CLICK LINKS BELOW
FALLING AGRO EXPORT FALLOUT OF POOR YIELDS AND CURRENCY TURMOIL.
The rising trend in Agri and allied exports of last five years has reversed to the “negative zone” by 8.5% (from $33 billion to $30.1 billion) –though decline is somewhat checked by higher beef and meat exports which are up by about $500 million. It simultaneously reflects continuing policy paralysis in the Indian Agricultural policies rendered redundant with the march of time and technology. Can we ignore this tapering trend and be content with comfortable CAD of 1.3% of GDP attributable to lower crude oil prices in FY15? Can we insinuate this phenomenal fall in exports to the tumbling global prices by about 20-25%? No, not fully.
Worldwide demand expansion of Agro commodities continues. Competing origins like Brazil, Argentina, France, Russia and Ukraine have been able to grab our traditional markets. Currency depreciation of many rival countries, poor yield of Indian agro produce, inflexibility due to tight control by the government in agro sector are other factors for this dismal performance. The abrupt fall in exports of major agro items to the extent of 50% is also captured in the chart below.
The continuing fall in crude oil prices due to Sunni-Shia conflict in Middle –East, inevitable entry of Iran and ample supply of USA’s shale oil output is likely to trigger price compression of ethanol and other bio-fuels which is bound to diminish consumption of corn and soya. That trend will activate further bottoming down of values of agro-commodities like wheat, sugar, oil meals and vegetable oils.
Greece’s bailout uncertainty will keep Euro weaker. Dollar/Euro 1:1 parity is already speculated. Russia/Ukraine conflict and falling crude values create more distress in their currencies. Brazil’s Real will fall further as it struggles to ensure export consistency of their humongous crops of Soya and Corn to service weakening power of China. These factors warrant that India will remain out priced in near future.
In short term descending values will prevail internationally unless there are major draughts or environmental issues. Even under relative volatile conditions, world will produces more agro commodities with improved technologies of sowing/harvesting/irrigation/ fertilizers and GM seeds. To meet the competition owing to global changes and turbulence, India has to introspect on its macro policy profile for bigger crops by attaining higher yield to lower per unit costs. The motto has to be “More crops per drop” of everything –not limited to water alone— but also including each unit of power, fertilizer and technological investment.
Some of debatable issues are—do we need to keep our agro paradigm focussed on over emphasis of wheat and rice production tied to dedicated procurement for 7%-8% farmers; should we keep importing about 14 million tons of edible oil with annual increment of one million tons per annum ; are we to sustain ourselves with rising demand of yearly pulses import currently at 5-6 million tons with increasing appetite in future ; are we to shed our aggression in oil meals export where decline is 52% in FY15 over FY 14; can we afford to keep our soy output unchanged at 10-11 million tons for last five years; will the maize/corn production remain static at 23-24 million tons while Brazil’s output has jumped to 80 million tons from 50 million tons in last five years; is the chaotic policy of pricing sugarcane irrespective of market realization of sugar is sustainable; do we realize that more yield/hectare will give more probability of attaining self-sufficiency domestically and spurring our exports; will we continue to impose custom duties on items which are cheaper abroad to protect our domestic inefficiencies and outdated policies. India has transmuted into high cost agro market compared to world’s standards. Even Pakistan and Bangladesh who hitherto sourced oil meals from India have shifted to South American origins despite logistical disadvantage.
ANOTHER GREEN REVOLUTION NEEDED
Green revolutions happened when India has either kept pace with world’s scientific developments or adapted them. The introduction of high-yielding varieties of Mexican wheat seeds suggested by Norman Borlaug, USA’s biologists, with fertilizer and irrigation was responsible for green revolution that spiralled average yields to about 3meteric ton/ha (though Punjab has 5 mt/ha) from less than one metric tons in mid 60s. Otherwise India would have been a begging bowl for wheat internationally. Hybridisation of paddy by ICAR led by scientist VP Singh has enabled India to increase quality and quantity of Basmati rice. Hybrid maize has augmented its yield to 2.6 mt/ha, though it is still far below the world maximum yielding of 10 metric ton/ha for GM(genetically modified) crops. Soy yield has remained static to one mt/ha while world average is 3mt/ha. Lower yields mean sub-optimal use of land, labour, inputs and other natural resources. Reduced output implies lower income or implied taxation on the farmers. It means lower GDP and fiscal stress in the economy.
There appears to be congenital apathy in India against GM crops which are now widely grown in USA and S. America. China is the most active importer/user of 74 million tons of GM soybeans. The widely used argument in India is that GM crops will help MNCs. But its denial supports vested entrenched interests in the country in the agriculture, industrial and political circles. Why a fair cost/benefit analysis is held up for GM crops? Ambivalence on the evaluation/ introduction of GM crop has confounded all.
If GM crop is harmful, let there be an official conclusion. All allopathic medicines have some side effects; even the change of seasons has side effects—but they do give relief too. Can we become an isolated island in agricultural practices? If some modifications are to be introduced for induction of GM crops let it be deliberated upon. On the one side we are one of the biggest consumers of imported GMO soy oil and cotton seed oil but denying its admission formally. Is it not the height of self-imposed hypocrisy? Are we not denying the viable opportunities and options to our farmers by imposing anti-GM policy and thrusting high priced produce to consumers?
As India’s growth rate escalates, we need more corn, soy, pulses, wheat, rice, edible oils, sugar. Unless we blend our policies rightly—we may soon turn out to be importers rather than large producers and exporters. There is a need for another green revolution of 2015-20 with all available resources at our command than to be driven by selective discretion even if it means some creative destruction.