INDIAN AGRO IMPORTS RISING TREND; EXPORTS DOWN --FINANCIAL EXPRESS
5TH JULY 2017
AN ANALYSIS OF TRADE OF AGRO ITEMS
IMPORTS SOAR & EXPORTS DIP
TEJINDER
NARANG
There is a rise of 30% in value of imports of
three essential agro items, namely wheat, pulses, vegetable/edible oils, --
indicative of substantive demand pull in the country (See charts below).
Data analysis of India’s seven select but vital
agro related items of exports reveals that there is a sharp slump—40% in their
overall value-- during last four years. Commodities are wheat, rice, sugar,
cotton, soymeal, guar gum and beef+fish .
Exports falter when goods are not competitive,
lack of local production and/ or poor demand overseas. Edible items are of
daily use. Thus with rising population, probability of lower demand abroad is
not logical. Two successive draughts in 2014-15-16 may justify drop in
production but lack of adoption of new technologies and efficient farm
practices is the root cause.
IMPORTS
Pulse’s import jumped from $2.3 billion in
2013-14 to $4 billion--an increase of 74%. Out of 5.4 million tons (mts) of
pulses shipped to India 50% or about 2.7 mts are peas/yellow peas from
Canada/USA. Kharif acreage of pulses is down by 33% which give ideas of lower
output, compelling higher imports of Tur, Urad Moong. News of possible decline
in production will make imports costlier.
Government has been fronting state agencies for
import through bulk tendering. PSUs tenders escalate world prices, thereby
pushing up values for private import as well. When state agencies dispose
pulses in domestic market at subsidized prices—that is at a loss-- this again
disturbs the parity of private imports because they cannot discount their
costs. This may discourage trade to import thereby creating more scarcity in
the country.
Wheat
From exporter of wheat of about 14 million tons
(Approx. $4billion in 2012-13 to 2014-15), India has turned structural importer
of $ 1.5 billion of grain in last three years. Spike in wheat import in 2016-17
over previous year is 840% by value.
In
2014-15 and 2015-16 market estimates of production each year varied 84-87
million tons (mts) (though Government claimed 93-95 mts). FCI stocks depleted
to 8 mts (buffer norm 7.5mts) on 1st April2017 and imports ballooned
to about 4 mts in 2016-17 thus validating market’s view.
Wheat procurement pf 30mts this year vs targets
of 33 mts implies that OMSS supply to flour millers will be restricted. This
necessitates private imports of 5-6 mts in 2017-18.Already importers are
looking for cargos from September 2017 onwards from Australia and Black sea at
landed values of $240 and $205 respectively which will be cheaper than domestic
wheat after 10% duty paid.
Government has rightly stayed away from
importing wheat directly for FCI and let privates fill the gap. This prudence
has kept world wheat prices range bound and non-inflationary, because trade
imports in economical lots with spread of time, instead of bulk tendering by
Public sector Undertakings (PSUs) which results in inflated import values.
Vegetable oils
Import of palm/soy/sunflower oils has remained
steady-- value wise between $8-9 billion per annum. There are strong pressures
from oil seed crushing industry to raise import tariff to create a disparity by
having high landed cost of overseas product so that locally produced oil could
be cheaper. Government has done well in levying moderate duties on oil to
protect consumers –60% of which are based in rural areas including farmers and
not to promote inefficient production and processing.
Unless high yielding oilseed varieties are
available in the country –the value and volume of vegetable oils import is
bound to ascend.
EXPORTS
In 2014-15 basmati/ non-basmati rice exports
were $7.8 billion that has slipped to $5.8 billion in 2016-17—though India
remains world’s largest exporter of rice of 10mts. Poor demand in Africa, especially
in Nigeria of non-basmati rice, and slow down of basmati shipments to Iran and
Saudi Arabia could be possible reasons. Iran shipments declined from 1.44
million tons in 2013-14 to 0.7 million tons in 2016-17—down by 50%.
Outlook of Non-Basmati rice for 2017-18 appears
positive as strong demand for Nigeria via neighboring Benin is supportive;
Bangladesh requires more than one million tons of rice desperately and trade is
focused on this demand. Indian non-Basmati rice prices are lower than
competition from Thailand, Vietnam, Pakistan.
The success of Rice export business is
attributed to minimal interference by Government, diversity of paddy varieties,
superior capability for par-boiled rice, logistical advantage for Africa,
botched up past policies of Thai government in paddy pricing and poor
performance of Pakistan. Indian rice export is negligible to South East Asia
and China.
Cotton
Cotton exports tapered down from $3.8 billion
to $1.4 billion during 2013-14 and 2016-17---lower by 63%. Exports to China and
Pakistan suffered, while Bangladesh remained a consistent market. India’s share of exports to China has dropped from almost 80
percent in 2011 to 10 percent in 2015. Indian trade is diversifying to newer
markets of Indonesia, Taiwan, Turkey and Thailand to gain the momentum.
Soymeal /Guar gum /Beef and Fish
Drastic fall (86%) in Soymeal
exports from $2.8 billion to $0.38 billion ; likewise 75% lower guargum exports
and 48%decline in Beef and Fish in
2016-17 from their peak performance of $10 billion in 2014-15. Beef exports are
not likely to pick up because of current confusion. GST complexities is another
factor that is bound to affect the trade.
We are becoming a high cost economy in agro
related items. If we continue to dither in our export earnings by lack of
quality/procedures/ poor yields/price parities, resultant suffering will be
transmitted via trade to the farmers and another undesirable cycle of
joblessness and loan waivers will commence.
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