New Agriculture Export Policy to Spur Employment Creation

Dr. S.P. Sharma &

Ms. Surbhi Sharma

The role of the agriculture sector remains critical to the Indian economy as a large proportion of population still depends on agriculture directly or indirectly. The sector is a supplier of food, fodder and raw materials for a vast segment of industry. Hence, enhanced and stable growth of the agriculture sector is important not only for generating purchasing power among the rural people but also through its contribution to price stability, demand creation and employment creation in the economy.

Currently, India's agriculture sector contributes to around 15-16% to GDP with the work force dependency still remaining at around 50%. The agriculture and allied  sector grew at 3% (average) during 2012-13 to 2018-19. The Government has announced various initiatives to boost the growth of agriculture sector such as Minimum Support Price (MSP) at the rate of 1.5 times of the cost of farm produce, strengthening irrigation facilities, promoting organic farming, enhancing credit for farmers, crop insurance, timely updates on weather developments, strengthening road connectivity in rural areas, among others.

In a major breakthrough, the Union Cabinet has recently approved the Agriculture Export Policy 2018 with an objective to double farmers' income by 2022. In this regard, exports of agricultural products would play a critical role in achieving this objective. This breakthrough is expected to create immense employment opportunities in the agriculture and food processing exports; shifting disguised unemployment from traditional agriculture to food processing and agriculture exports and creating new employment opportunities for growing young unskilled, semi skilled and skilled workforce.

Going ahead, integrating Indian farmers and agricultural products with global chains would be necessary to harness the export potential of Indian agriculture sector.  The key objectives of the Agriculture Export Policy 2018 are as follows:

• To double agricultural exports from the present level of USD 30 billion to USD 60 billion by 2022 and reach to around USD 100 billion in next few years
• To diversify the export basket and boost high value and value added agricultural products including focus on perishables.
• To promote indigenous, organic, traditional and non-traditional agriculture products exports.
• To provide an institutional mechanism for pursuing market access, tackling barriers and deal with sanitary and phyto-sanitary issues.
• To double India's share in world agriculture exports by integrating with global value chain at the earliest.
• Enable farmers to get benefit of export opportunities in overseas market.
• These reforms would go a long way and contribute to doubling the income of the farmers by 2022 in addition to improving the agriculture-infrastructure. It will not only uplift the agriculture sector but also the rural demand which will ultimately increase the demand for consumer durables further giving a push to the manufacturing sector and creation of employment opportunities for the growing young workforce.

Agriculture Export Policy to boost exports

For the promotion of agriculture exports and employment creation, the Government of India under the vibrant Agriculture Export Policy 2018 would be focusing on the following reforms to harness the export potential of Indian agriculture through policy instruments and to make India a global power in agriculture and raise farmers' income.

• Policy measures and stable trade policy regime: The agriculture export policy will strengthen and encourage discussions with public and private stakeholders across the agricultural value chain in order to discuss emerging developments in the sector and highlight changes required to boost agricultural exports. Further, providing a policy assurance that the processed agricultural products and all kinds of organic products will not be brought under the ambit of any kind of export restriction.
• Reforms in APMC Act and streamlining Mandi fee: The policy aims to put efforts with State Government in removing perishables from their Agricultural Produce Marketing Committees (APMC) Act. Further, consultation among the relevant stakeholders and Ministries to identify the commodities which are essential from food security perspective and barring such identified commodities under any kind of export restrictions will be promoted.
• Liberalizing land leasing norms: The policy focuses on liberalizing land leasing norms and promotion of adopting contract farming act which provides a possibility of an extended farming area and expected to generate large scale private investments, promoting mechanization and, thus, produce surplus volumes of standardized, exportable quality of agricultural products.
• Infrastructure and logistics boost: The policy focuses on strengthening robust infrastructure which involves developing pre and post harvest handling facilities, storage and distribution, processing facilities, roads and world class exit point infrastructure at ports facilitating trade. The policy focuses to compile all the logistics and infrastructure bottlenecks confronting different products by undertaking need-gap analysis of existing export oriented infrastructure across the value chain. Developing sea protocols for perishables will be promoted for long distance markets.
• Greater involvement of State Governments in Agriculture Exports: The policy focuses on identification of a nodal state department or agency for promotion of agriculture exports. The Ministry of Commerce and Industry, Government of India will play a proactive role in supporting and handholding such nodal agency at the state level. Although many State Governments have come with export policy, however, the policy aims to promote the inclusion on agricultural exports in the State Export Policy.
• Focus on clusters, promoting value added exports, promotion of R&D activities and marketing of agriculture products: The policy focuses on cluster development approach to boost the agricultural production in India. A similar approach in export centric clusters is like to result in more focussed pre and post harvest management of the production as well as upgrading the supply chain to attain higher level of exports in the coming times.
• It also focuses on product development for indigenous commodities and value addition, promote value added organic exports, development of organic exports zones, food park, marketing and branding of food products, developing uniform quality and packing standards, promotion of research and development for new product development for the upcoming markets . Further, Agriculture -start-up fund will be created to support entrepreneurs to start a new venture in agriculture products exports during their initial period of establishment.

Trend in India's agricultural exports

Over the years, India has been gradually integrating its agriculture with global markets and as a result, our exports of agriculture and allied products have grown. The key agriculture and allied export products from our country are broadly categorized into forty three categories which includes animal casings, alcoholic beverages, basmati rice, buffalo meat, cashew, cashew nut shell liquid, castor oil, cereal preparations, cocoa products, coffee, cotton raw including waste, dairy products, floriculture, fresh fruits, vegetables, fruits or vegetables seeds, groundnut, guargum.

It also includes marine products, milled products, miscellaneous processed items, molasses, niger seeds, non-basmati rice, oil meals, other cereals, other meat, poultry products, processed fruits and juices, processed meat, processed vegetables, pulses, sesame seeds, sheep/goat meat, shellac, spices, sugar, tea, manufactured and unmanufactured tobacco , vegetable oils, wheat and other cereals, meat, oil seeds.

The exports of agriculture and allied products have scaled upward from USD 24 billion in 2010-11 to USD 38 billion in 2017-18 with a growth rate of 12% (average) during the same period. As per the projections made in the Agriculture Export policy 2018 , the agricultural exports would increase from the present level of more than USD 30 billion to USD 60 billion by 2022 and reach at around USD 100 billion in next few years.

Agriculture and allied balance of trade scenario

The balance of trade of agriculture and allied products has remained in surplus during the last many years. The trade balance of agriculture and allied products was at around USD 13 billion in 2010-11 of which exports were at around USD 24 billion and imports at USD 11 billion. The trade balance increased to USD 15 billion in 2017-18 of which exports were at around USD 38 billion and imports at USD 23 billion.

Pattern in India's agriculture and allied exports basket

Over the last seven years, India's top ten agriculture export products have witnessed a change in the basket of products. During FY 2011, the top agriculture export commodity was cotton raw, which has been replaced by marine products in FY 2018. Sugar, other cereals, tea and unmanufactured tobacco exporting commodities have been replaced by non-basmati rice, castor oil, coffee and cashew during FY 2018 in the list of top ten exporting agriculture commodities.

Pattern in India's direction of agriculture & allied exports

Key importing countries (advanced economies) of India's agriculture & allied products are USA, Italy, Belgium and Netherlands in FY2018. The commodities exported to advanced economies are cashew nut shell, cereal preparations, cocoa products, dairy products, floriculture, guargum, marine products, milled products, misc processed fruits and juices, processed vegetables, shellac, spices, tobacco unmanufactured.

While, key importing countries  (emerging and developing) of India's agriculture & allied products are Indonesia, United Arab Emirates, Indonesia, Vietnam, Iran, Sudan, Bangladesh, China, Bhutan, Oman, Nepal, Algeria in FY2018. The commodities exported to emerging and developing economies are Alcoholic beverages, fresh fruits, sheep/goat meat , tobacco manufactured ,other cereals ,buffalo meat, groundnut, processed meat , sesame seeds, sugar ,wheat , fresh vegetables, non-basmati rice, castor oil , vegetable oils, other meat , basmati rice , tea, fruits / vegetable seeds, pulses , poultry products , animal casings etc.

Workforce dependency on agriculture sector

The workforce dependency on agriculture sector is declining over the years. During 1991, the workforce dependency on agriculture sector was at about 64%, which declined to around 60% in 2000, 52% in 2010 and 42% in 2018. The reason is attributed to the shift of workforce from agriculture to other upcoming sectors of the Indian economy such as services sector including telecom services, information echnology, tourism, construction, among others.

Exports linked jobs created in the agriculture and allied sector

India has a large and abundant agriculture base and is among the world's leading producer of cereals, milk, sugar, fruits and vegetables, spices, seafood products among others. India is supporting  around 18% of world's population with about 2.4% of world's land and 4% water resources. Therefore, efforts and innovations towards productivity, pre and post harvest management, processing and value addition, use of technology, skill development and infrastructure creation are key areas for Indian agriculture. The total number of export  linked jobs in agriculture and allied sector has increased from around 20 million (average) in 1999-2000 to 2005-06 period to more than 23 million in the recent times.

Export supported jobs across the agriculture and allied sector (million)

Source: PHD Research Bureau compiled from Occasional paper by EXIM bank, November 2016. Note: figures are represented as round offs

New Agriculture Export Policy to spur employment creation

Expected to create 20 million employment opportunities in the agriculture and food processing exports; shifting disguised unemployment from traditional agriculture to food processing and agriculture exports and creating new employment opportunities for growing young unskilled, semi-skilled and skilled workforce.

A well developed agriculture sector with higher level of processing helps

 in reduction of wastage, improves value addition, ensures better return

to the farmers, promotes crop diversification, generate employment

opportunities and increases export earnings. India is globally acknowledged

 as the leading producer of several agriculture and allied products. Globally

India is well known as the leading producer of milk, banana, mango, guava, papaya, ginger, okra, wheat, rice, fruits, vegetables, tea, sugarcane, cashew nut, cereals, coconut, lettuce, chicory, cardamon, pepper, among others. It gains from location advantage from the viewpoint of trade, due to its close proximity with Middle East, Africa, Europe from the western coast and Japan, Singapore, Thailand, Malaysia, Korea, Australia and New Zealand from the eastern coast.

Several incentives have been provided by the Government to push the growth and exports of agriculture sector. The following reforms under the vibrant New Agriculture Export Policy 2018 will help in increasing agriculture export and create employment opportunities in the coming times

Reforms under New Agriculture Export Policy 2018

On the back of supportive and conducive reforms for agriculture sector, the Agriculture Export Policy 2018 envisages to increase the exports of agriculture products to USD 60 billion by 2022 from the present level of around USD 38 billion in 2017-18.  The vision of the policy supported with several dynamic and vibrant reforms in the coming times would help in harnessing the export potential of Indian agriculture sector and spur employment creation in the coming times. It is estimated that 20 million export supported jobs  will be created in the agriculture and food processing sector by 2022 in the areas of primary and secondary processing, preservation technology, product development, packaging, logistics, laboratory testing, food quality and safety standards, research and development, retail, transportation, marketing and sales, among others.

Conclusions and suggestions

Agriculture continues to be the single most important livelihood for masses in India. It holds vital demand and supply linkages with other sectors of the economy. Going ahead, boosting food processing and agricultural exports holds immense significance for India to map on global charts as our country only contributes 2% share in global exports of agricultural products. In this regard, new agriculture export policy 2018 with a vision to double the farmers' income and increase the agricultural exports would play a critical role in the coming times. Some of the suggestions to boost the growth and exports of agriculture sector and employment creation in the economy are:

• Ease of doing business: Availability of sound ease of doing business is critical for the growth of agriculture sector. A dedicated Investor Portal called 'Nivesh Bandhu' has been set up to facilitate and assist investors in taking informed decisions. There is a need to strengthen environment for providing one stop information source on various policy developments, incentives offered, agriculture supporting resources and infrastructure facilities across the country.
• Promotion of cluster approach: Promoting cluster approach and setting up more agriculture based and food processing clusters would go a long way in supporting the individual entrepreneurs to sustain viable infrastructure facility at different stages in value chain. Promoting processing clusters and creating strong backward and forward linkages from farm gate to retails outlet through various measures including setting up of food parks/processing clusters with good fiscal and financial incentives is necessary to push growth of agriculture sector.
• Infrastructure development: There is a need to improve physical infrastructure like access to road, strength rural connectivity and competitiveness of the agriculture sector. Priority should be given to strengthen rural connectivity to markets for building strong linkage between raw material supplier and processing units. The logistics, transport system and development of ports including dry ports should be promoted on PPP mode in the coming times.
• Research and Development (R&D) and technology up gradation: R&D especially in areas like packaging, product development, food technology, among others needs to be strengthened. Provision of sponsored research and grants for promoting research related activities should be promoted from time to time. As small scale sector contribute a major chunk in food processing, they should be facilitated with technology up gradation facilities, ease of access to credit availability, market access, technical advice on productivity, marketing, selection of equipment and machinery, among others.
• Implementation of quality standards/certification: Adherence to minimum quality/ standard of food products for the international market is necessary to increase the share of Indian food processing products on global map. Awareness on quality of standards of food products need to be created through organizing large scale seminars, events, training programmers, among others. The food processing industry should strengthened its implementation module regarding global standards to increase their exports to several parts of the world in the coming times.
• Ease of access to raw materials: Regular availability of raw material is important for ensuring competitiveness of food processing industries. The cost of raw material tends to be high due to higher transportation costs and wastage of raw materials during transportation. Promotion of reliable and strong supply chain network between raw material suppliers and processing units on PPP basis should be promoted.
• Export marketing of products: Strengthening marketing and brand building of Indian products in foreign markets is critical to enhance exports of agricultural products in the coming times. There is need to embark upon the promotional campaign to promote high value added Make in India food products in developed markets. Further, there is need to promote an environment of undertaking market studies either in-house or engaging any research firm before launching any product or entering into a new market.

Encourage training and skill development: Small scale and unorganized food processing units generally hold a large section of unskilled, semi-skilled and skilled rural workers. In order to create better and favorable working environment, there is need to promote training and skill development of manpower, continuous technology up gradation, diversification and marketing of products, enhancement of knowledge about food safety and requirements, among others.

(Dr. S.P. Sharma is Chief Economist and Surbhi Sharma is Associate Economist with PHD Chamber of Commerce and Industry New Delhi.

E-mail: spsharma@phdcci.in)

Views expressed are personal.