A Case for Agri Exports - Part I

In this blog, my effort is to make a case for Agricultural exports from India. I will put across my views on why we need to focus more on this area, when compared to 'any' other area of exports. And why we must move beyond making noise about Cotton/Sugar and get serious with other agri commodities. As I will take my time to build up the case, the blog is split into two parts. 

To start, the top 6 exports from India last year (April2011-March2012, you can see more details here), with approximate values are:

            EXPORT ITEMS                           VALUE              GROWTH                   GROWTH 

                                                                                         (last year)                 avg. over last 5 years

1. Engineering Goods --------------    58    USD Billion    -02.8%                          23.9%
2. Petroleum Products --------------   56    USD Billion     34.3%                          39.6%                         
3. Gems and Jewelry --------------     47    USD Billion     27.3%                          38.8%                    
4. Chemical and related -------------- 40    USD Billion     27.4%                          22.9%                                        
5. Agriculture and allied products----  27.4 USD Billion     52.4%                          43.0%                     
6. Textiles                                ----- 27.2 USD Billion     21.2%                          13.1%                     

Agricultural exports, by value, is placed fifth. However, going by growth rate of last year, or for the last five years, it should be placed first. 

The constituents of the Agri exports show an amazing uniformity of distribution. It is not one or two products that are pulling the agri exports up. Cereals exports lead at around 6.2 Billion dollars, followed by guargum, meat and preparations, nuts and seeds, oil meals, spices, processed foods, sugar and molasses, all of which have an export value between 2 and 3.5 Billion USD. The distribution, to that extent, is spread over multiple products. 

Contrast this with Engineering exports, where transport equipment and auto components constitute more than half of the exports. 

It is important to understand the imports that go into export products. I want to talk about value addition here. I am aware of intra-industry trade in auto and some other sectors, which hinders my arguments. However, I shall account for that later. So for the last year, the figures are as shown below

            ITEMS                                            IMPORT VALUE

1. Engineering Goods                    65 USD Billion (deduced - approx)
2. Petroleum crude and Products  155 USD Billion
3. Gems and Jewellery                  92 USD Billion (30.6 for precious stones, 61.55 for Gold/Silver)                      
4. Chemical and related                19 USD Billion (excluding Petro chemicals above)
5. Agri                                         12 USD Billion (Edible oil 9.5 Billion, Pulses 2 Billion)
6. Textiles                                     5 USD Billion (data approximate, from textile ministry)

It can be seen that, except textile and agri sector, all other sectors have imports that outweighs exports. In case of chemicals, it is not obvious as petroleum imports also go into chemical exports. Once accounted, chemical sector will come into deficit. In case of Gems and Jewelry, gold imports is mainly for domestic consumption. However, a small part, goes back in jewelry form. I couldn't get the exact figure, but I am sure that if we combine precious stones and gold, it will be slightly lower than export figures, with low figures for value addition. Precious stones is mainly traded with India for polishing, cutting, grinding, grading and jewelry making. Except for the last one, the scope for higher value additions in other activities is low.

Petroleum again, is mostly for domestic consumption, but a third of it is refined and re-exported. Due to cost advantage of refining, we are exporting petroleum products. 

Textile imports is mainly due to import of yarn and fabrics, followed by semi raw and raw materials to make fabrics. Ready-made garment imports is insignificant. You can see more about textile imports here.  The value addition in textiles is quite high and most of the exports have indigenous origins of raw material. 

Agri exports, have a very high value addition. In case of exports of direct produce, like apples/mangoes, it is almost 100%. In case of processed foods, it is slightly lower. Even then, overall value addition of this sector is undisputed highest. After accounting for fertilizer imports, some capital machinery for food processing and  accounting for fuel that went into transport etc, I can say that if I am getting one dollar through exports of Agri products, I can be reasonably sure that I have gained at-least 90 cents of foreign exchange, on a net to net basis. I cannot say that about 'any' other export product. 

The second part shall follow soon...

(PS: I thought I will talk about intra-industry trade of engineering sector here, but I am reserving it for a separate blog on a later date as it mars the flow. My apologies)