The impact of the Red Sea crises and Russia-Ukraine war is visible on the Indian agriculture sector, especially on exports. India’s agriculture exports slipped nearly 9 per cent between April and February in FY24 to $43.7 billion due to the Red Sea crisis, the Russia-Ukraine war, along with domestic restrictions.

According to a CRISIL report, the impact of Red Sea crises will be significant on the agricultural sector due to the perishable nature of the goods and lean margin profiles, which limit the ability of the sector to absorb the risks from rising freight costs.

For instance, India is the largest exporter of rice globally. In 2022, the export volume of basmati rice from India amounted to over three million tonnes globally. Rising freight costs have curbed its export — which accounted for 30-35 per cent of the production — and this is now being sold in the domestic market at lower margin.

Currently, India’s agriculture export share in the global market is only 2.4 per cent which needs to increase up to 4-5 per cent.

There is a need to develop a holistic agriculture export plan with diversification of products and markets. The focus should be on commodities with high potential for export growth such as bananas, mangoes, grapes, guava, pomegranate, watermelon, onion, green chilli, capsicum, okra, garlic, groundnut, alcoholic beverages, cashew nut, buffalo meat, jaggery, natural honey, potatoes, and baby corn.

While India’s exports of these items in 2022 stood at $9.03 billion, the global imports of these came in at $405.24 billion in the same year, with the US, Malaysia, Canada, Russia, Germany, France, Korea, China, Indonesia, Japan, Italy, Belgium and the UK being the top buyers.

Develop sea protocol

There is a need to develop a sea protocol to enhance these exports. For instance, ginger, pineapple, mangoes and oranges, among others, are mainly transported by air, which increases transition costs; the export of these commodities needs to be promoted through sea routes. Developing a sea protocol reduces the logistics cost, especially for export of horticulture produce to long-distance market, and will enable a quantum increase in exports.

India accounts for 14 per cent of global wheat production, more than Russia and Ukraine combined. But India’s share in wheat exports is only 3 per cent as wheat is largely used for domestic purposes.

Indian wheat stocks are three times the mandatory limit of 7.6 million tonnes.

Egypt, Israel, Oman, Nigeria and South Africa, among others, are the major wheat importing countries and they rely on Russian or Ukrainian wheat. Since India has excessive wheat stock, it can be exported to the aforementioned countries.

Improving agriculture export infrastructure, especially pack houses, integrated cold storages and processing mechanisms, will help reduce the perishability of exported commodities. A specific long-term strategy is needed with diversification of agricultural production and exports that factor in comparative advantage, available market, productivity, consumption, subsidies and incentives, conserving scarce resources such as water and energy, and reducing the carbon footprint.

Also, there’s a need to focus more on value-added processed food products, rather than processed agricultural commodities, for exports.

The writer is an agricultural economist