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'Export or Perish' more relevant to agriculture & food products
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Sunday, 16 January, 2005, 08 : 00 AM [IST]
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PNV Nair, Mumbai
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The 'Export or Perish' slogan was given to the country by the first Prime Minister, Pandit Jawaharlal Nehru. When he made the call, there was not much for the country to export. We were depending too much on imports, including food. Today, the slogan is more relevant to farm and food products. Almost 30-35 % of fruits and vegetables produced in the country are rotting and go waste in the absence of proper storages and preservation. We build up mountains of grain buffer stocks every year, a part of which is ultimately wasted as the stocks are not lifted by the beneficiaries of the PDS and the government's decision of not allowing grain exports at the cost of the domestic consumers.
India's exports of agricultural and food products are about Rs 330 billion ($6.5 billion), which constitutes about 1.3% of total global trade in food and agriculture ($460 billion). Exports of agriculture and food products have grown at 15 % annually (vis a vis 19 % growth in India's national exports) in the last decade. The share of agricultural exports in India's total exports has decreased from 19 % to 13 % in the same period.
The vision is to have at least 3 % share in world trade of agricultural and food products by 2015 from the present 1.3 %. India should aim at 2 % of world exports by 2010 and 3 % by 2015. This implies annual growth rate of 11 % till 2010 and 8 % growth between 2010 and 2015. At current prices, 3% share in exports would mean Rs 770 billion ($15 billion) per year.
Rabo Bank has prepared a Vision 2015 Document on India's food processing industry, which has been accepted by the Ministry of Food Processing Industries. The Vision document is meant to help India emerge as a food supplier to the world by making maximum use of its inherent advantages. Following are extracts from the Vision report relating to India's agricultural and food products.
Global food and agri exports increased from $326 billion in 1990 to $ 442 billion in 2002. The main items in food and agri trade include fruits and vegetables ($75 billion), cereals and preparations ($58 billion), fish and seafood ($57 billion), meat and preparations ($46 billion), beverages ($40 billion) and dairy & eggs ($28 billion).
Latin America has by far the largest agricultural trade surplus, followed by Oceana. Brazil and Argentina contribute greatly to the Latin American trade surplus. Owing to Japan, Asia has the largest trade deficit of all regions. India has a trade surplus of $2 billion (exports $6 billion - import $ 4 billion).
Marine products account for 20 % and rice 18 % of exports from India. An analysis of 15 export categories from India shows that with the exception of buffalo meat, rice and cashew, India's share in global agricultural and food trade is insignificant. Marine products, which have the highest share in Indian exports, have a 2 % share in world exports. Many categories display single digit or negative growth.
India has a miniscule share in a highly competitive export market and faces stiff competition even in areas where it has a strong production advantage. India needs to address both sector-specific and cross-sectoral issues to become globally competitive.
Against exports of approximately $6 billion, India's imports of agricultural products stand at about $ 4 billion, giving the country a trade surplus of $ 2 billion. India has abolished restrictions on imports of many agricultural and food products, post-liberalisation.
However, tariff quotas are maintained on some edible oils, maize and milk powder. Import prohibitions are in place for certain fats, oils of animal origin, and beef, based on GATT Article XX that permits countries to restrict imports on religious grounds. Some products such as wheat, rye, oats, maize, rice, canary and other cereals continue to be traded by the Food Corporation of India. Despite liberalization of imports, India's imports are growing at about 1% for the last five years.
While exports cover a wide range of products, imports are skewed towards pulses and oil seeds. Pulses and oil seeds are the key food items in India's imports (more than 60 % share) of food items displaying year on year growth. Increasing production of edible oils in India can reduce the country's dependence on imports to a large extent.
India continues to be either absent or at the most a marginal player in most of the leading markets for its exports. Indian players have not succeeded in establishing direct export contacts with the importing countries, as a result of which a large portion of exports are being re-exported by other countries, thereby losing a large part of the3 gains of trade in the process. (Use table 2).
Most exporters from India lack scale. For example, the largest fresh produce exporter records annual sales of Rs 500 million. The low volume translates into lack of economies in operations and makes exports uncompetitive. Hence, exporters are not able to establish themselves as long-term players in the export market, and rely heavily on opportunistic businesses. .
Countries like Vietnam (rice, cashew, coffee), Thailand (tuna) and Kenya (tea) have adopted very focussed strategies and are a threat to Indian exports.
Intensive farming and advanced technologies have led to a consistent increase in paddy yields in Vietnam from 3.69 tonnes/ha in 1995 to 4.6 tonnes/ha in 2003, much higher than other Asian countries, including India (2 tonnes/ha), Thailand (2.2 tonnes/ha), Myanmar (3.2 tonnes/ha) and the Philippines (2.89 tonnes/ha). Vietnam is the largest cashew producer in South-East Asia and the third largest cashew exporter in the world after India and Brazil. Over 90 % of its production is exported. The developments in processing technology have enabled Vietnam t6o export cashew in processed form. Vietnam is considered as the second largest coffee exporter in the world since 2000, next to Brazil. It exports to 62 countries. The two largest markets include European Union (47 % share) and USA (15 % share). The government has played an important role in promoting coffee exports.
Besides Sri Lanka, Kenya is becoming a threat to Indian tea exports. The key markets for Kenyan tea are Pakistan, UK, Egypt, Afghanistan and Russia. The Kenyan Tea Board is targeting new markets such as West Africa, Eastern Europe and the Middle East.
Brazil is an outstanding example of a success story having achieved leadership status in exports of a wide range of agri products, including sugar, orange juice, meat and oil seeds. The key underlining factors which differentiate Brazil from India are: Direct farmer-processor linkage: The has multi-fold benefits enabling the processors to achieve scale in operations which has led to sustainable business models, ensuring the farmers to adopt best practices to enhance crop productivity and availability of financing to growers, on the back of firm offtake arrangements with processors. The other key enabler has been that free market forces determine pricing across all products. The free market scenario has ensured that processors and farmers aim to maximize operational efficiencies. For example, one tonne of sugarcane produces 140 kg of sugar in Brazil as against 100 kg in India.
In order to sustain the momentum of penetrating new markets without losing share in the existing markets, it is important to focus on key markets, which offer growth potential and products where India has an inherent advantage. As highlighted in the above case studies, 'focs' and 'long-term strategy' are the cornerstones for sustainable success in agriculture & food pro
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