Changing The Agri Exports Basket

Context: India has the potential to become a global leader in the food processing sector.

Potential of food processing industry (FPIs) in India

• FPIs can drive ambitious targets in agri-exports, that is worth $60bn by 2022.
  • From 2015-16 to 2019-20, value of agricultural and processed food increased from $17.8bn to $20.65bn.
• Huge under-utilised potential: Ministry of Food Processing Industries shows that contribution of agricultural and processed food products in India’s total exports is just 11%.
  • In this also, primary processed agricultural commodities form majority share.
• Domestic potential: FPIs promises scope for high economic growth and makes good profits.

    

Issues limiting India’s growth in agri-exports

• India lacks comparative advantage in many items: That is, domestic prices of processed food products are much higher compared to world reference prices.
• Non-tariff measures imposed by other countries: Some of these include
  • Mandatory pre-shipment examination by the Export Inspection Agency being lengthy and costly.
  • Compulsory spice board certification being needed even for ready-to-eat products which contain spices in small quantities.
  • Prohibition of import of meat- and dairy based-products in most of the developed countries.
  • Withdrawal of Generalised System of Preference by the U.S. for import of processed food from India.
  • Export shipments to the U.S. requiring an additional health certificate
• Regressive policy paradigm: Such as lack of strategic planning of exports by State governments, lack of a predictable and consistent agricultural policy discouraging investments by the private sector etc.
  • Absence of an equivalency agreement with developed countries for organic produce.

Way forward: India’s competitive advantages in various agricultural commodities shall be passed onto processed foods, focusing on cost competitiveness, global food quality standards, technology etc.