India, Brazil must strengthen farm-related ties

Both Brazil and India are rapidly developing economies, endowed with natural resources, large food producers and can potentially feed the world. They face similar challenges like food and nutrition security as well as climate change.

This is the context to explore partnership opportunities between India and Brazil in agriculture and allied sectors.

India is world’s third largest producer of food (behind China and the US). The share of agriculture in GDP is 14-18 per cent only; yet the farm sector is important because it employs as much as 50 per cent of the country’s workforce.

Food security and nutrition security are challenges. India may not be food insecure today, but portends are ominous. Indeed, nutrition security is critical as the current nutrition status of the population leaves much to be desired.

Indian agriculture faces new challenges in the form of land constraints, water shortage and climate change. At the same time, food demand is set to burgeon. As the country moves toward the ambitious $5 trillion GDP target, a combination of rising incomes plus demographic pressure plus current low per capita consumption is set to propel the demand for food.

Food demand growth may outpace supply growth over time. In the event, India’s export surplus will fall while import volumes will rise to meet the food needs of the people. The already fragile supply-demand fundamentals may weaken further in the coming years.

Areas of partnership

There are several areas of partnership for India and Brazil that may be placed in four different but interconnected buckets or four pillars of collaboration and cooperation: trade; investment; research; and technology.

Trade: From an Indian perspective, the following key crops/commodities deserve attention.

Oilseeds: India’s production has stagnated, while vegetable oil imports are humongous at 14-15 million tonnes a year valued at $12-13 billion a year. Vegetable oils are finished or semi-finished goods. India must at least partially replace the import of semi-finished oil with import of raw material — that is, oilseeds.

India imports 3-3.5 million tonnes of soyabean oil annually, equivalent to 20 million tonnes of soyabean. As part of the annual import plan, 4-5 million tonnes of soyabean should be allowed for import in lieu of soya oil. Soyabean import will deliver multiple benefits — help improve utilisation of idle processing capacity, deliver much needed soya oil and protein rich soyameal, generate employment and income, and generally benefit value chain participants.

As the world’s largest producer, Brazil can supply soyabean while India can use the customs tariff mechanism to ensure imported soyabean is priced at par with the minimum support price (MSP) for domestic soyabean.

Feed: The growing livestock and poultry sector often faces looming threat of feed shortage and volatile prices. The case for liberalising feed import is strong. Two years ago, India allowed import of 1.2 million tonnes of GM soyameal. The liberal policy must continue for the benefit of the Indian livestock and poultry industry.

Similarly, liberal import of dried distillers’ grains (DDG) must be allowed for the poultry sector. In oilseeds and meal, Brazil can become a reliable supplier.

Cotton: India has the world’s largest area (12.5 million hectares) planted to cotton, but acreage is stagnating. Yields are rather low and possibly plateauing. Meantime, domestic demand for cotton is set to grow and outpace domestic production. In the next few years, India’s export surplus of raw cotton will dwindle while import volumes will rise. Extra-long staple varieties will be in demand. Brazil can step in to service the Indian cotton market with competitive terms of supply.

Pulses: Although India is the world’s largest producer and consumer of pulses, it is also a large importer to bridge the domestic production shortfall. Stagnating acreage and low yields make harvest size uncertain. Demand is sure to rise. India’s import volumes are set to expand further from the current 2-2.5 million tonnes. Brazil can service the Indian market with its pulses; but have to be wary of sudden changes in policy.

Wheat and corn: These may also turn out to be opportunities for Brazil in future. Indian wheat is at the limit of heat tolerance even as climate change has begun to take a toll. India needs to boost domestic production with appropriate policy intervention. The risk of India becoming a net importer of wheat and corn over time is real.

Investment: Of the 270 million families in India, 75-80 million families may be middle-class and above with purchasing power. This growing middle-class with high aspirations is primarily driving the Indian demand for a range of goods and services. This segment creates investment opportunities for overseas partners.

Evidently, the processed foods market (ready-to-cook, ready-to-eat) is set for a big demand surge. Hundred per cent foreign direct investment (FDI) is allowed through the automatic route in the food processing sector. There’s big opportunity in fruits and vegetables as India is the world’s third largest producer.

Livestock and poultry too are ready for FDI. Genetic improvement, animal health, milk supply chain, value added dairy products are areas ready for overseas investment.

Plant protein is an emerging area. Vegetable protein is more economical than animal protein. With a section of the population shifting away from animal protein to plant protein, market opportunities are opening up. India has a large production base of plant protein material including legumes (oilseeds, pulses). Brazilian investments would be welcome.

Research: Indian and Brazilian research institutions can collaborate in sectors such as livestock and dairy in the area of genetic improvement, animal health, animal nutrition, enhancing milk yields, and so on. Crops like pulses, oilseeds, corn (maize) and sugarcane too offer collaborative research opportunities including in genomics and agronomy. Water use efficiency and climate-smart or climate-resilient agriculture is a great area for research collaboration.

Technology: Collaboration for technology development and transfer is critical. With fragmented landholding and smallholder cultivation, precision farming is the way forward for India.

Employing multiple technologies will help — information and communication technology (ICT), agri biotechnology, satellite tech (remote sensing), nuclear agri tech (mutants varieties of seeds; irradiation to extend shelf-life), nanotech, drones, field robotics, etc.

Finally, while opportunities present themselves, it is for the policymakers and entrepreneurs of both countries to seize the opportunity. Both sides have to stay committed to the common cause and work towards positive outcomes.

The writer is a policy commentator and agribusiness specialist. Excerpts of a talk delivered by the author during Brazil India Agribusiness Conference in New Delhi on November 2

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