Indian Agricultural Trade: Export-Import Dynamics and Policy Challenges

Indian agricultural exports faced a notable decline of 8.2% in the fiscal year ending on March 31, 2024, primarily attributed to the imposition of export restrictions on various commodities such as cereals, sugar, and onions. The constraints imposed on these exports significantly impacted trade dynamics, leading to a decrease in the total value of agricultural exports to $48.82 billion in the fiscal year 2023-24, down from the previous year’s record high of $53.15 billion and $50.24 billion in the fiscal year preceding that.

This decline in exports can be traced back to the earlier years of the Narendra Modi government, where agricultural exports experienced a downward trend from $43.25 billion in 2013-14 to $35.60 billion in 2019-20, juxtaposed with a simultaneous increase in imports from $15.53 billion to $21.86 billion during the same period. Such fluctuations were largely influenced by the decrease in global agricultural commodity prices, as evidenced by the UN Food and Agriculture Organization’s food price index.

However, the global price recovery following the Covid-19 pandemic and geopolitical events such as Russia’s invasion of Ukraine led to a surge in both Indian agricultural exports and imports to record highs in the fiscal year 2022-23, before declining in the subsequent fiscal year.

Export restrictions on key commodities like sugar and non-basmati rice, primarily imposed due to concerns over domestic availability and food inflation, significantly contributed to the overall decline in exports. For instance, sugar exports were valued at only $2.82 billion in 2023-24 compared to $5.77 billion in the previous fiscal year. Similarly, restrictions on wheat exports and fluctuations in onion export policies also played a role in shaping trade dynamics.

While certain agricultural export items, such as basmati rice and spices, experienced notable growth, others like buffalo meat, oil meals, and raw cotton did not reach previous record levels. Notably, imports of vegetable fats witnessed a decrease in the fiscal year 2023-24 due to lower global prices, while imports of pulses nearly doubled.

The fluctuating nature of export-import policies has raised concerns among farmers and traders regarding policy stability and predictability. Abrupt export restrictions, particularly, tend to prioritize consumer interests over producer interests and hinder efforts to build sustainable export markets. In response, economists have advocated for a more predictable and rules-based policy approach, such as the implementation of temporary tariffs instead of outright bans, to mitigate these issues.

Moreover, the government’s decision to reduce import duties on certain pulses contradicts its stated objective of promoting crop diversification and reducing dependence on water-intensive crops like rice and wheat. As the new government takes office post-elections, there is a pressing need for a comprehensive review and reformulation of export-import policies, aiming to strike a balance between the interests of producers and consumers while aligning with the short- and long-term goals of the agricultural sector. Such reforms should prioritize stability, sustainability, and competitiveness in India’s agricultural trade landscape.