India has been generating large surpluses in a vast range of agriculture products such as rice, wheat, sugar, milk… But their prices are higher than those offered by competitors. The focus should be on improving productivity and hence, competitiveness.
The Regional Comprehensive Economic Partnership (RCEP) ensures free trade amongst the 10 ASEAN and the five Pacific countries. Citing its adverse effects on the Indian farmers, MSMEs, and the dairy sector, India walked out of the recent Free Trade Agreement that required gradual elimination of tariffs on the import of goods and agricultural produce. The primary reason is the uncompetitive feature of several Indian products compared to those produced at the ASEAN countries and China, Japan, Australia, New Zealand, and South Korea. These countries excel in manufacturing a variety of goods at lower costs. Even in agriculture products, India is uncompetitive.
IE had pointed to the enormous annual surpluses generated by China’s exports over imports, which averaged $ 500 billion per annum for the last five years. This contrasted poorly with an annual deficit of over $ 200 billion in India’s trade.
There is good potential for the export of milk and rice to China, the Philippines, Hong Kong, and several other neighboring countries. India must address the issue of high costs of Agri products. New Zealand’s export of dairy products is 93 per cent of local production compared to the small share of India’s. It sells milk powder at Rs 160/kg compared to India’s Rs 280/kg. This again results from low productivity: against 13 litres per day per cow in New Zealand, it is 3.5 litres in India (Times of India, 04 November).
A separate ministry of foreign trade
IE has been suggesting the creation of a separate
Ministry of Foreign Trade with a top marketing professional as its head. India should select a few products, earmark land for export-oriented growth and improve productivity.
I had pointed to the potential for soybean exports to China (imports annually over 80 million tonnes). Large tracts of land in Madhya Pradesh can be developed for sustained large scale production of soya bean. There is a ready outlet in China and such export will help reduce the trade deficit with China.
Excelled in parts
India has done well in agribusiness in the past. I cite two instances: the first was the success of PepsiCo under Ramesh Vangal that revolutionised the production of potatoes and tomatoes in Punjab in the 1980s. Anil Kumar Epur of VST Natural Products did a similar thing in Andhra Pradesh through contract farming for export.
India failed to build on these successes but China achieved quantum jumps in the productivity of potato by getting expertise and technology from the US. – SV