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India’s Agricultural Trade: An International Perspective – IMPRI Impact and Policy Research Institute

India’s Agricultural Trade: An International Perspective - IMPRI Impact and Policy Research Institute

Mukul Asher

Accelerating exports of agriculture products, and reducing their import dependence are among the key priorities for India. The agricultural sector’s export potential, which is considerable, has in the past not received sufficient policy focus and has not been approached in an integrated manner. But recently this limitation is being addressed in an energetic and competent manner as India is determined to pursue the external sector as one of the key pillars of Atmanirbhar globalization.

Sharply enhancing India’s agricultural exports is also consistent with India’s strategy to increase its soft power as it underlines India’s ability to be a reliable and trustworthy supplier of key products needed for food security. India’s Atmanirbhar and Be-vocal-for local strategic concepts applied to agriculture are thus designed to enhance India’s relevance to the world.

This column examines India’s global agricultural trade in International perspective.

Table 1 provides data for 2020 from the World Trade Organization (WTO) Trade Profiles for agricultural exports and imports of India and selected high income and middle income countries. The total exports and imports of countries are for 2019, to which the share of agricultural exports and imports is applied to obtain the figures in Table 1. The 2021 Trade profiles have just been published, but due to covid-19 pandemic induced distortions in global economic activity, they are not used. Broad trends of Table 1 are however not expected to be affected.

International Trade in Agricultural Products (Billion USD)

High Income Countries

Country Exports Imports Trade Balance
USA 169.2 177.2 -8.7
Australia 38.5 16.2 22.3
France 75.2 69.0 6.2
Netherlands 109.2 76.9 32.3
Japan 11.3 80.0 -68.7
United Kingdom 32.3 74.7 -42.4
Spain 58.4 45.4 13.0
Canada 68.4 40.8 27.6
New Zealand 28.7 5.2 23.5

Middle Income Countries

Country Exports Imports Trade Balance
India 38.9 26.7 12.2
Brazil 87.7 12.0 75.7
Indonesia 30.6 20 10.6
Thailand 43.1 17.7 25.4
South Africa 11.8 8.7 3.0
Vietnam 34.9 26.2 8.7
Source: Estimated from World Trade Organization, Trade Profiles 1

The following observations may be made from the data in Table 1.

  • The three largest global exporters of agricultural products are United states (USD 169.2 billion), Netherlands (USD 109.2 billion), and Brazil (USD 87.7 billion).
  • The three largest global importers are United States (USD 177.2 billion),  Japan (USD 80 billion), Netherlands (USD 76.9 billion). United Kingdom (USD 74.7 billion) is also a major importer.
  • The three countries with the largest trade surplus in agricultual products are Brazil (USD 75.7 billion), Netherlands (USD 32.3 billion), and Canada (USD USD 27.6 billion).

The above figures suggest that it is the high income countries that are major global traders in agricultural products and that there is considerable intra-industry trade in agriculture products. The use of agricultural technology and branding plays a major role in global agricultural trade performance.

  • Thailand (USD 25.4 billion), New Zealand (USD 23.5 billion), and Australia (USD 22.3) billion also exhibited large surpluses.
  • India’s positive balance of trade was modest at USD 12.3 billion. India hopes to increase this number over next few years.
  • The largest  deficit in agricutual products was by Japan (USD 68.7 billion), and United Kingdom (USD 42.4 billion).

In 2019, India was ranked by WTO as the ninth-largest exporter of agricultural products in the world, the first time it was ranked among the top 10 countries2.

India hopes to improve this rank further as currently processed and branded agriculture products share is relatively low. But with initiatives such as 22 mega food parks already operational and diversification into fisheries and other areas, as well as efforts at greater market access through technology and strategic diplomacy. Share of processed and branded agricultural products, where value addition is higher, is expected to grow.

The Mega Food Park program aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors, and retailers so as to ensure maximizing value addition, minimizing wastage, increasing farmers’ income and creating employment opportunities, particularly in the rural sector.

The Mega Food Park program is based on the “Cluster” approach and envisages creation of state of art support infrastructure in a well-defined agri/horticultural zone for setting up of modern food processing units in the industrial plots provided in the park with a well-established supply chain.

A Mega Food Park typically consists of supply chain infrastructure including collection centres, primary processing centres, central processing centres, cold chain and around 25-30 fully developed plots for entrepreneurs to set up food processing units3.

There are positive signals that the recent initiatives relating to the agricultural sector are in the right direction. As an example according to the Arab-Brazil Chamber of Commerce, in 2020, India became the largest food supplier to Arab nations, overtaking Brazil, a major global agricultural exporter.

Global supply chain disruptions and India’s close geographical proximity to the Arab nations contributed to this outcome. Brazilian shipments to Saudi Arabia that once took 30 days could now take up to 60 days, according to the Chamber, whereas India’s geographic advantages allow it to ship fruits, vegetables, sugar, grains and meat in as little as week.

India’s developing strategic partnerships with Arab nations such as the UAE and Saudi Arabia, and its domestic initiatives, could continue India’s prominence as food supplier to Arab nations.

India is also taking initiatives to reduce the extent of imports of oilseeds, and palm oil which forms a large share of its agricultural imports. Thus, India imported 8.5 million tonnes of palm oil in 2021 but is projected to decrease to 8.1 million tonnes due to rising domestic production4.   

Absolute size of total exports and imports  are also relevant 

In analysing a country’s global contribution and integration, the absolute size of total international trade is also relevant.  UNCTAD (United Nations Conference on Trade and Development) estimates that global trade in merchandise and services was USD 25.2 Trillion in 2019.  India’s total international trade of around USD 1.2 billion is therefore about 4.8 percent of global trade, a non-trivial share.                               

Table 2 provides estimates of merchandise plus services exports to selected countries for 2021. The following observation may be made from the data in Table 2.

  • India’s merchandise exports are ten times the exports of Bangladesh. No data on service exports are available for Bangladesh. Given this, India’s total exports are16 times that of Bangladesh.
  • China’s  total merchandize exports are 8.2 times that of India; and those of the United States 5.7 times that of india.In services exports, the gap between India on the one hand and United States, China and Germany is much lower.
  • India is in striking distance of catching up with merchandize exports of Taiwan. But Vietnam is rapidly closing the gap with India in merchandise exports.
  • India’s total exports, however, remain significantly larger than those of Indonesia, Taiwan, and Vietnam due to services exports. But its total exports remain much lower than those of South Korea, Germany, United States and China.

India’s recent initiatives such as the PLI (Production Linked Incentive) schemes for various sectors, including electronics, semiconductors, textiles, telecom equipment, automotive sector and durable household goods are likely to reduce the gap between India and those countries which have much higher exports and widen the lead with others. These initiatives will also help address overdependence on the China-based global supply chain of key products and materials, thereby enhancing India’s resilience and relevance.

Table 2

Concluding Remarks

India’s recent initiatives in the agricultural sector are expected to enhance its role as an agricultural exporter contributing to food security of a significant number of countries as a reliable and trusted economic partner. While India usually exhibits large overall merchandise trade deficit (it was USD 162 billion in 2019), it exhibited a trade surplus of USD 12.2 billion in 2019 in agricultural products. The prospects are for this surplus to become larger due to recent policy initiatives designed to make an external sector one of the important pillars of Atmanirbhar globalization.

The column has also argued that the absolute size of global trade of a country should matter in assessing a country’s contribution to and integration with the global economy. In 2019, India’s global trade share at 4.8 percent was indeed non-trivial, and there is room for optimism that India’s share will exhibit a rise.

First published in MyIndMakers as India’s Global Agricultural Trade in International Perspective on 17th January 2022.

About the Author

passport size Photo Mukul Asher edited

Prof Mukul Asher
Former Professor, Lee Kuan Yew School of Public Policy, National University of Singapore

Watch Prof Mukul Asher at IMPRI #Web Policy Talk

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