The Indian government is encouraging agricultural exports to meet the ambitious target of $60 billion by 2022. The Ministry of Food Processing Industries shows that agricultural and processed food products contribute 11% to India’s total exports. Primary processed agriculture accounts for the majority of commodities. India’s export earnings will increase with a greater focus on value-added processed food products rather than primary processed agricultural commodities (Siraj Hussain, 2021). From 2015-16 to 2019-20, the value of agricultural and processed food increased from $17.8 billion to $20.65 billion. Indian agricultural economy is shifting from primary to secondary agriculture where more focus is given on developing various processed foods. Indian food processing industry promises high economic growth and makes good profits.
export basket replacement
India’s agricultural export basket is shifting from traditional goods to non-traditional processed foods. Traditionally, Basmati rice is one of the top export commodities. However, now there has been an unusual increase in the export of non-basmati rice. In 2020-21, India exported 13.09 million tonnes of non-basmati rice ($4.8 billion), up from an average of 6.9 million tonnes ($2.7 billion) over the past five years.
Similarly, Indian buffalo meat is witnessing strong demand in the international markets due to its lean nature and organic nature. The export potential of buffalo meat is tremendous, especially in countries such as Vietnam, Hong Kong and Indonesia.
The exports of poultry, sheep and goat meat, cashew, groundnut, guar gum and cocoa products went down in terms of value and total volume in 2020-21.
Exports of processed food products are not growing fast enough as many commodities in India lack comparative advantage. This may mean that the domestic prices of processed food products are much higher than the world reference prices.
The main objective of the Agriculture Export Policy is to diversify and expand the export basket so as to increase exports of high value items including perishable and processed food rather than primary products. Exporters of processed food face difficulties and non-tariff measures imposed by other countries on Indian exports (Siraj Hussain, 2021). Some of these include mandatory pre-shipment examination by an export inspection agency being lengthy and costly; Ready-to-eat products containing small amounts of spices also require mandatory Spices Board certification; Lack of strategic planning for exports by most of the state governments; Lack of predictable and consistent agricultural policy discouraging private sector investment; Restrictions on the import of meat and dairy based products in most developed countries; withdrawal of the normalized system of preference by the US for import of processed food from India; Export shipments to the US requiring an additional health certificate; and lack of an equity agreement with developed countries for organic products.
road ahead
The policy of the Center should be towards creating a conducive environment for nurturing food processing companies, ensuring low cost of production and global food quality standards and promoting export of processed food. Developed countries have set high standards for the import of food items. Reputed Indian brands should be encouraged to export processed foods globally as they can comply with the global standard of Codex. Indian companies should focus on cost competitiveness, global food quality standards, technology and tap the global processed food export market. Various agricultural commodities in India have competitive advantages that can be passed on to processed foods. It has the potential to become a global leader in the food processing sector.
Parashram Patil is a Nehru Memorial Museum and Library Fellow, New Delhi.
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