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Agricultural Trade Surplus Amid Rising Imports
Context:
India’s agricultural exports have witnessed a 6.5% increase, rising from $35.2 billion in April-December 2023 to $37.5 billion in the corresponding period of 2024.
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- This growth surpasses the overall 1.9% rise in the country’s merchandise exports during the same timeframe.
- However, the contrast is more evident in imports.
- While total goods imports increased by 7.4% in April-December 2024 compared to the previous year, agricultural imports surged by 18.7%, from $24.6 billion to $29.3 billion.
Shrinking Agricultural Trade Surplus
- Narrowing Surplus: Despite being a net exporter of agricultural commodities, India’s trade surplus in this sector has been narrowing.
- It declined from $10.6 billion in April-December 2023-24 to $8.2 billion in the same period of the current fiscal year.
- Historically, the surplus peaked at $27.7 billion in 2013-14 but dropped significantly to $8.1 billion by 2016-17.
- It rebounded to $20.2 billion in 2020-21 before gradually falling to $16 billion in 2023-24, with further reductions expected this fiscal year.
- Export Trends: This fluctuation is largely driven by export trends.
- During the early years of the present government, agricultural exports declined from $43.3 billion in 2013-14 to $35.6 billion in 2019-20, while imports rose from $15.5 billion to $21.9 billion.
- The drop in exports was linked to a slump in global commodity prices, reflected in the UN Food and Agriculture Organisation’s (FAO) food price index, which fell from an average of 119.1 to 96.4 points between 2013-14 and 2019-20.
- Pandemic and War: Post-pandemic supply disruptions and the Russia-Ukraine war contributed to a price recovery, with the FAO index climbing to 133.1 in 2021-22 and 140.6 in 2022-23.
- This resurgence boosted India’s agricultural exports to $50.2 billion and $53.2 billion, respectively.
- However, as the index eased to 121.5 in 2023-24 and 123.4 in 2024-25 (April-January), export levels have moderated accordingly.
Key Export Trends
- Marine Products: Marine products, the leading export commodity, declined from $7.8 billion in 2021-22 and $8.1 billion in 2022-23 to $7.4 billion in 2023-24, with further reductions anticipated.
- Given that frozen shrimp, which constitutes two-thirds of marine exports, is heavily dependent on the US market (34.5% share in 2023-24), potential tariff impositions by President Donald Trump could further impact sales.
- Sugar: Sugar exports have also faced a downturn, plummeting from $5.8 billion in 2022-23 to $2.8 billion in 2023-24, alongside wheat exports, which have virtually ceased due to government-imposed restrictions to ensure domestic availability and curb food inflation.
- Rice: Conversely, rice exports continue to thrive, particularly non-basmati varieties, despite intermittent export curbs such as the ban on white rice and the 20% duty on parboiled grain.
- Basmati rice, along with spices, coffee, and tobacco, is expected to reach new export records in 2024-25.
- A drought in Brazil and typhoon activity in Vietnam have bolstered India’s coffee exports, while crop failures in Brazil and Zimbabwe have benefited Indian tobacco exporters.
- Additionally, India has strengthened its position as a leading exporter of basmati rice, chilli, mint products, cumin, turmeric, coriander, fennel, and other spices.
Rising Agricultural Imports
- Edible Oils and Pulses: India’s agricultural imports are dominated by edible oils and pulses.
- Pulses imports had significantly declined from $3.9 billion in 2015-16 and $4.2 billion in 2016-17 to an average of $1.7 billion over the five years ending 2022-23.
- However, a poor domestic harvest in 2023-24 has reversed this trend, with imports expected to exceed $5 billion for the first time.
- Edible oil imports are set to reach their highest levels since 2021-22 ($19 billion) and 2022-23 ($20.8 billion), largely due to the global price surge following the Russia-Ukraine war.
- Pulses imports had significantly declined from $3.9 billion in 2015-16 and $4.2 billion in 2016-17 to an average of $1.7 billion over the five years ending 2022-23.
- Spices: Spices represent a unique case, as India is both a major exporter and importer.
- In 2023-24, India’s pepper and cardamom imports (34,028 tonnes and 9,084 tonnes, respectively) surpassed exports (17,890 tonnes and 7,449 tonnes), making the country a net importer of these traditional spices despite its dominance in chilli and seed spices exports.
- Cotton: Cotton, once a major export commodity, has seen a sharp decline.
- The Bt cotton revolution had positioned India as the world’s second-largest exporter, with outbound shipments valued at $4.3 billion in 2011-12, $3.7 billion in 2012-13, and $3.6 billion in 2013-14.
- However, exports plummeted to $781.4 million in 2022-23 and $1.1 billion in 2023-24.
- In April-December 2024, India’s cotton exports fell by 8.1% year-on-year to $575.7 million, while imports surged by 84.2% to $918.7 million, making India a net importer of cotton.
