fruits and 191.77 million MT of vegetables (National Horticulture Database)
(National Horticulture Board, 2020). The total production of vegetables in
the world is 1,130.2 million MT for 2019-201 while the total production of
fruits worldwide is 883.42 million MT for 2019.2 The contribution of India
towards the production of fruits and vegetables is significant according
to the statistics record. However, the lack of scientific storage, cold chain,
and processing facilities results in the spoilage and wastage of fruits and
vegetables. Therefore, agricultural exports and processing have been
receiving high priority in India. This opens the scope for generating foreign
revenues for the country. The Government of India (GoI) has been making
consistent efforts for boosting agriculture exports. Indian agricultural
exports registered an increase of 17.34 per cent (US$ 41.25 billion) between
1
Available at https://www.statista.com/statistics/264059/production-volume-of-
vegetables-and-melons worldwide-since-1990/, accessed on 23rd February 2022
2
Available at https://www.statista.com/statistics/262266/global-production-of-
fresh-fruit/, accessed on 23rd February 2022
182 India’s Agriculture and Food Exports

2020 and 2021.3 The Agriculture Export Policy (AEP) was announced in
2018 to boost export-oriented production, market, and the promotion of
agricultural produce. The Policy emphasises a farmer-centric approach.
Progress has been made in providing support to export the produce to the
Farmer Producer Organisations (FPOs). The direct linkages of FPO with
the export markets have led to an increase in the farmers’ income (Bikkina
et al., 2018). The Policy advocates a cluster-based approach for promoting
agriculture exports. Forty-seven unique district clusters have been notified
for export promotion. The clusters form FPOs and connect them to the
exporters. This helps in sorting out the problems of transportation, logistics,
packing, etc. Varanasi cluster of farmers in different districts and Fresh
Vegetables and Fruits Exporters Association (VAFA), Mumbai have set an
example for increasing agricultural exports from the country.

Literature Review
This section elaborates on the overview of agriculture and food exports
through cluster development, agriculture exports during COVID -19, drivers
for agriculture exports, the impact of agro-processing and cluster-based
approach for boosting agriculture export. Clusters have been a part of the
industrial framework for time (Nuur, 2005). Clusters are interconnections of
companies in geographies to support economic growth (Monni et al., 2017).
The cluster approach includes the capabilities, information, knowledge,
organisational process, and all assets controlled by a firm for improving
efficiency and effectiveness. The cluster approach helps in collaboration,
managing resources, relational resources, managing capabilities, innovative
capabilities, and export-oriented capable markets (Haddoud et al., 2017).
The cluster can be based on the Italian model consisting of small- medium-
sized firms and a hub and spoke model where the lead firm can manage
the activities of the small firms (Humphrey and Schmitz, 2000). Cluster
approach results in better performance, competitiveness, and productivity
by having a pool of skills, innovative ideas, and resources (Kumari et al.,
2021b; Sultan, 2014).

Overview of Agriculture and Food Exports Through Cluster

Development
The AEP has focussed on doubling agriculture exports The Policy aims to
diversify the export basket and boost high-value horticulture crops and

3
Available at https://www.business-standard.com/article/economy-policy/india-
s-agriculture-exports-increase-17-34-at-41-25-bn-in-2020-21-121061000744_1.html,
accessed on 3rd February 2022.
Modelling Agriculture Exports in Emerging Economy... 183

value-added agriculture exports. The Policy enables farmers to benefit

from the export opportunities and provides an institutional mechanism for
pursuing market access. The clusters have helped in promoting agri-exports.
The Lucknow Cluster for Mangoes had dispatched 26.25 MT of mangoes to
Oman during the lockdown in June 2020. Fresh mangoes were also exported
to Dubai. Nagpur clusters have exported 15 MT of oranges to Dubai. Nagpur
has exported more than 100 MT of oranges to the United Arab Emirates
(UAE). Anantapur cluster has exported 9,790 MT of bananas to the Middle
East. Theni clusters have exported bananas to Dubai, Saudi Arabia, and the
Maldives. Kolhapur, Solapur, and Jalgaon clusters have exported 32,78,275
and 77 containers, respectively, of bananas to date. Surat, Narmada, and
Bharuch cluster exported 8,735 MT of fresh bananas to the Middle East
countries, viz., Bahrain, Dubai, Georgia, Iran, Oman, Saudi Arabia, Turkey,
the UAE, Iraq, etc., to date. Sangli, Nasik, and Pune clusters have exported
grapes in large quantities. Bangalore Rural and Chikkaballapura clusters
have exported 7,167.62 MT of rose onions to Malaysia, Singapore, Indonesia,
Bangladesh, and Sri Lanka from October 2020 to December 2020 (Reforms
to Promote Agri Export, 2021).4
In addition to the clusters identified under AEP, 54 districts are covered
under the One District One Product (ODOP) scheme for the export
promotion of spices. Saffron—Kharewa, Pulwama, Budgam, Kishtwar, and
Srinagar districts of Jammu and Kashmir exported saffron to the UAE and
increased by 101.37 per cent during April-December 2020 as compared to
the previous period. Ginger—Bidar (Karnataka), South District (Sikkim),
Dima Hasao, West Karbi Anglong and Karbi Anglong (Assam), Sirmaur
(Himachal Pradesh), Koraput (Odisha), and Pherzawl (Manipur) export
has increased by 81.98 per cent during April 2020 and December 2020 as
compared to the previous period. Turmeric—Chamraajnagar (Karnataka),
Erode (Tamil Nadu), Bilaspur (Himachal Pradesh) Guntur and Prakasam
(Andhra Pradesh), Bongaigaon (Assam), Kandhamal (Odisha), Lalitpur
(Uttar Pradesh), Kangpokpi (Manipur)—Dry Turmeric export increased
by 33.95 per cent. Other Turmeric export increased by 58.14 per cent and
Turmeric Oleoresins export increased by 78.7 per cent between April 2020
and December 2020 as compared to the previous period. Coriander—
Kota (Rajasthan) increased its export by 18.34 per cent between April and
December 2020. Cumin—Patan and Surendranagar (Gujarat) and Jodhpur
(Rajasthan) export increased by 14.90 per cent between April 2020 and
December 2020 as compared to the previous period.

4
Available at Reforms to Agri Export (2021). https://commerce.gov.in/wp-content/
uploads/2021/06/Reforms-to-promote-Agri-Export.pdf, accessed on 4th April 2022.
184 India’s Agriculture and Food Exports

Agriculture Exports during COVID-19

The COVID-19 outbreak has disrupted the world’s trade and supply chain
since 2019. The global agriculture supply chain suffered from behavioural
uncertainties. Amid the uncertainties, India’s agriculture exports (including
marine and plantation products) have beaten the Pandemic registering a
growth of 17.34 per cent to US$ 41.25 billion in 2020-21.5 Farmer Producer
Companies (FPCs) have actively pursued growth in commodity sales by
enabling the farming community, including the small and marginal farmers,
in addressing their production and marketing issues. The research was
undertaken to understand the role of FPCs in addressing the challenges
in supply chain and agriculture exports and exploring the antecedents for
sustaining agricultural export in India. The sustainable approaches by the
selected FPCs who were key players in agriculture exports were explored.
The findings suggest a resilient aggregate model for sustaining agriculture
exports. The drivers for the same and their linkages are discussed in the
model. The results of this study can provide useful guidance and implications
for agricultural exports to cooperatives and policymakers for mitigation
efforts to navigate this global pandemic.
The agriculture exports slowed down during 2019 with the arrival of
COVID-19 and resulted in the disruption of the supply chain. With time
the agricultural export managed to rise to their peak. The data show that
agriculture exports were recovered from 2020. Over the last 6 months, Indian
agricultural exports have been boosted. Arrangement of online issuance of
certificates for exports was made available. The Agricultural & Processed
Food Products Export Development Authority (APEDA) created an
emergency response cell to help exporters in addressing movement issues.

Drivers of Agriculture Exports

Agriculture exports from India have remained stagnant since 2011-12,
besides being the largest producer of agricultural commodities. Agriculture
exports are supported by strategic and operational drivers. The strategic
elements include policy measures, infrastructure, and government
support. The operational elements include cluster formation, research and
development, private investments, and quality production. The farmers need
to be trained for the processing of agricultural produce. The farmers need
to be made aware of the tastes and preferences of the global consumers as
exporters. Having diversified agro-climatic zones the country has untapped

5
Available at https://economictimes.indiatimes.com/news/economy/agriculture/
indias-agriculture-exports-jump-to-41-billion-despite-pandemic-disruptions/
articleshow/83400113.cms?from=mdr, accessed on 14th January 2022.
Modelling Agriculture Exports in Emerging Economy... 185

potential for exporting processed fruits and vegetables. The challenges which
are commonly faced by the farmers are the lack of agriculture logistics and
post-harvest infrastructure.

Agro-Processing and its Impact

Self-Help Groups (SHGs) have been contributing towards agro-processing
and have set successful stories on the same. SHGs like Kruthika Group have
set examples of successful enterprises in processing fruits and vegetables
and producing value-added products like pickles, jaggery powder, and
vermicelli. Sumitra Food has streamlined the makhana processing in the
Darbhanga district of Bihar under the capacity building component of the
PM Formalisation of Micro Food Processing Enterprise. Anuradha Home
Produce, through an entrepreneurial mindset, has set up tomato papad and
amla pickle. Shriram Home Products initiated by Kalleshwara SHG led to the
production of jackfruit jam and lemon pickle. Jamuna SHG at Betul, Madhya
Pradesh also set an example for pickle production and sale.
There have been success stories documented on SHGs, but there are very
few studies that need to be documented on a cluster-based approach, with
special reference to FPCs. This has driven us to present a case on the cluster
approach of FPCs. The case will be a model for the other FPCs that can
sustain agro-processing and exports.

Cluster-Based Approach for Boosting Agri Exports

The cluster-based approach is essential for boosting agricultural exports. The
present need of the hour is to boost agro-processing and exports through a
cluster-based approach. The farmers’ cluster of produce can result in the bulk
of the produce with proper management of the quality and better marketing.
Farmers producing in silos may not be able to tap the export market due
to the small quantity and lack of facilities for the same. Therefore, farmers
producing the same agricultural produce can come together to tap the export
market with better economies of scale. The concept of the cluster approach in
the form of collectives, Farmer Producer Companies (FPOs), SHGs, FPOs,
and cooperatives has been helpful in boosting agriculture export (Kumari
et al., 2021a).

Research Methodology
The selection of cases is done based on the secondary data. Successful cases
from secondary data were identified and analysed using SWOT Analysis,
Root Cause Analysis, and Situation Analysis. Several other analyses of their
strategies like Service Mix Portfolio, Segmentation-Targeting—Positioning,
186 India’s Agriculture and Food Exports

Marketing Strategy Situation, Objectives, Strategy, Tactics, Action and

Control (SOSTAC) Strategic alternatives—Worst to Best Case, Ansoff
Matrix and GE McKinsey Matrix, etc., will also be undertaken for a better
understanding of the processes in this industry.

Results and Discussion

Aggregation of farmers, especially small and marginal farmers, is a solution
for the promotion of agro-processed product exports. The cluster approach
makes it easy to access technology, finance, input, marketing, and knowledge.
The different models of SHGs, Farmers’ Interest Group (FIGs), collectives,
and FPOs have been introduced to professionalise the agriculture processing
sector. The FPOs are concentrated on marketing and value addition of
agricultural produce increasing agri export. The primary objective in the
formation of FPOs and FPCs is to build a strong infrastructure and adequate
production and processing facilities to increase the reach of agricultural
produce. This section elaborates on the collectives selected for the study.
The results are tabulated for comparing different parameters for the agro-
processed exports.

Bombay Fruits and Vegetables Export

Bombay Exports (BFVE)6 was established on 23 November 1989 by Anand
K. Shejwal. BFVE started as a small proprietorship export firm and has
established the brand name ‘Daisy’ in the export market. The Company has
been exporting fresh fruits and vegetables to Doha, Muscat, Dubai, Bahrain,
the Netherlands, the United Kingdom, the Kingdom of Saudi Arabia,
Sultanate of Oman, Sri Lanka, and Abu Dhabi. The Firm is also trying to
expand its export business to Singapore, Mauritius, and Malaysia. BFVE has
been among the highest foreign exchange earners in the country, providing
the best Made in India produce to the world. It participated in a mango
promotion campaign held in the UAE and Doha to maintain high-quality
fresh fruits and vegetables in the international market. The Firm won the
Bronze APEDA export award for outstanding contribution to the promotion
of agri produce and the silver APEDA export award for excellence in export
in 2002-2003 and 2003-2004.
India is the world’s largest producer of mango, growing 1,000 varieties
of mango. BFVE has exported different varieties of mango like Alphonso,
Banganpalli, PIU, Totapuri, Neelam, Kesar, Lalbaug, Rajapuri, and Rumali.
The mango varieties are exported in corrugated boxes of 2 kilogram (kg),
6
Bombay Fruits and Vegetables Export, available at https://www.bombayexports.
net/frameset1.htm, accessed on 29 September 2021.
Modelling Agriculture Exports in Emerging Economy... 187

5 kg, and 7 kg. Mangoes are majorly exported to the UAE, Oman, Saudi
Arabia, the UK, and Bahrain. The Firm exports varieties of grapes like Flame,
Red Globe, Black and White/Green Thomson. The grapes are procured from
regions of Maharashtra like Narayangaon, Junnar, Sangli, and Solapur. The
grapes are packed in 4.5 to 1 kg corrugated boxes. Fruits like pomegranate,
custard apple, orange, and sapota are available throughout the year. The
fruits are procured from districts of Maharashtra and Gujarat and packed in
5 kg corrugated boxes for export to the UAE, Oman, Bahrain, Saudi Arabia,
and the UK.
Watermelon, papaya, pineapple, and lime are also exported to the UAE,
Oman, and Bahrain. The fruits are procured from nearby states like Madhya
Pradesh, Andhra Pradesh, Karnataka, and Kerela. The same is packed in 8
kg, 9 kg, and 10 kg corrugated boxes. Guava, banana, and bore fruits are
available throughout the year for export. The produce is procured from the
districts of Maharashtra and Andhra Pradesh.
Apart from fruits, the Firm also exports vegetables. Vegetables like arbi,
beans, carrot, cauliflower, drumstick, green bananas, green chilli, ladyfinger,
tomato, ginger, onion, and pumpkin. The vegetables are procured from
nearby states like Gujarat, Andhra Pradesh, Maharashtra (Nashik and
Pune), and Tamil Nadu (Chennai). The vegetables are packed in corrugated
boxes. BFVE has two sister concerns, namely, Daisy Exports established on 2
December 1996 and Crown Traders established on 10 April 2000.

Jay Agro Exports

The Jay Agro Exports (JAE) is located in Nashik and contributes to 80 per
cent of the grapes, onion, and vegetable export. The Firm is known for
exporting grape, pomegranate, onion, mango, and fresh vegetables. The
Firm was started in 2003 and exported grapes to the Netherlands. In 2011,
the Firm started supplying quality fruits and vegetables in the domestic
market and became a leading supermarket chain. The modern packhouse
and cold storage facilities for grapes, pomegranate, and fresh vegetables
were given prime importance. All the products are monitored and tested
in APEDA, and therefore meet the customer’s requirements. JAE provides
technical and managerial support for cultivation. The professional team
helps in crop management, food safety, and quality assurance. The products
are mainly exported to the Netherlands, Germany, France, Italy, Canada,
Malaysia, Thailand, Singapore, Gulf countries, and the UK. The Firm has
created a set of standards for good agriculture practices. The professional
team has controlled the usage of agrochemicals by partnering with Food
Chain Partnership. Modern packing methods and cold chain management
have helped in building hygiene and safe production.
188 India’s Agriculture and Food Exports

Om Gayatri Farmer Producer Company

Om Gayatri Farmer Producer Company (OGFPC)7 started its work by
providing quality seedlings to the farmers and guiding them to produce
good crop yield till the stage of harvesting. It started venturing into exports
in 2016. Based in the agriculture capital of Maharashtra, the FPC can manage
agriculture production by increasing the nutrition, sweetness, freshness,
colour, odour, and size of the crops. The FPC has the vision to educate the
farmers by applying scientific technology and supporting the growth of
quality products to meet international standards, thereby increasing the
agriculture export. The farmers get a fair price in the international market.
The process helps in smoothing the import-export cycles based on a
transparent business. The FPC is consistently engaged in agriculture research
and technology. The FPC has an aim to build a network of 1 lakh farmers
pan India to enhance quality export. It also provides strong assistance for the
farmers from planting to selling the produce.

Sahyadri Farmer Producer Company

Sahyadri Farmer Producer Company (SFPC),8 located in Nashik district, has
exported different value-added produce of a variety of fruits and vegetables
across the country. Sahyadri Farm was declared the leading exporter of
grapes in 2014 shipping 625 containers amounting to 9,000 MT of grapes
valued at US$ 17 million.9 The Company also processes the farm produce
into pulp, juices, jam, squash, and ketchup. Sahyadri has excellent produce
as aseptic fruit pulp and concentrates, frozen pulp, dry fruits, fruit drinks,
Individual Quick Freezing (IQF) vegetables, and jams. The processed produce
is exported to countries like the United States (US), Europe, and Canada.
Sahyadri has also exported instant quick-freezing grapes to Australia. For
agro-processed export produce, Sahyadri has excellent facilities in the cold
chain and was awarded Confederation of Indian Industry (CII) cold chain
awards for outstanding performance of packhouses. The Company adheres
to the standards set for all the packhouses handling and processing the
horticulture produce meets the standards in terms of international quality
and safety.

7
Om Gayatri Farmers Producers Company, available at https://www.ogfpc.com/,
accessed on 9 September 2021.
8
Sahyadri Farmer Producer Company, available at https://www.sahyadrifarms.
com/, accessed on 29 September 2021.
9
Available at https://www.sahyadrifarms.com/milestones.html, accessed on 23rd
February 2022
Modelling Agriculture Exports in Emerging Economy... 189

Shree Agro Krushi Farmer Producer Company

Shree Agro Krushi FPC (SKFPC)10 is an FPC with a team of 2,000 farmers
working for the world market for agricultural produce. SKFPC exports
primary produce and diversified products like pickles, jams, jelly, cashew,
etc., to the rural population The priority of the FPC is to strive for the
production of quality products with good agriculture practices and scientific
post-harvest methods. They focus on diversified produce having a range
of fruits like pomegranate, mangoes, grapes, custard apple, fig, strawberry,
etc. The FPC has performed very well in Maharashtra, Gujarat, Karnataka,
Andhra Pradesh, and Tamil Nadu. A comparative analysis of selected five
FPCs involved in agro-processed export produce is presented in Table 10.1.
It has been observed that though Bombay Fruits and Vegetables focuses
only on fruits and vegetables undergoing primary processing, it has got a
good brand value in agriculture exports. JAE and Om Gayatri FPC also have
big clusters and focus on the export of primary processed quality fruits and
vegetables. The Sahyadri FPC and Shri Agro Krushi FPC focus on processed
fruits and vegetables with a diversification of the produce. If we compare the
approaches, then it can be observed that a cluster like Sahyadri has expanded
in the export market as it focuses on processed fruits and vegetables. The
three other clusters that are doing well in primary processed produce can
expand their market by focusing on diversified processed produces.
Table 10.1 presents the situation analysis of the collectives. BFVE, JAE,
and OFPC follow legal standards. They do not have advanced technology,
and so their main focus is on the export of primary processed products only.
SFPC and SKFPC have advanced technology and good support from social,
economic, and political indicators.
Table 10.2 presents the internal environment analysis of the collectives.
It has been observed that the success of processed agro exports depends to
a large extent on leadership. SFPC and SKFPC have strong leadership. The
primary focus of JAE, BFVE, and OGFPC is the delivery of quality products
and is less prone to innovative technology.
Service Mix Portfolio
Figure 10.1 focuses on quality agriculture produce exports concerning the
service mix portfolio. The clusters selected for the study have focused on
quality products to meet international standards. SAFPC and SKFPC are
providing services through advanced technology and building a strong
networking system.

10
Shree Agro Farmer Producer Company, available at https://www.shreeagrofpc.
com/, accessed on 20 September 2021.
 Table 10.1: Situation Analysis of the Collectives: External Environment Analysis 190
Collectives Political Economic Social Technology Environment Legal
Bombay Fruits The Company The Company They are the leading The Company does The fresh fruits and The Company follows
and Vegetables follows the EXIM has a wide reach exporter of high-quality not have advanced vegetables meet the legal standards for the
Export Policy in terms of horticulture produce, technology as it does not quality standards export of the produce
(BFVE) buyers and sellers building a strong network focus on the processing with good agriculture
of buyers and consumers. of fruits and vegetables practices
Jay Agro The Company The cluster The Company not only It provides advanced It has the most The quality is
Exports follows its policy approach again has a strong network of techno-managerial advanced agricultural monitored and tested
(JAE) of excelling in helps in having a growers but also has been support practices focusing on in APEDA recognised
export high economy of successful in having good food safety measures laboratories as per the
scale buyers satisfying them with and quality standards customer’s needs
excellent produce
Om Gayatri The FPC follows Strong export The FPC has a network of OGFPC has a strong The FPC is particular To create awareness
Farmer the export policy infrastructure farmers and a strong system infrastructure and in maintaining the on grafting and
Producer and guidelines helps in for the export business. focuses on technology quality standards for residue-free farming
Company for exporting smoothening like packhouse, pre- agriculture export. amongst farmers.
(OGFPC) agriculture fresh the process cooling chamber, cold
and processed flow for exports storage, refrigerated
produce. and quality container, and quality
maintenance. control equipment.
Sahyadri Farmer The FPC have a Sahyadri came Sahyadri has a strong Sahyadri has strong
Producer strong command to be known as a network system. traceability and
Company on followingpolicy brand across the technology adoption.
(SFPC) world.
Shree Agro The FPC possesses They have The SKFPC makes sure They have good The products are The fruits possess
Krushi Farmer the entrepreneurial efficient and that fruits meet the technology for processing natural, fresh, and all the health safety
Producer spirit to handle the skilled labour for health, safety, and quality the fruits. nutritious standards.
Company networks of the managing agro- standards for exporting
(SKFPC) farmers. processing. across countries.
Source: Created by Authors
India’s Agriculture and Food Exports
 Table 10.2: Situation Analysis of the Collectives
Internal Environment Analysis
Collectives Leadership Innovation Product Promotion Place Price
Bombay The Company It maintains the fast The Company The Company has The Company The farmers
Fruits and connects with delivery and quality exports fruits and good publicity for is located and get a fair
Vegetables the farmers for produce vegetables exports has a network price for the
Export different agro with buyers agricultural
(BFVE) produce and sellers produce
across
Jay Agro Team building It provides a modern JAE focuses on the They export The Company The
Exports and consistent pack house/cold storage primary processing under a joint is located in international
(JAE) guidance to facility for grapes, and fresh produce venture cultivation Mumbai and market helps
the farmers pomegranate, fresh of pomegranate, programme with has a wide the farmers in
have made it vegetables, and an onion mangoes, grapes, Bayer crop science network of getting a fair
the leading packing facility. onion, tomato, and and Germany food buyers and price for their
supermarket vegetables chain partnership. sellers produce
Modelling Agriculture Exports in Emerging Economy...

chain in India
Om Gayatri The FPC They have focused on The FPC focuses on They have The FPC is The primary
Farmer under the innovative technology fresh and processed participated in located in aim of the
Producer Chairmanship like pack houses, cold products from fruits the world food Nashik but FPC is to
Company of Madhukar storage, refrigerated and vegetables like market export welcomes an provide the
(OGFPC) Ishwadas containers, pre-cooling tomato, okra, chillies, and invited many international right price to
Gavli has led systems, and processing mangoes, onion, foreign delegates forum for the farmers.
the farmers to techniques for value capsicum, drumstick, for discussing the linking the
produce quality addition. grape, watermelon, possibilities for market with
products to get musk melon, and agro exports. agricultural
the right price pomegranate. produce.
191
 192

Collectives Leadership Innovation Product Promotion Place Price

Sahyadri It is a companyThe FPC has The prime focus is The FPC focuses The FPC is Every farmer
Farmer owned by implemented Systems, given to processed on capacity located in gets a fair
Producer the farmers, Applications & Products fruits and vegetables. building for Nashik but deserved
Company ensuring in Data Processing promoting their finds buyers return
(SFPC) connectivity for
(SAP) ) solutions, quality produce from all over for their
the farmers. traceability, blockchain the world. agricultural
technology, and has produce.
launched a business-
to-consumer (B2C
) application for the
customers. It has also
launched incubation for
50 farmer collectives.
Shree Agro It has focused Shree Agro Krushi The diversified range The FPC has The FPC Shree Agro
Krushi on building FPC focuses on the of fruits is focused on worked on a strong finds its place Krushi FPC
Farmer connections agriculture value chain the FPC network and in Gujarat, ensures that
Producer with farmers resulting in gaining a promotion of their Maharashtra, the right
Company and the market competitive advantage quality products. Tamil Nadu, price and
(SKFPC) by generating a surplus Andhra information
for the farmers. Pradesh, and are provided
Karnataka
Source: Created by Authors
India’s Agriculture and Food Exports
Modelling Agriculture Exports in Emerging Economy... 193

Figure 10.1: Service Mix Portfolio

Source: Created by Authors

Marketing Strategy SOSTAC Strategic Alternatives

Table 10.3 focuses on the 5 S approach, viz., sell, serve, speak, save and sizzle.
These approaches involve in consistent functioning of all the stages in order
like sorting the produce for sale, grading, monitoring the quality specifications
for serving, publicity of their produce, marketing and expanding the market.
These approaches were chosen concerning the collectives. BFVC, JAE, and
OGFPC serve the agri exports. The SFPC and SKFPC are more prone to
adopt global international standards.
Table 10.4 presents agro-processing exports by clusters using Ansoff
Matrix. The Ansoff Matrix has highlighted the clusters that have focused on
the existing produce and new produce to target the market.
Table 10.5 presents the agro-processed exports by collectives using the
GE McKinsey Matrix. Since SFPC focuses on processed produce without
compromising on the quality therefore it comes under build selectively. The
SKFPC has good products and is trying to expand the market, therefore,
it comes in the Expand/Harvest. They have the potential of increasing
their market. Most of the clusters face problems as they lie in the product
positioning. They have a good market but the quality of the product is very
poor. These clusters are required to have handholding support to increase
their quality.
 Table 10.3: SOSTAC Approach 194
Collectives Sell Serve Speak Save Sizzle
Bombay Fruits The Company sells They serve the international The Company has The collective growers’ The Company has
and Vegetables fruits and vegetables market covering different good publicity agriculture produce been expanding
Export countries for being quality saves the cost its client list each
(BFVE) consciousness year and increasing
agriculture export
Jay Agro The Company is They have served quality They have a strong Excellent produce has They have set
Exports involved in selling produce to the Netherlands, privilege to fulfill the led to good pricing of up global good
(JAE) fruits and vegetables Germany, France, Italy, requirements of the the produce agricultural practices
Canada, the UK, Malaysia, customers to provide safe food
Thailand, Singapore, and Gulf products
Countries.
Om Gayatri The FPC is involved The FPC has shown active The FPC welcomes The collective The FPC aims to
Farmer in selling fresh and participation in attracting the agri tour, experts, and approach has led to build up a network of
Producer processed fruits and global market for its produce. foreign delegates to saving the cost and 1,00,000 farmers.
Company vegetables. promote the export increasing the revenue
(OGFPC) business for the farmers.
Sahyadri Sahyadri FPC has They serve the domestic The FPC explores new The FPC is on the
The farmer collectives
Farmer focused on selling market as well as export their markets and access have been widely path to integrated
Producer prominent crops, produce to technological benefited by the value chains
Company fresh and processed to Africa, Gulf, California, and practices Company empowered by
(SFPC) fruits, and vegetables other countries technology and
efficient management
Shree Agro The FPC is involved The FPC is owned and The farmers and The FPC with a cluster The FPC adopts
Krushi Farmer in selling domestic managed by the farmers who labourers were approach has saved the global agriculture
Producer fruit and exporting make the best in agriculture involved in getting the expenses of the small practices for
Company processed fruits. practices. maximum guidance. and marginal farmers uncompromised
India’s Agriculture and Food Exports

(SKFPC) generating revenue. quality standards.

Source: Created by Authors
Modelling Agriculture Exports in Emerging Economy... 195

Table 10.4: Agro-Processing Exports by Clusters Using Ansoff Matrix Approach

Existing Produce New Produce
Market Penetration Product Development
Agro Processed Produce sale in the Different small SHGs and clusters have
Existing country. Different clusters at the transformed their products to increase
Market micro-level are excelling in producing the marketing of agricultural processed
and marketing the processed produce. produce.
BFVC, JAE, OGFPC SFPC, SKFPC
Market Development Diversification
The product has an excellent scope Clusters, as discussed in the chapter, have
New in export as there is a good market produced diversified products like fruit
Market waiting for the processed agriculture pulp, frozen food, jams, ketchup, etc.,
commodities. which finds a good market in the foreign.
BFVC, JAE, OGFPC SFPC, SKFPC SFPC, SKFPC
Source: Created by Authors
Table 10.5: Agro-Processing Export by Collectives Using
GE McKinsey Matrix
Product Positioning Invest to Build Build Selectively
Clusters having low-quality Some collectives build the These are those clusters
standards fail to find the agricultural produce but that have very good quality
market for agro-processing are not able to maintain the agriculture products and can
High

and export though such secondary processing to go attract a good market.

produce finds a place in the ahead. Some of the clusters have
domestic market. been discussed in the case
study (Kumari et al., 2021a).
SFPC
Build Selectively Selectivity Expand/Harvest
Market Attractiveness

These are those collectives These collectives need to This category falls for those
having low-grade produce expand their market as well collectives that make high-
as work on agricultural quality processed products
Medium

produce. They can expand and are trying to expand

by focusing on processed their market. Such collectives
produce. need hand-holding support
OGFPC for increasing their market.
SKFPC
Protect Position and Focus Manage for Earnings Divest
Clusters having very low- Such collectives need to Some collectives have high
quality standards fail to find be given the training to productivity but are not
the market in domestic and diversify their products for able to attract the market
Low

export. finding a better market. due to a lack of knowledge

Such collectives only and process about market
Problems with the Cluster
manage the produce for attractiveness.
their earnings.
Low Medium High
Competitive Strength of Agro Processed Export
Source: Created by Authors
196 India’s Agriculture and Food Exports

Action Plan for Agro Processed Export

The study highlights the strategies to sustain the export of agro-processed
produce. Krishi Vigyan Kendras (KVKs) and agriculture institutions
should offer training to the farmers to enhance the efficiency of agriculture
production. The KVKs and agriculture institutions need to handhold the
farmers to grow the right quality of agricultural produce demanded in
the foreign markets. Most of the agriculture commodities fail to meet
international quality standards which are tested by the maximum residual
limits. The use of pesticides and agrochemicals also needs to be understood
for better agriculture processed produce. There is also a need to build up
farmer-exporter linkages as there is no direct farmer-supplier relationship.
Despite the farmers understanding of the quality and variety of agricultural
produce demanded from the foreign market, they are not able to directly
market the produce (Kumari et al., 2021b). The FPO is a good source for
building up a direct link between the cluster of agricultural produce and the
value addition followed by the export of processed produce. Few countries
suspended a few agriculture products from India because of poor quality
standards and health safety measures. Therefore, agricultural production in
the country should be harmonised by the quality standards of the agencies
like AGMARK, APEDA, BIS, and FSSAI. The Food Processing Industry
accounts for 32 percent of the total food market (ET, 2021).11 The share can
further increase by tapping the market opportunities for other processed
fruits and vegetables in the form of tomato ketchup, jams, jellies, sauce, juice,
sugar, curry paste, etc. The export of processed products like processed
meat, processed cereals like sweet biscuits, noodles, toasted rusks, infant
food, pasta, cocoa, tea, coffee, etc., can enhance their market share around
the globe. India’s growth in agriculture exports is driven largely by cereals,
spices, oilseed, marine produce, and meat.

Root Cause Analysis for Poor Agro-Processed Export

There has always been a concern for low agro-processing and agro exports.
A questionnaire was prepared and the collectives were asked about the root
causes for low agro-processed exports. The problems were identified and
analysed in Figure 10.2 using root cause analysis. After undergoing extensive
literature, it has been found that the primary cause for poor agro-exports is
poor quality and networking. The farmers and clusters will have to stress

Available at ET (2021). https://economictimes.indiatimes.com/industry/cons-

11

products/food/level-of-food-processing-must-be-raised-from-just-10-pc-now-minister/
articleshow/85687454.cms?utm_source=contentofinterest&utm_medium=text&utm_
campaign=cppst as accessed on 4th April 2022.
Modelling Agriculture Exports in Emerging Economy... 197

the quality product and build linkages with the export market. The fishbone
diagram also tells that the need for investments and awareness is required for
boosting agro export in the country.

Figure 10.2: Fish Bone Diagram

Source: Created by Authors
After undergoing an extensive study, it can be concluded that agro-
processed export requires strategic as well as operational approaches to
boost the export sector (Table 10.6).
Table 10.6: Strategic and Operational Approaches for
Agri Export Sector
Strategic Operational
Network building among private public Cluster approach needs to be promoted
stakeholders
Infrastructure and logistics support Investments need to be attracted in the
processing sector
Training Quality control
Farmer exporter linkages Enhancing the yield of the fruit crops
Promotion of collectives in the form of Infrastructure and logistics
cooperatives, FPOs, and FPC
Source: Created by Authors
Figure 10.3 is derived from a conceptual model after analysing the
clusters and undergoing an extensive literature review. It has been found
that the drivers for the supply chain are infrastructure, training, areas of
operation, customer focus, market strategy, linkages in the exports, and
quality control.
198 India’s Agriculture and Food Exports

Figure 10.3: Model for Export of Agro Processed Produce using Cluster Approach
Source: Created by Authors

Conclusions
The construction of dynamic networks among countries can lead to
competitiveness in the agriculture trade (Liu et al., 2019). Agri export
is the primary contributor to agriculture development. Collectives have
increased agriculture export. The agro-processing sector faces constraints
like insufficient raw materials, inconsistent quality, inappropriate packaging
material, poor technology, and the absence of management (Kumari et al.,
2021c). The EXIM Policy of 2002-07 endeavours necessary directions for
agriculture export. With self-sufficient agriculture inputs, the country has a
competitive advantage for the export of agricultural commodities. Nearly 80
per cent of the trade in the world market is shared by agricultural products
like cotton, rice, soybean, sugar, tea, tobacco, spices, vegetable oil, and wheat.
The cases highlighted have the utmost potential for the collectives to pave a
way forward in understanding their strengths and opportunities for agro-
processed exports. The case study is limited to five cases chosen from FPO
dominant state. For boosting agriculture processed produce export, it is
essential to understand the drivers and strategies to be undertaken by the
clusters.

References
C. Liu, J. Xu, and H. Zhang, ‘Competitiveness or Complementarity? A Dynamic
Network Analysis of International Agri-trade Along the Belt and Road’,
Applied Spatial Analysis and Policy, 2019, 1-26.
C. Nuur, ‘Cluster Dynamics and Industrial Policy in Peripheral Regions: A
Study of Cluster Formation as a Local Development Process’, Stockholm:
Universitetsservice US AB, 2005, available at https://www. divaportal.org/
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smash/get/diva2:13761/FULLTEXT01.pdf, accessed on 22nd February

2022.
J. Humphrey and H. Schmitz, Governance and Upgrading: Linking Industrial
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September 2021.
M.Y. Haddoud, M.J. Beynon, P. Jones, and R. Newbery, ‘SMEs’ Export Propensity
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Advanced Estimates, 2020, available at http://apeda.gov.in/apedawebsite/
six_head_product/FFV.htm#:~:text=It%20ranks%20second%20in%20
fruits,million%20metric%20tonnes%20of%20vegetables, accessed on 2
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Through Collectives: Comparative Case Analysis’, International Journal of
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S. Kumari, P. Raghuram, V.G. Venkatesh, and Y. Shi, ‘Future Perspectives on
Progressive Farming with Adoption of Virtual Reality Technology for
Sustainable Quality in Agriculture’, The TQM Journal, 2021b, Vol. ahead-of-
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S. Kumari, V.G. Venkatesh, E. Deakins, V. Mani, and S. Kamble, ‘Agriculture
Value Chain Sustainability During COVID-19: An Emerging Economy
Perspective’, The International Journal of Logistics Management, 2021c, Vol.
ahead-of-print No. ahead-of-print.
S. Monni, F. Palumbo, and M. Tvaronavičienė, ‘Cluster Performance: An Attempt
to Evaluate the Lithuanian Case’, Entrepreneurship and Sustainability Issues,
2017, (1), 43-57.
S.S. Sultan, ‘Enhancing the Competitiveness of Palestinian SMEs Through
Clustering’, Euro Med Journal of Business, 2014, 9(2), 164-74.
CHAPTER 11

Attaining US$ 100 Billion Agriculture and

Food Exports: The Way Forward
Debesh Roy* and Bijetri Roy**
* Chairman, Institute for Pioneering Insightful Research & Edutech Pvt. Ltd.
(InsPIRE), Greater Noida.
E-mail: [email protected]
** Managing Director & Chief Strategy Officer, Institute for Pioneering Insightful
Research & Edutech Pvt. Ltd. (InsPIRE), Greater Noida.
E-mail: [email protected]

Introduction
The Agriculture Export Policy (AEP) 2018 of the Government of India (GoI),
aims at achieving an agriculture export target of $60 billion by 2022 and
US$ 100 billion within a few years, thereafter. This is indeed a challenging
task and would need a resetting of the timelines for achieving the targets.
A reasonable timeline for achieving the target of US$ 60 billion could be
Financial Year (FY) 2023-24, and a target of US$ 100 billion could be set for
2027-28. Record achievement of US$ 50.2 billion agriculture exports from
India in 2021-22 is a beacon of hope for achieving the target. Quick and
transformative reforms, and the signing of Free Trade Agreements (FTAs)
with India’s major trade partners, could fast track the achievement of the
target to 2026-27. The prerequisite for achieving the agriculture export
targets would be a well-calibrated, comprehensive, strategic, and result-
oriented agri-export policy and action plan, along with overall reforms in
the agriculture and allied sector.

Reforms Agenda for Attaining US$ 100 Billion Agri-Exports

The Government of India’s vision of Doubling Farmers’ Income (DFI)
signified a paradigm shift in agriculture policy from ensuring food security
to income security of farmers, by maximising their gains through post-
production activities, including exports. Agriculture export reforms, FTAs,
agriculture marketing reforms, developing efficient agri-value chains, and
building agriculture export infrastructure, are some of the major reform
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 201

measures that could be expedited to attain the agriculture export milestone

of US$ 100 billion.
To control prices in the domestic market, the Government has at
different times resorted to banning exports of major agri-commodities, be
it rice, wheat, sugar, or onion. Imposition of Minimum Export Price (MEP)
is another tool often used to tame inflation. Such moves bring relief to
domestic consumers, but create uncertainty among importing countries, and
deprive farmers of higher returns from their produce, which also discourages
them to increase the cultivation of the crop in the subsequent season. It has
been observed that exports of onion drop sharply whenever a high MEP
is imposed (Gulati and Wardhan, 2019). Therefore, a stable export policy
and agri-marketing reforms are the right recipe to ensure higher exports and
remunerative prices to farmers.
The AEP provides a blueprint for agriculture export reforms in India
(GoI, 2018). It has made wide-ranging recommendations for policy reforms,
to propel India’s exports of agricultural products to US$ 100 billion (Box
11.1). The policy states as follows:
India’s quest is to grow sustainably, trade abundantly, and progress
harmoniously. Agriculture export, if properly supported by infrastructure,
institutional backup, packaging, freight transport, and connected to the
internal production system backed by market access will be in a position
to transform the agricultural economy.
The AEP envisions a focus on agriculture export-oriented production,
export promotion, as well as better farmer realisation and synchronisation
within policies and programmes of GoI. It underscores the need to have a
‘Farmers’ Centric Approach’ for improved income through value addition
at the source itself which will help to minimise losses across the value chain.
The objectives of the Policy are as under:
• To double export to US$ 60 billion by 2022 and US$ 100 billion within a
few years;
• To diversify India’s export basket and destinations, and boost high value,
and value-added agricultural exports;
• To promote novel, indigenous, organic, ethnic, as well as traditional and
non-traditional agri-products for export;
• To provide an institutional mechanism for pursuing market access,
tackling barriers, and dealing with Sanitary and Phytosanitary (SPS)
issues;
• To strive to double India’s share in world agri-exports by integrating with
the global value chain at the earliest;
• Enable farmers to get the benefit from export opportunities in overseas
markets.
202 India’s Agriculture and Food Exports

The Policy aims at:

• Assuring that processed agricultural products and all kinds of organic
products will not be brought under the ambit of any kind of export
restriction;
• Identification of a few commodities which are essential for food security
in consultation with the relevant stakeholders and ministries. Any kind
of export prohibitions and restrictions on the identified commodities
would be taken up in a World Trade Organization (WTO) compatible
manner;
• Liberalised import of agricultural products for value addition and re-
export.

Box 11.1: Agriculture Export Policy: Major Recommendations

• Infrastructure and logistics: Pre-harvest and post-harvest handling
facilities, storage and distribution, processing facilities, roads, and
world-class exit point infrastructure at ports facilitating swift trade.
• Holistic approach to boost exports: To address issues of: (a) Research
and Development (R&D) for improved varieties, value addition,
and packaging; (b) Establishment of a good standards regimen;
(c) A holistic response to SPS and Technical Barriers to Trade (TBT)
barriers faced by Indian products; and (d) Identification of winning
sectors and strategies for augmenting exports in those sectors.
• Greater involvement of State Governments in agriculture exports:
(a) Identification of a nodal State Department/Agency for the
promotion of agriculture export; (b) Inclusion of agricultural exports
in the State Export Policy; (c) Infrastructure and logistics to facilitate
agricultural exports; (d) Institutional Mechanism at Union, State, and
cluster levels to support exports.
• Focus on clusters and transition to Agri Export zones: Export-
oriented cluster development across States will be key to ensuring
surplus produce with standard physical and quality parameters which
meet export demands. Subject to the successful implementation of
these clusters, a transition to Agri Export Zones (AEZs) could be
thought of to facilitate value addition, common facility creation, and
higher exports from such zones.
• Promoting value-added exports: (a) Focus on the promotion of value
added, indigenous and tribal products for export; (b) Promote value-
added organic exports; (c) Promotion of R&D activities for new product
development for the upcoming markets; (d) Skill development.
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 203

• Marketing and promotion of ‘Brand India’: (a) Marketing of India’s

best products as ‘Make of India’, by stepping up advertising and
investing in Geographical Indication ( GI) of unique products; (b)
Benchmarking of agriculture export promotion activities with peer-
group countries and best countries in the world.
• Attract private investments in export-oriented activities and
infrastructure: (a) Packhouse; (b) Processing infrastructure; (c) Cold
storage; (d) Exit point infrastructure; (e) Air cargo; (f) Infrastructure
abroad.
• Ease of doing business and digitisation: (a) Digitisation of farmer land
records; (b) Market Intelligence Cell at the Department of Commerce
(DoC) and Portal for Information Dissemination; (c) Trade procedures
and facilitation.
• Developing sea protocol: Developing sea protocols for perishables
must be taken on priority for long-distance markets.
• Establishment of strong quality regimen: The role of the Food Safety
and Standards Authority of India (FSSAI), Export Inspection Council
of India (EIC), plant and animal quarantine, and different Commodity
Boards in setting standards, enforcing such standards, and a robust
accreditation and certification arrangement to identify export worthy
establishments will be facilitating further exports.
• Establish and maintain a single supply chain and standards for
domestic and export markets: There has to be a convergence of Policy
related to quality standards set for the domestic market and those set
for the export market.
• Sanitary and phytosanitary and technical barriers to trade response
mechanism: Respond to rapid alerts and warnings and ensure that the
concerns/problem areas percolate to the producers/processors and
exporters.
– Submission of pest risk analysis, a dossier on animal health and
disease control programme, addressing safety concerns of the
importing countries/intending countries.
– Drawing up Residue Monitoring Plans (RMP) would help in
(a) Creating an online platform for maintaining traceability;
(b) Facilitating exports by standardising testing protocols. The
Agricultural and Processed Food Products Export Development
Authority (APEDA) has already initiated this for grapes.
– The United States Food and Drug Administration (USFDA) and
the European Union (EU) have developed a system of reflecting
import rejections on their web portal. As part of the AEP, the
204 India’s Agriculture and Food Exports

Department of Commerce proposes to develop a common portal

to monitor all export rejections and provide a platform for different
nodal agencies to take up a root cause analysis, take corrective
action, and in case of requirement, respond to the partner country
regarding action taken.
• Conformity assessment: EIC, APEDA, the Marine Products Export
Development Authority (MPEDA), Spice Board, etc., will continue
to strive for conformity assessment procedure to be recognised for
smooth export of agriculture exports.
• Research and development: (a) Agricultural R&D led by private
industry along with higher infrastructure spending by the Government
will be the key to boosting agricultural exports; (b) Importing export-
oriented germplasm; (c) Testing laboratories with strong infrastructure
in the North-East (NE) region to support the export of organic
produce.
• Creation of agri-start-up fund: Entrepreneurs are to be supported to
start a new venture in agri products exports during their initial period
of establishment.

Agriculture Export Reforms

Trade liberalisation under the WTO regime involves individual countries’
commitments to lower customs tariffs and other trade barriers, and opening
up of services markets. Governments are required to make their trade
policies transparent by notifying the WTO about laws in force and measures
adopted. However, issues relating to market access drag on for months, and
sometimes years together before countries allow market access for products.
Apart from tariff barriers, which have been declining over the years
on account of FTAs and Regional Trade Agreements (RTAs), the Non-
Tariff Barriers (NTBs), including SPS standards and TBT are becoming the
norm for restricting/preventing market access. In the absence of a response
mechanism, the likelihood of a temporary restriction/ban looms large and
sometimes it may take years to lift the ban.
The WTO rules on SPS measures help to ensure that agricultural
products are traded safely. In recent years a number of Indian agricultural
products have been facing rejection and export bans in the EU—a key
export destination for India’s agricultural exports—due to SPS measures.
Therefore, Mukherjee et al. (2019) have suggested the following measures
to address the issue of SPS barriers: Establishment of product traceability;
proactive measures to counter bans; implementation of Good Agricultural
Practices (GAP); strengthening testing procedures, and following global best
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 205

practices; establishment of specific state-of-the-art export infrastructure

facilities, which could be accessed by poor farmers; the need for the creation
of database by APEDA to raise an SPS issue with any trading partner;
scientific research on agricultural commodities and sharing the findings with
importing countries, exporters and other stakeholders; discuss SPS issue in
the WTO and also bilaterally with trade partners; signing of equivalence
agreements with trading partners to recognise each other’s conformity
assessment systems based on international standards; and knowledge
sharing and collaboration with the EU. These measures can ensure higher
returns to exporters and farmers. It is, thus, eminently important to sensitise
and educate Farmer Producer Organisations (FPOs) and other stakeholders
in the agri-export value chains, on ways to address SPS-related issues.
It is recommended by authors Goyal and Mukherjee in Chapter 7, ‘Behind
the Border Measures: Examination of Sanitary and Phytosanitary Barriers
Faced in the Case of Food Export From India’ (in this book) that to counter
rejection by a partner country in forums like the WTO’s SPS Committee or
TBT Committee, there is a need for data collection and scientific evidence-
based reports. Further, it is important to build the capacity of our small and
medium farmers and processors and inform them about the export market
requirements.
The development of export-based clusters and contract farming will
ensure traceability of farm produce, a key export requirement under SPS
Agreement, and ensure a significant rise in farmers’ income. QR codes or
RFID chips would enable traceability of agriculture produce, a major factor
in building importer confidence and enabler of export market expansion.

Doubling Farmers’ Income

The GoI has envisioned the achievement of DFI by 2024-25. The following
seven-point strategy for DFI is mostly under implementation: (i) Irrigation
with a focus on water-use efficiency, viz., ‘Per Drop More Crop (PDMC)
through Pradhan Mantri Krishi Sinchayee Yojana (PMKSY); (ii) Quality
seed and soil health; (iii) Investments in warehouses and cold chains; (iv)
Value addition through food processing; (v) Electronic National Agriculture
Market (e-NAM); (vi) Increase in the coverage and effective implementation
of Pradhan Mantri Fasal Bima Yojana (PMFBY); and (vii) Promotion of
ancillary activities like dairy, poultry, bee-keeping, and fisheries. The strategy
for DFI, involving an increase in private investment by 6.62 per cent per
annum from the base year 2015-16 at the national level, should also include
among others: (a) Promoting higher agricultural growth in less developed
regions, including rainfed areas, with a focus on marginal and small holders;
206 India’s Agriculture and Food Exports

(b) Strengthening livestock-related activities and crop diversification

to high value produce like horticulture, in line with market signals; (c)
Shifting priority focus to post-production management and the agricultural
marketing system; (d) Sizeable increase in institutional credit to farmers; (e)
Allocation of more resources by state governments towards minor irrigation;
and (f) Incentivising private corporate sector to participate in investments
in agriculture (GoI, 2017). To achieve DFI, GoI can use an income policy to
protect the poor, free up prices for farmers, and allow private trade to stock
and operate freely and have unhindered exports (Gulati and Hussain, 2017).

Agriculture Marketing Reforms

A critical problem faced by India’s agriculture sector is the fragmented and
distortions-ridden state of agricultural markets. One of the major reasons for
the low income of farmers is unremunerative prices for their produce due to
the lack of a competitive market structure, which is bereft of a transparent
price discovery system. The majority of farmers in the country belong to
the small and marginal category, who lack the bargaining power to sell
their produce at remunerative prices in the Agriculture Produce Marketing
Committee (APMC) markets. More often than not, they are forced to sell
their produce at unremunerative prices due to distress sales during the
immediate post-harvest season, because of their lack of holding capacity,
and the exploitation by traders (arhatiyas) in APMC markets. The lack of
aggregation of produce makes it uneconomical for farmers to transport their
produce to the APMC markets for their sale. APMC Acts require that farm
produce be sold only at regulated markets through registered intermediaries.
Therefore, without the options for alternative and competitive marketing
channels near the farm gate, small and marginal farm holders, on most
occasions sell their produce at unremunerative prices.
According to the National Commission on Agriculture (1976), the
objectives of an efficient marketing system are as follows:
(a) To enable the farmers as primary producers to reap the best possible
benefits;
(b) To provide facilities for lifting all the produce the farmers are willing to
sell, at a price incentive;
(c) To reduce the price spread between the primary producer and ultimate
consumer; and
(d) To make available all products of farm origin to consumers at a reasonable
price without impairing the quality of the produce.
Coinciding with the Green Revolution wherein productivity enhancement
was achieved, the country witnessed the emergence of state-regulated
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 207

markets. Well-laid out market yards and sub-yards were constructed, and for
each market area, an APMC was constituted to frame the rules and enforce
them. There are more than 6,600 APMCs in the country. In addition, the
country has more than 22,000 Rural Periodical Markets or Grameen Haats
(GRAMs) under the control of local bodies, panchayats, councils, APMCs,
etc., which lack even the basic amenities and marketing infrastructure. The
APMC Acts require that farm produce be sold only at regulated markets
through registered intermediaries.
The GoI announces a Minimum Support Price (MSP) in respect of
23 commodities. However, only a few states have strong procurement
systems like Punjab, Haryana and Madhya Pradesh, and FCI procures
major quantities of wheat from these states (82.5 per cent during Rabi
Marketing Year 2020-21). Farmers in these states can sell wheat and paddy
at MSPs, which over the years have incentivised farmers to shift to water-
guzzling paddy farming from traditional maize cultivation, leading to over-
exploitation of groundwater. However, the same is not true in respect of
other states and other commodities like pulses and oilseeds, and farmers
have been found to receive prices below MSP. Open-ended MSP itself is a big
challenge at present. If it is decided for any reason to ‘mandate’ MSP, we are
staring at disappearing export markets, a disrupted domestic supply chain,
unmanageable surpluses, and an unaffordable subsidy burden (Kumar, 2020).
In the current scenario of complex demands in a surcharged atmosphere, a
tectonic shift to a highly decentralised food and agriculture management,
giving more legal authority, financial support, and responsibilities to states
may be an option worth considering (Kumar, 2020).
Notwithstanding moves to deregulate, fragmented market players
continue to dominate. The transportation, marketing, and distribution of
agri-food commodities have also not developed scientifically.
The e-NAM is a transformative idea to reform the fragmented agriculture
market in the country. The Union Budget 2021-22 had announced the
availability of the Agriculture Infrastructure Fund (AIF) to APMCs for
augmenting their infrastructure facilities. Also, 1,000 more APMC mandis
were to be integrated with e-NAM. Presently, 1.72 crore farmers are registered
in the existing 1,000 e-NAMs in 18 states and 3 Union Territories, which
have displayed transparency and competitiveness in the agricultural market.
However, the goal of a national agriculture market, which would allow
farmers to sell their produce at the best available price, through transparent
price discovery, anywhere in the country, is still a distant dream.
The enactment of the Farmers’ Produce Trade and Commerce (Promotion
and Facilitation) Act, 2020 (FPTC Act, 2020), Farmers (Empowerment and
Protection) Agreement on Price Assurance and Farm Services Act, 2020
208 India’s Agriculture and Food Exports

(FAPAFS Act, 2020), and Essential Commodities (Amendment) Act, 2020

(ECA, 2020), signified the ushering in of the long-awaited comprehensive
agri-marketing reforms. However, the Acts have since been repealed,
in response to the year-long agitation by a section of farmers against the
Acts. It is, therefore, imperative for the central and state governments,
along with agriculture scientists, economists, farmers, agri-tech companies,
the corporate sector, and all stakeholders to start a consultative process to
facilitate state governments to enact agriculture marketing reform Acts, and
for GoI to enact a law facilitating the easy inter-state movement of agri-
commodities/produce. Further, to develop an efficient nation-wide agri-
marketing system, e-NAMs need to be scaled up and made more efficient,
and all private markets and accredited warehouses should be linked to
e-NAMs. Reforms in the agriculture marketing structure in the country
would also facilitate the linkage between domestic and export markets.

Research and Development (R&D) and Agriculture Advisory Service

Export-oriented R&D needs to be prioritised to develop varieties of
commodities in demand, and comply with packaging, traceability, and food
safety (GoI, 2018). For instance, a new variety of Basmati, viz., Pusa 1718,
developed by the Indian Agricultural Research Institute (IARI) has the
potential to increase the export of Basmati rice, through higher yield and the
ability to fight bacterial blight disease.
An effective and technology-driven Agriculture Advisory Service (AAS)
along the lines of the United States Department of Agriculture (USDA)
and the EU need to be considered, to ensure that farmers adopt an optimal
cropping pattern that maximises their income (NITI Aayog, 2018). There is
also a need to strengthen both government and private extension services, to
function in tandem with AAS.
The needs of farmers in terms of information and technology support
have become more complex, due to the rapid pace of developments in
the agriculture sector. India needs a vibrant, responsive, market-oriented,
and globally competitive agricultural research ecosystem (NITI Aayog,
2017). Budgetary resources for R&D on seeds (HYV and GM), and agri-
technology need to be enhanced significantly. The private sector, too,
needs to enhance investment in R&D. Further, there is a need to revitalise
agriculture extension services by making them more relevant and useful to
improve agricultural productivity. Also, efforts need to be made to enhance
post-harvest processing and value-added activities at the farm, while also
aiming at enhancing exports. FPOs/Farmer Producer Companies (FPCs)
could be developed into alternative agencies for providing extension services
to farmers.
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 209

Climate Mitigation and Adaptation for Sustainable Agriculture

Development and Green Trade
Climate Smart Agriculture (CSA) works to reconcile the objectives of
sustainably increasing agricultural productivity and incomes, building
resilience and adapting agriculture to climate change, and reducing and
removing Greenhouse Gas (GHG) emissions from agriculture (FAO, 2019).
Drip irrigation is a CSA technology which saves water and energy, while
reducing GHG emissions. Expansion in the use of solar-powered Artificial
Intelligence (AI)-based drip irrigation systems across all states in India and
for major crops, viz., rice, wheat, horticultural crops, and sugarcane can be
an integral part of a Water-Energy-Food (WEF) nexus approach to support
water-use efficiency, use of renewable energy, and the mitigation of GHG
emissions, food security, and sustainable agriculture.
Methane (CH4) emissions contribute to a third of the current
anthropogenic GHG warming. Paddy cultivation contributes about 15-20
per cent of the total anthropogenic CH4 emissions. Methods like System of
Rice Intensification (SRI), drip irrigation, soil amendments, organic matter
management, different tillage, rotation, and cultivar selection can facilitate
mitigation of methane emission (Roy, 2020).
Green trade has gained prominence in recent years and the WTO has
committed to promoting it. Therefore, environment and climate-change
concerns are being incorporated into FTAs across the world. Palit (2022)
has observed that multilateral efforts to align trade closely to deliver
outcomes achieved by the COP26, such as reaching emission reduction
goals and facilitating adaptation, should trickle down to narrower trade
policy discussions as well. However, this could pose policy challenges for
large Emerging Market Economies (EMEs) like India and Brazil. India’s new
FTA negotiations as well as re-negotiations with existing FTA partners need
to incorporate green trade issues to move in the right direction towards
achieving the country’s ‘net zero’ ambition by 2070. However, the EU’s
proposed Carbon-Border Adjustment Mechanism (CBAM), advocating
‘carbon prices’ or higher tariffs on carbon-intensive imports into the EU will
be difficult for India and several other developing countries to accept (Palit,
2022). Nevertheless, green trade needs to be high on India’s trade agenda and
pursued in a systematically and calibrated manner.

Economic Diplomacy and Promotion of Brand India

Economic diplomacy is one of the most vital factors which determines India’s
export performance. Diplomatic efforts are also imperative to promote
Brand India. The US, for instance, has imposed stricter norms to check pests
210 India’s Agriculture and Food Exports

and pesticides in case of exports of mangoes and rice from India. Also, some
of India’s agricultural product test laboratories are not recognised by Russia.
Therefore, intense diplomatic efforts are needed to address these as well as
SPS-related issues, with India’s major trade partners, viz., the EU, the US, the
United Kingdom (UK), China, the Association of Southeast Asian Nations
(ASEAN), the United Arab Emirates (UAE), and South Asian Association
for Regional Cooperation (SAARC) countries, as well as potential export
markets across the globe.
The DFI Committee had recommended that a post of Advisor (Agri-
trade) be created in Indian embassies, initially in ten selected export markets,
to focus on developing trade in all kinds of agricultural goods, beyond cereals
and meat (GoI, 2017). The preferred option for such trade could be a short
supply chain having a direct linkage with FPOs (GoI, 2017).

Free Trade Agreements for Growth of Agricultural Exports and

Fostering India’s Agricultural Export Competitiveness
David Ricardo (1817), who popularised the concept of free trade, argued
that free trade expands diversity and lowers the prices of goods available in
a nation while better exploiting its homegrown resources, knowledge, and
specialised skills. FTAs have spread rapidly in the last three decades, as they
reduce or eliminate barriers to trade across international borders.
Pohit and Pal (2020) have warned that, in general, an FTA, by changing
the rule of the existing trade regime, may increase the transaction cost of
trading unless complementary steps are taken, so that the ecosystem of
trading does not turn out to be inefficient due to additional complexity. Sun
and Reed (2010) find only limited evidence that FTAs have led to multilateral
lowering of trade barriers for agricultural products. They show that dynamic
results discover more import diversion among FTAs than the static results
and that this import diversion is likely due to continued high agricultural
tariffs for many non-FTA members. They assert that there is still much work
to be done in the WTO to lower tariffs on agricultural products if the world
is to reap the benefits from global free trade.
Pal and Mukherjee in Chapter 4, ‘Agriculture Trade of India and
Implications for Current and Future Trade Agreements, (in this book) have
pointed out that India’s FTAs and comprehensive economic partnership
agreements (CEPAs) have not significantly raised agricultural trade. They
have also stated that in most of the FTAs, signed by India, the country has
kept quite a few agricultural commodities on the negative list. Further, for
many commodities, India has committed a long time horizon to implement
the tariff cuts.
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 211

According to the High-Level Advisory Group (HLAG) set up by

the Ministry of Commerce, GoI, the lack of competitiveness of India’s
exports acts as a major bottleneck in tapping potential from trade enabled
through FTAs/RTAs (GoI, 2019). One of the reasons for India not joining
the Regional Comprehensive Economic Partnership (RCEP), which is the
largest ever FTA, was the apprehension that the signing of the agreement
would flood the Indian dairy market with cheaper imports from New
Zealand and Australia, based on the admission that Indian dairy industry
is not globally competitive. A multitude of stakeholders, including farmers’
organisations, trade unions, and industry associations, spoke in one voice
on the adverse implications of the agreement (Dhar, 2019). It has been
argued by Dhar (2019) that the FTAs that India has with ASEAN, Korea,
and Japan were expected to increase India’s exports. However, while exports
did not increase as Indian enterprises lack competitiveness, imports from
the partner countries expanded. Therefore, Dhar (2019) emphasised that
India’s future participation in FTAs must be conditioned on improving the
competitiveness of domestic entities.
India has in place ten FTAs and six Preferential Trade Agreements
(PTAs). Further, India is negotiating sixteen new and expanding seven
existing agreements, including with trading partners such as Australia,
Canada, the EU, the UK, and the US. India entered into a CEPA with the
UAE on 18 February 2022, which is expected to significantly enhance
agriculture exports from India. This was followed by the signing of India-
Australia Economic Cooperation and Trade Agreement (ECTA) on 2
April 2022, which is the first step towards the signing of a CEPA, within
a reasonable time. Further, India and the UK have launched formal FTA
negotiations on 13 January 2022. The early harvest agreement between the
two countries aims to achieve up to 65 per cent of coverage for goods and
up to 40 per cent coverage for services. The coverage for goods is expected
to go up to more than 90 per cent of goods, by the time the final agreement
is signed. A majority of FTAs/CEPAs under negotiations are comprehensive,
covering goods, services, investment, Intellectual Property Rights (IPR), etc.
Non-Tariff Measures, regulatory procedures, and trade facilitation are part
of such negotiations.
It is reported that India will safeguard the interests of its farm, dairy, and
fishery sectors while finalising multilateral or bilateral trade deals, including
talks at the 12th Ministerial Conference of the WTO as well as ongoing
bilateral trade negotiations.1 To benefit from FTAs/RTAs, Indian agricultural
1
Available at https://www.livemint.com/news/india/india-will-safeguard-agri-
dairy-sectors-while-negotiating-ftas-11641496320973.html, accessed on 28 January
2022.
212 India’s Agriculture and Food Exports

commodities, as well as dairy and other processed food products, need to

be globally competitive in terms of quality and price. This could be ensured
with the adoption of hi-tech and precision agriculture through AI and the
Internet of Things (IoT), water-use efficiency through solar micro-irrigation,
and the development of efficient agri-export value chains. Sectors allied to
agriculture, viz., horticulture, dairy, and fisheries have high export potential,
especially for value-added products. Therefore, it is imperative to develop
efficient export-oriented agriculture and allied sector value-chains to boost
export competitiveness, under FTA/RTA regimes. A significant policy
reform in this regard is the Production Linked Incentive (PLI) Scheme
for the food processing industry, which promises to make processed food
globally competitive.

Efficient Export-oriented Agri-Value Chains

Primary products constitute about 75 per cent of APEDA products exported
from India, in terms of value (US$). The AEP has, therefore, underscored
the need to promote the export of value-added agri-products to achieve the
formidable target of US$ 100 billion. The AEP has also recommended the
establishment of AEZs, to facilitate the value addition of agri-commodities
for increasing exports in a WTO-compliant manner.
The agriculture export strategy should prioritise the development
of export-oriented value chains in respect of dairy products, processed
marine products, processed fruits and vegetables, cereal preparations, and
organic food. The agriculture export strategy should include the integration
of value-added agriculture produce with Global Value Chains (GVC), by
adopting the best agricultural practices involving productivity gains and cost
competitiveness (Roy, 2021).
Nearly one-third of the global food production is wasted, yet up to 800
million people are chronically undernourished (World Economic Forum,
2019). In this context, food processing assumes great significance in raising
the value of agricultural produce and generating income and employment
along the agri-value chains, while reducing wastage of food and alleviating
poverty and malnourishment. The majority of India’s agriculture exports
are low value, raw or semi-processed products that are marketed in bulk.
The share of India’s high value and value-added agriculture produce in its
agriculture export basket is less than 15 per cent, compared to 25 per cent in
the US and 49 per cent in China. India’s low export of its vast horticultural
produce is due to a lack of uniformity in quality, standardisation, and its
inability to curtail losses along the value chain. The sector as a whole provides
employment opportunities to more than 6.5 million people, which is likely to
reach 9 million by 2024 (NABARD, 2018).
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 213

The strength of the food processing sector lies in the fact that India is
the leading producer of a number of commodities like cereals, milk, banana,
mango, chillies, ginger, meat, etc. The country is also the second-largest
producer of fruits and vegetables after China, the third largest in marine
products, and fifth in poultry production in the world. However, the major
cause of concern lies in poor post-harvest infrastructure facilities. The level
of processing is the highest in the dairy sector (35 per cent), followed by the
meat processing sector (21 per cent), marine fisheries (10.7 per cent), and
poultry (6 percent) (NABARD, 2018).
There needs to be a policy focus on promoting inclusive agri-value
chains, for the benefit of small and marginal farm holders. An effective
way to make it possible is through strong and efficient FPOs/FPCs. The
promotion of Micro, Small and Medium Enterprises (MSMEs) and services
sectors assumes significance in the context of reducing over-dependence
of the rural population on agriculture and providing alternative livelihood
options for farmers. These activities could be made profitable as part of
food and agri-value chains. Therefore, DFI requires strong linkages with the
manufacturing and service sector to transform the ‘agricultural units into
agricultural enterprises’ (GoI, 2017).
Enlargement in the scope of the ‘Operation Greens Scheme’, from
Tomatoes, Onions, and Potatoes (TOP) to include 22 perishable products, by
GoI is a step in the right direction. The Scheme promoted by the Ministry of
Food Processing Industries, GoI, aims to boost value addition in agriculture
and allied products and their exports, and provide support to promote
FPOs, agri-logistics, processing facilities, and professional management. The
integrated development of horticulture value chains would provide support
to farmers when prices of agri-produce are low. Therefore, the expansion
of the Scheme promises to provide income security to a sizable number of
farmers, while boosting exports.

Dairy
India’s low value of export of dairy products may be attributed mainly to
the high domestic consumption demand for milk and milk products. Also,
about 81 per cent of the Indian dairy and milk processing market is part of
the unorganised sector, which produces milk under unhygienic conditions.
India is the largest producer of milk in the world, having increased from
146.3 million tonnes in 2014-15 to 198.4 million tonnes in 2019-20 (GoI,
2021). However, the country was ranked 36th among exporting countries of
dairy products in the world. India’s export of dairy products is led by Gujarat
Cooperative Milk Marketing Federation Ltd (GCMMF) (Amul), which has
emerged as a global brand and is also part of the global dairy trade network.
214 India’s Agriculture and Food Exports

Amul’s success rests on a strong cooperative movement in Gujarat and a

technologically developed, professionally managed, and efficient export-
oriented dairy value chain. Mother Dairy is another major exporter of dairy
products as well as fresh and processed fruits and vegetables, which has
developed a strong export value chain.
India’s exports of dairy products have experienced fluctuations during
the 10-year period (from 2011-12 to 2020-21) (Figure 11.1). The year 2013-
14 recorded the highest ever exports at US$ 546 million, but fell sharply to
touch US$ 115 million in 2015-16, which was followed by a steady increase
to US$ 346 million in 2018-19. Subsequently, exports fell sharply to US$ 187
million in 2019-20 and rose to US$ 201 million in 2020-21 (Figure 11.1). The
Compound Annual Growth Rate (CAGR) of dairy exports stood at 3.8 per
cent during the 10-year period under review (Figure 11.2). The first 5-year
period (2011-12 to 2015-16) witnessed a CAGR of 10.8 per cent, while the
second period (2016-17 to 2020-21) experienced a CAGR of 8.3 per cent.

Figure 11.1: India’s Exports of Dairy Products

Source: Chart prepared by the author based on data accessed from
APEDA Agri Exchange

Figure 11.2: CAGR (%) of Exports of Dairy products

Source: Chart prepared by the author based on data accessed from
APEDA Agri Exchange
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 215

The major destinations of India’s dairy products in 2020-21are the UAE

(US$ 39 million, with a share of 19.5 per cent), Bangladesh (US$ 24 million;
12 per cent), the US (US$ 22 million; 11.3 per cent), Bhutan (US$ 22 million;
11.2 per cent), and Singapore (US$ 15 million; 7.6 per cent).2 Considering
India’s efforts towards signing FTAs with the UK, the EU, and the UAE, there
is a need to expand India’s exports of dairy products to these economies,
by focusing on the expansion of dairy processing capacity and strategic
marketing and branding of dairy products.
To boost the export of dairy products and make the dairy sector globally
competitive, GoI needs to consider the development of Dairy Export Zones
(DEZs) in collaboration with state governments, in leading milk producing
states like Uttar Pradesh, Rajasthan, Madhya Pradesh, Gujarat, Andhra
Pradesh, Punjab, Maharashtra, Haryana, Tamil Nadu, and West Bengal (Roy,
2021). Such zones could involve the creation of common infrastructure like
a cold chain, chilling plants, processing facilities, R&D facilities, logistics,
and connectivity to ports and airports. Leading dairy producers could set up
modern hi-tech dairy processing units in the DEZs, for producing globally
competitive high-value dairy products. The units in the DEZs could enter
into contract farming arrangements with dairy FPOs/FPCs/cooperatives for
sourcing milk. Such an arrangement would be mutually beneficial in terms
of cost efficiency and higher export revenue to the dairy companies, and
higher income for farmers. To ensure higher income for farmers, FPOs need
to be linked to AEZs to supply SPS-compliant agri-products.

Fisheries and Marine Products

India is the second largest fish-producing country in the world. A focus on
the development of efficient fisheries and marine products value chains could
significantly increase employment and improve the income of smallholder
farmers.
During the 10-year period from 2011-12 to 2020-21, exports of marine
products reached the highest value of exports at US$ 7,082 million in 2017-18,
after 6 years of fluctuations (Figure 11.3). Subsequently, exports witnessed a
steady decline to touch US$ 5,957 million in 2020-21, which could be due to
the impact of the Covid-19 pandemic. While during the first 5-year period
(from 2011-12 to 2015-16) exports of marine products grew at a CAGR of
10.9 per cent, they slumped to 0.03 per cent during the subsequent 5-year
period (from 2016-17 to 2020-21) (Figure 11.4). During the 10-year period,
the CAGR stood at 7.3 per cent.

2
Source: APEDA Agri Exchange
216 India’s Agriculture and Food Exports

Figure 11.3: India’s Exports of Marine Products

Source: Chart prepared by the author based on data accessed from MPEDA

Figure 11.4: CAGR (%) of Exports of Marine Products

Source: Chart prepared by the author based on data accessed from MPEDA
India’s major export destinations for marine products are the US ($2,451.0
million), China (US$ 939.2 million), the EU ( US$ 821.8 million), South
East Asia (US$ 665.6 million), Japan (US$ 412.1) and the Middle East (US$
251.1).3 The MPEDA, which is the nodal agency for the holistic development
of the seafood industry in India to realise its full export potential as a nodal
agency, needs to not only focus on consolidating the export growth of marine
products to these regions, but also facilitate the expansion of exports to other
regions, viz., Australia, Africa, and South America.
There are 621 marine products processing centres in India, under the
aegis of MPEDA, with a total capacity of 35,911.5 MT,4 located in 13 centres.4
Further, the expansion in capacity of the processing centres to meet the
growing export demand needs to be prioritised.

3
Data 2020-21 available at https://mpeda.gov.in/?page_id=438, accessed on 30
January 2022.
4
Available at http://e-mpeda.nic.in/registration/Rpt_Region_wise_Plants_With_
Capacity.aspx, accessed on 11 April 2022.
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 217

Processed Cereals, Fruits, and Vegetables

Value addition by way of food processing will play a major role in DFI.
Therefore, GoI has sanctioned 42 mega food parks and 315 cold chain projects
under PMKSY. Also, investments under PMKSY include the creation/
expansion of food processing/preservation capacities; infrastructure for
agro-processing clusters; creation of backward and forward linkages; and
food safety and quality assurance infrastructure. Infrastructure created
under PMKSY can be instrumental in significantly increasing exports of
processed food products. Linking of FPOs with the infrastructure so created,
through contract farming arrangements with food processing companies,
would facilitate an increase in income of small and marginal farm holders,
along with small dairy and fish farmers. Further, under Atmanirbhar
Bharat’s vision, the scheme of the Formalization of Micro Food Processing
Enterprises (FME), with an outlay of INR 10,000 crore, can boost value-
added agri-exports. The PLI Scheme for the food processing sector has the
potential to give a big boost to exports.
Among processed food exported from India, the major items are: (i)
cereal preparations; (ii) processed fruits, juices, and nuts; and (iii) processed
vegetables. ‘Cereal preparations’ was the sixth largest item of APEDA exports
in 2020-21. The exports of cereal preparations grew by 17.2 per cent in 2020-
21 over the previous year, to reach an all-time high of US$ 635.8 million
(Figure 11.5). During the 10-year period (from 2011-12 to 2020-21), exports
grew at a CAGR of 4.6 per cent (Figure 11.6). The first 5-year period under
review (from 2011-12 to 2015-16) witnessed a CAGR of 7.5 per cent, which
declined sharply to 3.4 per cent during 2016-17 and 2020-21. The major

Figure 11.5: India’s Exports of Cereal Preparations

Source: Chart prepared by the author based on data accessed from
APEDA Agri Exchange
218 India’s Agriculture and Food Exports

Figure 11.6: CAGR (%) of Exports of Cereal Preparations

Source: Chart prepared by the author based on data accessed from
APEDA Agri Exchange
export destinations of cereal preparations are US$ 102 million, with a share
of 19.2 per cent in 2020-21), Nepal ( US$ 44 million; 8.4 per cent), the UAE
( US$ 37 million; 7 per cent); Bangladesh (US$ 34 million; 6.5 per cent), and
the UK ($33 million; 33.6 per cent). India is a leading producer of cereals in
the world and there need to be concerted efforts to not only increase exports
to the leading export destinations but also to expand exports to other regions
of the world.
India is a leading producer of horticulture crops in the world and there is
immense potential for the production and export of processed fruits, juices
and nuts. The 10-year period (from 2011-12 to 2020-21) has witnessed a
steady growth in exports of fruits, juices and nuts, to touch a record level
of US$ 432 million in 2019-20, which was followed by a marginal decline
to US$ 428 million in 2020-21 (Figure 11.7). The CAGR during this period
was 7 per cent (Figure 11.8). However, while the first 5-year period (from
2011-12 to 2015-16) experienced a CAGR of 10.2 per cent, the second period
(from 2016-17 to 2020-21) witnessed a sharp decline to 3.3 per cent (Figure
11.8). The major export destinations for this item are the US ($55 million;
with a share of 12.8 per cent in 2020-21),5 the Netherlands (US$ 47 million;
11.1 per cent), Saudi Arabia (US$ 36 million; 8.5 per cent), the UAE (US$
31 million; 7.4 per cent), and Iran (US$ 17 million; 4.2 per cent). There is
a significant potential for exports of fruits, juices, and nuts. Therefore, the
sector needs to become globally competitive.
India is a major producer of vegetables and there is a significant
potential for the export of processed vegetables. The country witnessed a
sharp growth of exports of 9 per cent in respect of processed vegetables in
2020-21 to record an all-time high of US$ 502 million (Figure 11.9). The
5
Source: APEDA Agri Exchange
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 219

Figure 11.7: India’s Exports of Processed Fruits, Juices, and Nuts

Source: Chart prepared by the author based on data accessed from
APEDA Agri Exchange

Figure 11.8: CAGR (%) of Exports of Processed Fruits, Juices, and Nuts
Source: Chart prepared by the author based on data accessed from
APEDA Agri Exchange
10-year period (from 2011-12 to 2020-21), experienced a decent CAGR of
6.7 per cent (Figure 11.10). While the exports of processed vegetables in the
first 5-year period (from 2011-12 to 2015-16) grew at a CAGR of 6 per cent,
the second period (from 2016-17 to 2020-21) witnessed a sharp increase in
CAGR to 9.3 per cent (Figure 11.10). Such high growth of exports in this
sector should encourage further investments and exports, especially under
the PLI Scheme. The major export destinations for processed vegetables in
2020-21 are the US ($102 million, with a share of 20.4 per cent), the UK (US$
47 million; 9.4 per cent), Germany (US$ 31 million; 6.3 per cent), Thailand
(US$ 26 million; 5.3 per cent), and Canada ( US$ 22 per cent; 4.4 per cent).
220 India’s Agriculture and Food Exports

Figure 11.9: India’s Exports of Processed Vegetables

Source: Chart prepared by the author based on data accessed from
APEDA Agri Exchange

Figure 11.10: CAGR (%) of Exports of Processed Vegetables

Source: Chart prepared by the author based on data accessed from
APEDA Agri Exchange

Organic Exports
The Agricultural and Processed Food Products Export Development
Authority is implementing the National Programme for Organic Production
(NPOP), which involves the accreditation of Certification Bodies, standards
for organic production, promotion of organic farming and marketing, etc. The
European Commission and Switzerland have recognised NPOP standards
for production and accreditation systems for unprocessed plant products
as equivalent to their country standards. Similarly, USDA has recognised
NPOP conformity assessment procedures of accreditation as equivalent to
that of the National Organic Program (NOP) of the US. Further, APEDA
is also in the process of bilateral equivalence with South Korea, Taiwan,
Canada, Japan, and other countries.
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 221

With global trade in organic products estimated to be around US$

90 billion, there is a huge opportunity for exports of value-added organic
products from India, which exported 8.88 lakh MT of organic products,
valued at US$ 1,041 million in 2020-21.6 Further, under the aegis of NPOP,
new categories of products such as livestock and aquaculture having good
potential for exports, could bolster value-added organic exports. Total
production of organic products in India stood at 34,68,992 MT in 2020-21,
of which 25.6 per cent was exported. Madhya Pradesh (US$ 394.6 million),7
Maharashtra (US$ 134.4 million), Gujarat (US$ 106.3 million), Kerala (US$
52.3 million), Haryana (US$ 51.3 million), Karnataka (US$ 47.3 million),
Telangana (US$ 41.3 million), Uttar Pradesh (US$ 41 million), and West
Bengal (US$ 39.7 million) were the major exporters of organic products
in 2020-21. The major producers of organic products are Madhya Pradesh
(13,92,095.9 MT, which is 40.1 per cent of India’s total organic production),
Maharashtra (7,75,775 MT), Karnataka (3,55,718.7 MT), Rajasthan
(2,56,386.2 MT), Uttar Pradesh (1,83,409 MT), Odisha (131852 MT),
Gujarat (117805.7 MT), and Uttarakhand (46645.4 MT). It is desirable to
create Organic Clusters and Organic Product Export Zones (OPEZs) in these
states, with common infrastructure for processing, standardisation, storage,
logistics, and connectivity to ports and airports. Branding of products and
registration as GI could further facilitate exports of value-added organic
products. FPOs of organic farmers could be formed and linked to the OPEZs,
to ensure higher income for farmers.
The North Eastern Region (NER) produces high quality organic products.
But there is hardly any export of these products from this region. FPOs could
be promoted in the NER to be part of an efficient organic product export
value chain. The airport at Guwahati could be developed for handling cargo
for exports of agri-products to South-East Asia and the Indo-Pacific Region.
The major organic items exported from India are processed food
(6,55,986.2 MT, valued at US$ 588.5 million)8 having a share of 56.5 per
cent in terms of the value of total exports in 2020-21, followed by oilseeds
(84,072 MT, valued at US$ 94.1 million) with a share of 9.0 per cent, cereals
and millets (59,907 MT, valued at US$ 76.0 million), spices and condiments
(10,022 MT, valued at US$ 56 million), and tea (6,164.2 MT, valued at the
US$ 50.7 million). Key markets for India’s organic products are the US,
the EU, Canada, the UK, South Korea, Israel, and Switzerland. India’s FTA
6
Available at https://apeda.gov.in/apedawebsite/organic/data.htm, accessed on 30
January 2021.
7
Ibid.
8
Available at https://apeda.gov.in/apedawebsite/organic/data.htm#Category_wise_
production_2021, accessed on 30 January 2022.
222 India’s Agriculture and Food Exports

negotiations with major economies could lead to a significant increase in

exports of organic products, especially processed food and other major
export items.
Globally, organic products have their niche with high growth potential,
owing to an increasing number of health-conscious individuals due to
perceived benefits of the ‘purity’ or ‘quality’ of the organic ingredients used
like herbs and spices. Organic tea tops the list among organic beverage
categories. Organic fruit/vegetable juice is projected to have the highest
growth rate within the organic beverage category.

Development of Agri-Export Infrastructure

Investment in rural infrastructure is a pre-condition to enable the acceleration
of agricultural growth, the creation of new economic opportunities, and the
generation of employment. Robust infrastructure is a critical component
of efficient agricultural and agri-export value chains. This includes pre-
and post-harvest handling facilities, storage and distribution, cold chain,
processing facilities, roads, railways and world class exit point infrastructure
at ports and airports facilitating quick exports. It is also important to attract
private investments in export-oriented activities and infrastructure, in
addition to public investment. Further, while the central government may
advise and allocate funds, proper implementation of agriculture and market
infrastructure reforms lies at the behest of state governments.

Agri Export Zones

Sixty AEZs were notified in twenty states from 2001 to 2004, but they
were not able to achieve their objectives and were discontinued. The AEP
has recommended the establishment of AEZs, which could be redesigned,
to facilitate value addition and common facility creation for increasing
exports in a WTO-compatible manner. To ensure higher income for small
and marginal holders, FPOs need to be linked to AEZs to supply agri-
commodities, which are SPS-compliant.
Agri Export Zones across the country should have food parks and easy
connectivity to expressways, railways, airports, and ports. Developing and
upgrading airports in two-tier cities as international airports, with easy road
and railway connectivity from AEZs and districts under the One District
One Product (ODOP) scheme, could facilitate exports of agricultural
commodities, processed food, horticulture and dairy products, significantly
reducing transport time and minimising loss due to wastage of perishable
commodities. A case in point is the Lal Bahadur Shastri International
Airport at Varanasi, where the setting up of custom clearance and cold room
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 223

facilities, have aided exports of agricultural and processed food products

from the Poorvanchal region of Uttar Pradesh consisting of 17 districts.
Varanasi also has linkages with a robust network of FPOs. During the
6-month period (July-December 2022), more than 20,000 tonnes of cereals,
fruits, and vegetables sourced from farmers in this region have been exported
to Bangladesh, Nepal, the UAE, Bahrain, Qatar, Saudi Arabia, the UK, and
Australia.

Food Parks and Cold Chain Infrastructure

Setting up of mega food parks, integrated cold chains, food processing
units, agro-processing clusters, and implementation of Operations Greens
Scheme, under GoI’s comprehensive package of PM Kisan SAMPADA
Yojana (PMKSY), will not only provide a big boost to the growth of food
processing sector in the country but also ensure higher income to farmers,
while creating huge employment opportunities, especially in the rural areas,
reducing wastage of agricultural produce, and enhancing the export of
processed foods. The PLI Scheme for the food processing sector is a step in
the right direction, which would enable global competitiveness of the Indian
food processing industry.
Linking of FPOs through contract farming arrangements with export-
oriented food processing units of food parks created under PMKSY, for
producing processed cereals, fruits, vegetables, fish and marine products,
would boost exports of processed food and raise the income of small and
marginal landholders and small fish farmers.

One District One Product

The Government of India’s scheme of ODOP aims to enable products to
reap the benefit of scale in terms of procurement of inputs, availing common
services and marketing of products. The Scheme provides the framework for
value chain development and alignment of support infrastructure. Support
for agricultural products under the Scheme is for their processing along
with efforts to reduce wastage, proper assaying, storage, and marketing.
The state governments identify the food product for a district, keeping in
perspective the focus of the Scheme on perishables. The ODOP product
could be a perishable agri produce, cereal-based product, or food product
widely produced in a district and its allied sectors.
New units, whether for individuals or groups would only be supported
for ODOP products. Support for the common infrastructure, marketing, and
branding would only be for ODOP products. In case of support for marketing
and branding at the state or regional level, the same products of districts not
having that product as ODOP could also be included.
224 India’s Agriculture and Food Exports

The Department of Commerce, Ministry of Commerce and Industry,

GoI, is focusing on agriculture crops on a cluster approach for support
for exports under the AEP, and the Ministry of Agriculture and Farmers
Welfare is also focusing on a cluster approach for the development of
specific agriproducts in districts having a comparative advantage. The
ODOP approach of the Scheme would lead to easing in providing common
facilities and other support services. The ODOP scheme is a systematic and
comprehensive approach to boost the production and export of value-added
agriculture, horticulture, dairy, and fisheries products, with a balanced
development approach, benefitting most districts throughout the country.

Concluding Remarks
India faces the challenging task of propelling its agriculture exports to reach
US$ 100 billion by 2026-27. The prerequisite for achieving the agriculture
export targets would be a well-calibrated, comprehensive, strategic, and
result-oriented agri-export policy and action plan, along with overall
reforms in the agriculture and allied sector. The agriculture export strategy
should aim at the integration of value-added agri-produce with the global
value chain, by adopting the best agricultural practices along with attaining
productivity gains, cost competitiveness, and enhancing farmers’ income.
The issues related to SPS, TBT and traceability also need to be firmly
addressed. The action plan should include investments in AEZs/agri-export
clusters, agro-processing clusters/zones, marketing infrastructure, cold
chains, warehouses, roads, railways, and logistics along the export-oriented
agri-value chains, connecting to ports and airports through public, private,
and Public Private Partnership (PPP) modes. Also, investments in R&D
and technology, in the form of IoT, AI, and blockchain-based technology,
through a well-defined start-up ecosystem, supporting pre- and post-harvest
activities for agri-exports, need focussed attention.
Growing protectionism across major economies is a serious threat to
raising exports. This would require intense diplomatic efforts with India’s
trading partners to finalise trade deals. Efforts to upgrade ECTA to CEPA
with Australia, and finalise CEPAs with the EU, the UK, the US and
Canada, within the shortest possible timeline, and to promote diversified
agri-exports need to gather momentum. Also, business promotion and
diplomatic efforts are needed to tap potential agri-export markets on all
continents (Roy, 2021). India’s new FTA/CEPA negotiations as well as re-
negotiations with existing FTA partners also need to incorporate green trade
issues to move in the right direction towards achieving its ‘net zero’ ambition
by 2070.
Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 225

Concerted efforts by GoI, state governments, APEDA, MPEDA,

National Dairy Development Board (NDDB), GCMMF, exporters, food
and agro processing industry, RBI, NABARD, EXIM Bank, banks, agri-tech
start-ups, FPOs/FPCs, and all other stakeholders in the agri-export value
chains, would be able to address a whole range of issues pertaining to the
promotion of agriculture exports. These initiatives and comprehensive
reforms in the agriculture sector could propel India into the top bracket of
agricultural exporters in the world, while attaining US$ 100 billion in exports
of agriculture and food products by 2026-27.

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Attaining US$ 100 Billion Agriculture and Food Exports: The Way Forward 227
Indian farmers are going hi-tech

Digital Money Modern Farming Digital Marketing

www.nabard.org /nabardonline /nabardonline /nabardonline

Taking Rural India >> Forward