According to a new study by Icrier and World Bank, in the decade 2004-2014, the domestic prices of key agricultural commodities were under the export-parity prices during most of the time.
However, in the 2007-08 global food crises, as restrictive trade policies played spoilsport, the export/import opportunities were not always used, though many Indian products export-competitive rising global prices made from fully exploiting the trade opportunity rice and wheat exporters among others were prevented.
In India’s agriculture trade policies and the creation of a predictable and stable policy, the study recommended phasing out of “in-built consumer bias and anti-farmer nature”.
In the decade mentioned above, including wheat, rice, maize, potato, mango, buffalo meat and banana, 72% of the time domestic prices of 15 commodities, were, therefore, competing with imports while only 11% of the time they were above import-parity prices.
According to the study titled ‘Price distortion in Indian agriculture, as their prices were between the relevant exportable/importable references prices, these domestic commodities were in the ‘non-tradable’ zone in the remaining 17% of the period.
In the case of commodities like rice, groundnut, cotton, buffalo meat, onion, banana and potato It has stated the Indian prices were 90% to 100% of the time below their corresponding export parity prices. In most of the years, domestic prices were above import parity prices for sugar and skimmed milk power. It is noted that Soybean, maize and wheat prices were largely in the non-tradable band.
It made many Indian products very export-competitive as per the study stated on the positive impact of the global food crisis of 2007-8. from fully exploiting the trade opportunity the restrictive trade policy prohibited the exporters In the case of rice and wheat but the crisis translated into greater export opportunities for other agri-commodities like buffalo meat, onion and groundnut, revealed by the report.
The policymakers used restrictive export policies to keep domestic prices low in most years for majority of products; this is said pointing towards inconsistency in India’s agricultural exports policy. it means that policies more than often harm the farmers’ interests, and this showed the pro-consumer bias, at the prospect of the trade translating into rising domestic prices whose scope of getting higher returns globally are curbed, as per the study.
However, to transport and handling costs and increased opportunities to neighbouring countries, trade is highly sensitive for fruits and vegetables and livestock such as buffalo. The states like Bangladesh, Nepal, Sri Lanka etc have triggered Indian exports. It is noted that even on freight difference than on the inherent commodity price differential, the players were found to be competing more for foodgrain and bulk commodities.
As per the study, during 2004-2014 against the US dollar, the depreciating value of the Indian rupee also from the country competitive globally played an important role in making agricultural exports.
As a percentage of agri-GDP India’s agri-trade increased from less than 5% in 1990-91 to about 20% by 2013-14, as per the study it still hasn’t reached its full potential. Various policy reforms have been recommended by it. Those are phasing out built-in consumer bias in agri-policies, creating space for private players to have integrated market, etc