- Restrictive export regulations have been implemented by the Indian government in an attempt to contain food inflation ahead of the next state elections.
- This has a negative impact on agriculture, especially basmati rice.
- Although the goal of these steps is to keep inflation from becoming a political hot button, more research is needed to fully understand how they will affect global markets and the agriculture industry.
Basmati Rice Export Restrictions
- For basmati rice, an expensive kind mainly consumed by the upper middle class and sold to Gulf countries, Europe, and the US, the government has set a minimum export price (MEP) of $1,200 per tonne.
- Since Punjab and Haryana are the main producers, farmers there have suffered from lower prices as a result of the decision to set a high MEP, which has effectively limited basmati exports.
- In effect, the domestic upper-income urban class benefits at the expense of these farmers.
- Furthermore, by making this move, India runs the risk of losing its export markets to Pakistan, which is the only major rival for basmati rice.
Inadequate and Unstable Export Policies
- Export restrictions, in the form of export tariffs or export bans, apply not only to basmati rice but also to broken rice, non-basmati white rice, and parboiled rice.
- These policies don’t seem planned as they look unsteady and reactive.
- Approximately 40% of worldwide rice exports in 2022–2023 came from India, making it the largest exporter in the world.
- But these bans on rice exports, particularly non-basmati white rice, hurt India’s reputation internationally and make it more difficult for it to lead other countries.
Challenges in Doubling Agri-Exports
- The analysis shows that India’s agricultural exports have fallen short of the government’s lofty target of tripling agri-exports.
- Agri-exports increased significantly from $8.67 billion in 2004–05 to $43.27 billion in 2013–14, the final year of the UPA government.
- It is unlikely, nonetheless, that India’s agri-exports will even approach $50 billion in 2023–2024.
- The implementation of export restrictions that harm farmers while benefiting domestic customers is a major contributing factor to this failure.
What Should be done?
- There is a need for a more focused strategy that concentrates on assisting vulnerable segments of society through domestic income measures, as opposed to enacting restrictive export laws to support domestic consumers.
- Even if they appear to be good for farmers and consumers, India’s large subsidies, debt waivers, free power, and other populist policies may not be the best ways to ensure long-term agricultural competitiveness.
- India must prioritize funding for agricultural research and development (R&D), better farming practices, including precision agriculture, improved seeds, irrigation, fertilizers, and better farming equipment in order to increase agricultural competitiveness and exports.
- With just 0.5% of the agri-GDP going toward research and development, present levels of investment in this area are inadequate.
- In order for India to become a global leader in agricultural output and exports, this investment must be doubled or tripled.
- In conclusion, the competitiveness and health of the agriculture industry are being impacted by the restrictive export regulations that are a result of populist initiatives.
- In order to showcase its ability to create, produce, and export goods at a competitive rate, India needs to reevaluate its agri-export policies and investments in agricultural research and development.