analysis

Updated: Feb 15, 2018 12:23 IST

“India’s agri-exports potential is as high as $100 billion against current exports of $ 30 billion”, said finance minister Arun Jaitley in this year’s budget speech. He also said that the government will further liberalise agricultural exports to achieve this potential. Most people will welcome such statements.

Exports can be a big opportunity to enhance farm incomes in India. India’s agricultural trade regime is often accused of having a pro-consumer bias. When prices increase, export restrictions and lower import duties are used to control inflation. Domestic consumers gain but the farmer loses out on gaining from these cyclical movements. There is no bailout for the farmer when prices crash in domestic markets.

There are good reasons why a liberalised export push in agriculture might not be an unambiguous good. These are related with issues of long-term sustainability in agriculture and domestic food security concerns.

What is the biggest component of India’s agricultural exports? Spices, tea, cotton etc.all come to mind. The correct answer, however, is rice. Between 2006-07 and 2016-17, rice alone accounted for around 17% of the total value of India’s agricultural exports. More than half of our rice exports are of the basmati variety. Many farmers and exporters must have gained from the sharp rise in India’s rice exports.

These exports, however, entail a huge cost for the environment. Rice production uses a lot of water. In a 2016 Mint article, I used data from the Water Footprint Network – a global network on water related issues – to estimate that 10 trillion litres of water went into the production of India’s basmati exports in 2014-15. The story also pointed out that India was among the largest virtual exporters of water via agricultural exports.

Depleting water tables due to excessive use of ground water is a major concern vis-à-vis the sustainability of farming in India. Exporting more and more basmati rice without thinking of its environmental repercussions is not going to help matters. It would only hasten the destruction of agricultural ecosystems.

Agricultural production in India needs to change drastically if we want to prevent irreparable damage to our environment. A policy which only looks to maximise exports would not take us very far in achieving this. We need to come up with incentives which reward our farmers for shifting to producing environment-friendly crops, even if they do not get us more in export earnings.

An environment-friendly readjusting of India’s agricultural production need not necessarily be contradictory with farm incomes. India imports a large amount of pulses currently. The latest available data for past three years (2014-15 to 2016-17) shows that the value of India’s pulse imports is more than half of total rice exports from India. Why can’t we encourage farmers to switch to pulse cultivation from rice? Unlike rice, pulse cultivation can improve soil health, as pulses help in increasing nitrogen content, which is a crucial soil nutrient.

India’s agricultural production basket is extremely diverse. Given this fact, the pursuit of self-sufficiency in agriculture is not necessarily a bad thing. Not only would this save us valuable foreign exchange, it can also protect our farmers from the price volatility in international markets. Such an approach can also help us safeguard our food security interests.

The complete liberalisation of agricultural trade can make our domestic food production vulnerable to cheaper imports from highly subsidised production in developed countries. India’s policy makers are aware of this threat, which is why they are insisting for a permanent solution on the issue of public stockholding and special safeguard mechanisms in the World Trade Organisation.

There can be no disagreement about the fact that agricultural incomes have to be increased in India. The challenge would remain even if a significant part of agricultural workers move out of farming. What many people do not realise is the fact that leaving everything to the markets can be counter-productive in agriculture. Current farming decisions and practices are crucial for future sustainability. Markets, especially in foreign trade, are not the best way to send the right signals to adhere to these concerns. A smart country would encourage its farmers to cultivate environmental-friendly crops and import the environmentally-damaging ones. The farmer cannot be expected to act with foresight in such matters. This increases the role of futuristic policy making even more.

@roshanjnu