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Need of Export-Import Policy

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May 11, 2024

Why in news?

A rational agricultural import and export policy is required, as India needs to balance the interests of the both.

Status of India’s agricultural trade

  • Exports- It fell 8.2% in FY ended March 2024 on the back of shipment curbs on a host of commodities, from cereals and sugar to onions.
  • As per Department of Commerce data the value of farm exports declined from 48.82 billion in 2023-24 to 53.15 billion of 2022-23.
  • From 2013-14 to 2019-20 the exports declined with increase in imports.
  • Imports- The decrease in overall agricultural imports in 2023-24 was mainly attributed to lower imports of edible oils, driven by a decline in global prices.
  • However, imports of pulses surged, indicating a shift in consumption patterns or domestic production inadequacy.
  • Import dynamics- The trend suggests a trade imbalance, where imports outpaced exports, potentially due to factors such as domestic demand, import dependencies, or trade agreements.

Why India needs a rational export-import policy?

  • Decline in exports- Restrictions on the export of key commodities such as sugar, rice, wheat, and onions have contributed to the decline in agricultural exports.
  • Policy paralysis- Government’s export bans and duty impositions can hinder investment climate and undermine ease of doing business, particularly in the agricultural sector.
  • Political impact- During election season measures such as subsidies, loan waivers etc., may have short-term benefits but can also strain fiscal discipline and impact the economic health of the agricultural sector.
  • Concern of import policy- The removal of import duties on certain agricultural products aims to reduce consumer prices and promote trade but it raises concerns about the impact on domestic production and crop diversification.
  • Impact on farmers- A reduction in onion prices, for example, can lead to significant revenue losses for farmers, impacting their livelihoods.
  • Trade diversification- By facilitating a diverse range of imports and exports, India can reduce its dependence on specific markets or commodities, thus mitigating risks associated with fluctuations in global demand or prices.
  • Foster global relations- A coherent import-export policy strengthens India's position in international trade negotiations and fosters positive relations with trading partners, leading to mutual benefits and opportunities for collaboration.
  • Global uncertainty- A rational import-export policy is needed to tackle issues such as Russia-Ukraine war, COVID-19 etc., which disrupted global supply chains and trade flows, impacting agricultural imports.

Restrictions imposed by  India on Agricultural exports

  • Sugar- India, the world’s second producer of sugar has banned it’s export for the first time in 7 years as lack of rain has cut cane yields.
  • Non-basmati rice-A ban on white non-basmati rice exports since along with a 20% export duty on parboiled grain shipments, resulted in a reduction of non-basmati rice exports.
  • Selective ban on rice export- It is due to various factors such as
    • Decline in rice production due to deficient monsoon rainfall
    • Low rice stock could pose a threat on PMGKY and public distribution system.
    • Possibility in yield reduction due to a new virus that has caused dwarfing of paddy plants in Punjab and Haryana.
    • To curb threat of inflation and to divert broken rice for India’s ethanol production.
  • Wheat- Export restrictions is aimed at preventing the speculative trading in wheat to stabilise the agriculture sector.
  • Onion- The exports were banned in 2023 to ensure adequate availability for local consumption against the backdrop of estimated lower Kharif and Rabi crops in 2023-24 compared to the previous year and increased demand in the international market

What lies ahead?

  • A more balanced approach is needed, considering the interests of both producers and consumers, as well as the short-term and long-term goals of the agricultural sector.
  • Temporary tariffs could be considered as an alternative to outright bans or quantitative restrictions, providing a more predictable regulatory environment for stakeholders.
  • The creation of buffer stocks for essential commodities is proposed as a means of market intervention to manage price volatility.

 

References

  1. Indian Express- Need of export-import policy
  2. Indian Express- Need of more rational agri policy
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