Dispensing with quantitative restrictions on agri-exports or imports, and replacing them with a transparent system of tariffs, is the way to go.
India’s agricultural exports have been a bright spot in an otherwise dismal balance of payments landscape in recent times. At $37.1 billion in 2011-12, such exports far exceeded imports of $17.2 billion in that year. But it is not just being a net agri-exporter – the surplus here rose from $14 billion in 2010-11 to almost $20 billion last fiscal, even as the country’s overall merchandise trade deficit ballooned to $ 190 billion from $ 131 billion during the same period – that is heartening. Equally significant is the diversification that has happened within the agri-export basket. Till about 10 years back, this was dominated by marine products, cashew, tea, coffee and spices. But today, there are newer and more dynamic segments such as cotton, rice, wheat, maize, meat, oil-meals and guar-gum. India has even emerged as the world’s No.1 exporter of rice (ahead of Thailand) and beef/buffalo meat (beating Brazil), while turning from an importer to the largest cotton shipper after the US.
What is remarkable is that all this has been achieved notwithstanding a policy environment that has not been particularly conducive for agri-exports. The Government has clamped bans and other restrictions in exports of rice, wheat, sugar, cotton, onion or milk products at the slightest indication of domestic shortages or upswing in global prices. On the other hand, virtually all farm products now are importable at nil duty. If agri-exports have fared well despite such a trade hostile regime – clearly discriminating against producers in the name of protecting poor consumers – it only indicates the inherent competitiveness that India possesses in this field. The fact that the country has also substantially diversified its export basket beyond traditional marine and plantation products – even while two-thirds of its agri-imports are constituted by just two items, edible oils and pulses – further reinforces this point.
Given the above inherent advantage, and the added opportunity for exports presented by a weaker rupee, the country should not fritter it away. The time has come to institute a stable and rational agri-trade policy, as opposed to the existing regime of knee-jerk export restrictions or fixing import duties based on selective lobby pressures. The Government may do well to follow a recent suggestion by the Chairman of the Commission for Agricultural Costs and Prices, Ashok Gulati, to totally dispense with quantitative restrictions on agri-exports or imports and replace these with a transparent system of tariffs. The tariffs, in turn, should be linked to global price trends. If international prices for a particular commodity fall, say 15-20 per cent below a certain long-term trend level that can always be determined, the Government could impose de novo or even raise tariffs in a calibrated manner. They can likewise be levied on exports, when world prices shoot up more than 15-20 per cent above the trend line. Tariffs are definitely a better way to regulate exports and imports than bans or quotas.