TrendsinIndiasAgriculturalTrade whoevercommandstheseacommandsthetradeandwhoevercommandsthe tradecommandstherichesoftheworld Theglobaltradecycleshavelongsincestronglyimpactedtheperformanceofthe shippingbytheireffectonfreightvolumescarriedandprices.However,whilegeneral relationshipbetweentradeandshippingisfairlywellestablished,howsuccessivetrade cycles,especiallychangingcommoditypatternsoftradeimpacttheshippingmarketis notveryselfevident.Tounderstanditsimpactonewouldhavetofactorintheextentof ballooningeffecttheglobaltradegrowthhasontheshippingmarkets,intermsof absolutegrowthinmerchandisevolumes.Thegrowthofmerchandisetradebothona globallevelaswellasonacountrylevelthus,haveimportantconsequencesand agriculturalcommoditytradeisonesuchemergingkeyvariables,increasingly influencingtheshippingdemand.

Increasingvolumeofcommoditytrade,especiallyofagriculturalproducts,hasbeenone ofthemajorsourcesofgrowthofmerchandisedemandandhasseenimpressivegrowth aftertheformationoftheWorldTradeOrganisation(WTO)andratificationofGATT treatyin1995.AccordingtotheFood&AgriculturalOrganisation(FAO),thegrowthin internationalagriculturaltradeisexpectedtobeabout4.5percentmoreorlessinline withtheexpectedgrowthinworldgrossdomesticproduct(GDP)growthtill2005, thoughyeartoyearfluctuationsinagriculturaloutputcouldactuallymeanslowergrowth inthedeficientyears.However,withmanydevelopingcountries,havingpredominance ofagricultureintheireconomy,beginningtopegtheirmacrogrowthstrategieswith growthofagriculturalincomesandemployment,asteadyincreaseinagriculturaltrade volumesismorethanlikelyintheyearstocome.However,thegrowthofworldtradein agriculturalandagroindustrialproductshassofarbeenslowerthanthatofgeneraltrade anddevelopingcountrieshavenotbeenstillabletocaptureaslargeashareoftrade growthinagriculture,asinotherindustrialmanufacturedproducts,mainlydueto prevalenceofvarioustariffandnontariffbarrierstoagriculturaltrade,especiallyinthe developedworld.However,withmoreliberalandequitabletradeenvironmentinrespect oftradeinagriculturalproductssubstantialincreaseinglobaltradevolumeislikely. Willsuchbarrierstointernationaltradeforagricultureandagroindustrialproductsbe reducedfarenoughandfastenoughtobringaboutsizeablegrowthinglobalagricultural trade?Orwilltheseconstraintstoagriculturaltradeparticularlytheagricultural protectionisminindustrialcountriescontinuetoinflictlossesonthedevelopingworld bydeprivingthemofnewtradingopportunities?AlotdependsonthefutureofWTO tradenegotiationsandthelikelyroletobeplayedbynewemergingagriculturaltrading countrieslikeChinaandIndia. IndiasAgriExports IntheIndiancontext,bulktransportationoffoodrelatedcargoisgraduallyemergingasa newfoundtradeopportunityinrecentyears,bothbywayofdrybulkandcontainercargo

volumes.TheKandlaportontheWestcoasthasinparticular,emergedasamajorrice handlingportandlasttwomonths(AprilMay2002)inparticularhaveseensharp increaseinriceexports,withthegovernmentsupplyingriceatsubsidizedratesto exportersfromthesurplusstocksFoodCorporationofIndia(FCI).Indiahasbeen exportingricemainlythroughtheKandlaporttocountriesinWestAsia,toliquidateits excessstocksofriceatabout24milliontonnnes,againstthebufferrequirementof16 milliontones.TheKandlaporthashandledabout1.5milliontonesofricein200102 (AprilMarch)andthisisexpectedtorisebyatleasttwomilliontonnesin200203.The NhavaShevaportintheMumbairegionhasalsohandledabouthalfamilliontonesof foodgrainsin2000.Infact,thefreightvolumeshavefluctuatedonanyearonyearbasis inthelastthreeyearsandhaveonanallIndiabasiscomedowndramaticallyin200001, followingpoorrainsandlowerfoodgrainoutput(seetablebelow).Theshortfallin foodgrainsexporttradeishowever,expectedtobeovercomeduring200203,whichis forecasttobeayearofagriculturalsurplus. TotalAgroRelatedTrafficHandledAtMajorIndianPorts(000onnes)
199899 Commodity Loaded Unloaded Total Foodgrains Sugar EdibleOil 1,830 40 195 1,710 377 2,804 3,540 417 2,999 199900 200001 Loaded Unloaded Total Loaded Unloaded Total 946 24 247 1,729 690 4,159 2,675 714 4,406 1,671 136 242 265 1 3,618 1,936 137 3,860

Source:IndianPortsAssociation(IPA) Indiasagriculturaltradevolumethoughstillataverylowlevel,comprisesadiversified basketofproductsandcanbedividedintothreebroadcategoriesa)rawproductsb) semirawproductsandc)processedandreadytoeatproducts.Rawagriculturalproducts exportedareessentiallyoflowvalueandhighvolumenature,whilesemiprocessed productsareofintermediatevalueandlimitedvolume.TheshareofIndiasagricultural exportsintotalexporttrade(byvalue)hassofarvariedbetween13to18percent,with greaterimportancebeingattachedtoexportofprocessedfoods,whichbringsubstantial valueadditioninexports.During200001,agriculturalproductsexportedfromthe countrystoodatmorethanUS$6billioninvalue,ofwhichthemarineproductsalone contributedimpressive23percent,thesinglelargestcontributortothetotalagricultural exportsfromthecountry,accountingforoveronefifthoftotalexports. India'sExportsofPrincipalAgriculturalProducts (US$Million)
Products Tea Coffee Cereals Tobacco Spices 199899 538 411 1,495 181 388 %ofAgriExport 8.9 6.8 24.8 3.0 6.4 19992000 412 331 724 233 408 %ofAgriExport 7.3 5.9 12.9 4.2 7.3 200001 433 259 744 191 354 %ofAgriExport 7.2 4.3 12.4 3.2 5.9

Cashew Sesame&NigerSeeds GuargumMeal OilMeals Fruits&Vegetables ProcessedFruits&Vegetables Meat&MeatPreparations MarineProducts Others AgroExports As%oftotalexports TotalExports

387 78 173 462 184 69 187 1,038 446 6,037

6.4 1.3 2.9 7.7 3.0 1.1 3.1 17.2 7.4 100.0 18.2

567 86 188 378 209 86 189 1,183 614 5,608

10.1 1.5 3.4 6.7 3.7 1.5 3.4 21.1 11.0 100.0 15.2

411 131 132 448 248 122 322 1,394 815 6,004 13.5 44,560

6.8 2.2 2.2 7.5 4.1 2.0 5.4 23.2 13.6 100.0

33,218

36,822

Source:MinistryofFinanceUnionBudget200102 Amongothercommodities,cereals(mostlybasmatiandnonbasmatirice),oilmeals,tea, coffee,cashewandspicesareamongtheotherprominentproducts,eachofwhich accountsfornearly5to10percentofthecountrystotalagricultureexports.(Seetable below).Duringthelasttwoyearsbetween19992002Indiastotalagriculturalexports havesufferedduetopoorgrowthinoutputfollowingerraticrainfallinmanypartsofthe country.Theinabilityofagriculturalexportstotakeoffinasignificantwayisalso attributedtodistortionsindomesticpricingforproductslikerice,wheat,oilmeals,tea andcoffee,whichhaveaffectedtheexportcompetitivenessofthesecommodities. Indiasagroimports Indiasagriculturalimportontheotherhandconstituteonlyasmallportionofcountrys totalimportsandisbarelyabout4percentofthetotalimportsintothecountry.The importofagriculturalproductsintothecountrymainlycomprisesofvegetableoil,which aloneaccountsforabout72percentofthetotalagriculturalimportsintermsofvaluein 19992000(bulkofvegetableoilcomesaspalmoilimportedfromMalaysia),besides cashewnutsandalmonds(fromUSA)whichareimportedforfurthervalueadded processingandreexported.In200001,countrysagriculturalimportswereonlyUS$ 1.8billion,whichismuchlowerthanagriculturalexportsofmorethanUS$6billion.In fact,despiteremovalofquatitativerestrictionsonimportsandreductionoftariffs,the quantumofimportsofagriculturalcommoditieshasnotincreaseddramatically.Given thecurrentpatternofagriculturaltradeIndiacan,inthelongtermemergeasanet agriculturalexportcountryandemergetobesignificantnicheplayerinanumberofkey agriculturalcommodities. Indiahasfairlygoodcomparitivetradeadvantagesinhorticultureproduce,especially processedfruitsandvegetables,floricultureproductsandmedicinalplants,wherenew moderncontractbasedfarmingtechniquesarebeingfollowed.Besides,other conventionalplantationproductslikespices,teatobaccoandcoffeeareamongotherareas wherethetradeadvantageswithIndiaarequitelucrativeaswell.Highercostsof agriculturalproduceinIndiacoupledwithhighercostsoftransportationhaveinfactbeen oneofthekeyproblemsinraisingthelevelofagriculturalexports.Hence,toharness tradingadvantagesintheseexportcommoditiesalsorequiresthatdomestictransportation

andfreighthandlinginfrastructureandserviceslikecoldchainstorage,reefercontainer handling,deepfreezemodeofpreservationetcbefurtherenhancedandmadeavailableat morecompetitivecoststomakeexportsmorecosteffective. India'sImportsofPrincipalAgriculturalProducts (US$million)

199899 Commodity Cereal Pulses Milk&Cream CashewNuts Nuts&Fruits Sugar OilSeeds Veg.Oils TotalAgriImports %Agri.Importsto TotalImport TotalImports Value 288 169 3 230 159 264 2 1,804 2,919 7 42,389 %ofAgri.imports 9.9 5.8 0.1 7.9 5.5 9.0 0.1 61.8 100.0 Value 222 82 25 276 136 256 4 1,857 2,858 6 49,671 19992000 %ofAgri.imports 7.8 2.9 0.9 9.7 4.8 9.0 0.1 65.0 100.0 Value 19 109 2 211 175 7 2 1,334 1,858 4 50,536 20002001 %ofAgri.imports 1.0 5.9 0.1 11.3 9.4 0.4 0.1 71.8 100.0

Source:MinistryofFinanceUnionBudget200102, CompetitivenessofIndiasagriculturaltrade Indiawitnessedselfsufficiencyinfoodproductiononlyduringthedecadeofeightiesand hasbarelyenteredtheglobalagriculturaltradeinthenineties.Indiasagriculturalexports generallyareyettobecometrulycompetitiveonaglobalscaleandbyandlargecontinue tosufferfromanumberofcriticalproblems.Amongsomeofthekeyissuesinachieving globalcompetitivenessofIndianagriculturalexportsare:

LowproductivityandyieldperhectareinIndia,whichtranslatesintohigherinput costscomparedtoproductivity/cropyieldlevelselsewhereintheworld.Against anaverageyieldof8tonnesperhectareintheUS,theyieldperhectareinIndiais aslowas1.6tonnes.Productivity/yieldlevelsalsovarysharplyacrossdifferent growingregionsaddingonalotofcomplexitytopricingandcostingpractices. Mostagriculturalcommoditypricesintheglobalmarkethavebeencomingdown sharply,whereasIndianagriculturalexportpricesaretothecontraryare increasingmakingourexportsuncompetitiveandoutpricedintheinternational markets. ThequalityofIndiasagriculturalproduceandtheiroutputlevelscanbe substantiallyimprovedthroughuseofbiotechnology,highlyproductiveseedsand intensiveuseoffarmmachinery,asinotherdevelopedagriculturaleconomieslike theUSandCanada.Thishowever,requiresimprovedinstitutionalaccesstobetter technologyandlatestagriculturalpracticesandmarketaccesstocapitalresources, whicharedifficulttoobtain.

TheIndianagriculturalexportsarealsounabletocompetewiththelowcost agriculturalproductsfromdevelopedcountries,wherethefarmlobbiesareableto wrestconsideableamountoffiscalsubsidiesandothermarketsupportmeasures fromtheirgovernments. Tariffandnontariffbarriersindevelopedcountriesarehighlyskewedagainst agriculturalproductimportsfromthedevelopingcountries,includingIndia,while favouringtradingamongthedevelopedeconomiesthemselves.

Despitetheseobstacles,Indiastandsafairlygoodchancesubstantiallyimprovingits shareinglobalagriculturaltrade,giventhegenericadvantagesofsomeofitskey agriculturalproductslikerice,wheat,horticulturalproductswiththeoverallpaceof changestakingplaceintheagriculturaleconomy,undertheimpactofeconomicreforms andglobalisationoftraderegimes. TheIndianbasmatirice,whichenjoysaspecialplaceininternationalmarketcommandsa highpremiumandisawellestablishedgenericbrand.However,tradingofothervarieties ofriceunderthebasmatitradenameorsimilarsoundingnameshavebroughttothe foreissuesofpatentprotectiontoagriculturaltradeandIndiahadtofightforprotection ofitstradeinterests.Inrespectofwheat,Indiaisyettoestablishitselfasaregularwheat exportingnation,despitecontributingalmost13percentofglobalwheatproduction. Demandexistsintheinternationalmarketsforbothdurumandaestivumvarietiesof wheat,growninIndia,whichisusedinproductionofvalueaddedproductslike Macaroni,Sphagetti,Vermicilli,Semolinaetc. ThedurumvarietyofwheatgrowninIndiaaccountsforonly4percentofthetotalworld wheatproductionandnearly1012milliontonnesofdurumwheat(valuedUS$2,600 million)istradedannuallyworldwide.Thegovernmentisbelievedtobenowtargetingto export15milliontonesofriceandwheatduring200203,whichisquiteasizeable increaseinagriculturaltradevolume.Iftheexporttargetweretobemet,itcouldresultin substantialgrowthbothintermsofcontaineraswellasdrybulkhandlingoffoodgrains trafficvolumethisyear. India'sAgriculturalProduction19982001
Crop Foodgrains Rice Wheat CoarseCereals Pulses NonFoodgrains Oilseeds Groundnut Soyabean Sugarcane Cotton Jute&Mesta MiillionTonnes MiillionTonnes MiillionTonnes MiillionTonnes MillionBalesof170kgeach MillionBalesof180kgeach 24.8 9 7.1 288.7 12.3 9.8 20.9 5.3 6.8 299.2 11.6 10.5 18.2 6.4 5.1 300.3 9.4 10.4 Units 199899 203.6 86.1 71.3 31.3 14.9 19992000 208.9 89.5 75.6 30.5 13.4 200001 196.1 86.3 68.5 30.3 11.1

MiillionTonnes MiillionTonnes MiillionTonnes MiillionTonnes

Tea Coffee AllCropsGrowthrate*

MillionKG(calendaryeardata) MillionKG Percent

870.4 265 7.9

805.6 292 0.7

823.4 301.2 6.5

Source:ReserveBankofIndia,AnnualReport200001 *BasedontheIndexofAgriculturalProductionwithbase:trienniumending198182 =100 FutureOutlook Despiteimpressivegainsandsomemilestoneachievementsinfewselectagricultural commodities,Indiastillhasalongwaytogoinmakingitsagriculturalexportsmaking morecompetitiveintheworldmarket.Liberalisationandglobalisationofofworldtrade regimesinagricultureproductshascertainlyopenedmanynewopportunitiesfora countrylikeIndia,withitsnearselfsufficiencyinagriculturalinputs,relativelylow costsoflabouranditsdiverseagroclimaticprofile,whichcansupportproductionof widerangeofagriculturalexportproducts.However,Indianeedstoraisethelevelof productivityandqualitystandardstointernationallevels,whichisoneofthemajor challenges,followingdismantlingofquantitativerestrictionsonimportsandwith adoptionofWTOagreementonagriculture. Whileabeginninghasbeenmadeinpartlyfreeingtheglobalagriculturaltradefromthe constraintsofstiflingtariffandnontariffbarriers,considerableeffortstillneedstobe takenuptoneutralizethedevelopedeconomiesfromresistingagriculturalimportsfrom thedevelopingworldandbringdownthelevelofprotectionandsubsidiestobring greaterparityintermsoftrade.Indiaschallengesontheglobalagriculturaltradefront arethus,bothinternalasalsoexternalinnature.Whilerequiredchangesintheexternal globaltradeenvironmentwilltakelongertimeandgreatercollectiveeffortofnations, Indianeedstoinitiallyfocusonimprovingitsinternalsituationintheagriculturalsector, byrebuildingitscompetitiveadvantagessothatitcanpresentstrongerpositionswhenit comestonegotiatingeitherwithWTOorotherdevelopedcountries.