Context: With global supply chains being disrupted because of the COVID-19 crisis, the Indian government has given a clarion call for “Aatma Nirbhar Bharat”.
- The government has banned 59 Chinese apps, it has stepped up effort to check imports and investments from China, even raised import duties, and asked Indians to “be vocal for local”.
- Many economists have described all this as back to protectionism.
Self-reliance in the agriculture sector:
- Presumption: For a large country like India, with a population of 1.37 billion, much of the food has to be produced at home to avoid a situation like the mid-1960s (ship to mouth).
- India realised the political cost of over-dependence on food aid.
- Difference between the mid-1960s and today: The availability of foreign exchange reserves. In the mid-1960s, if India had spent all its foreign currency reserves, the country had about $400 million. Today, India has foreign exchange reserves of more than $500 billion.
- Biggest reform in the last three decades: The reform that has led to self reliance in food is the correction of the exchange rate, coupled with the gradual integration of India with the world economy.
- This has helped India increase its foreign exchange reserves from $1.1 billion in June end, 1991 to more than $500 billion today.
India a net exporter of agri-produce:
- India has been a net exporter ever since the economic reforms began in 1991.
- The golden year of agri-trade was 2013-14, when agri-exports peaked at $43.6 billion while imports were $18.9 billion, giving a net trade surplus of $24.7 billion.
- Strategy to augment exports and compress imports: For this there is the need to keep in mind the principle of “comparative advantage”. That means exporting more where India has a competitive edge, and importing where we lack competitiveness.
Agri-produce where India has Comparative advantages:
- The current agri-export basket of 2019-20 gives a sense of “revealed comparative advantage”.
- Marine products with $6.7 billion exports top the list, followed by rice at $6.4 billion (basmati at $4.6 billion and common rice at $2.0 billion), spices at $3.6 billion, buffalo meat at $3.2 billion, sugar at $2.0 billion, tea and coffee at $1.5 billion, fresh fruits and vegetables at $1.4 billion, and cotton at $1 billion.
- Virtual export: Together power and fertiliser subsidies account for about 10-15 percent of the value of rice and sugar produced on a per hectare basis.
- It is leading to the virtual export of water as one kg of rice requires 3,500-5,000 litres of water for irrigation, and one kg of sugar consumes about 2,000 litres of water.
- Disadvantage: The two crops are leading to a faster depletion of groundwater in states such as Punjab, Haryana (due to rice) and Maharashtra (due to sugar).
- This leads to increased pressure on scarce water and a highly inefficient use of fertilisers.
- It may be worth noting that almost 75 percent of the nitrogen in urea is not absorbed by plants. It either evaporates into the environment or leaches into groundwater making it unfit for drinking.
- On the agri-imports front, the biggest item is edible oils, worth about $10 billion (more than 15 mt).
- This is where India needs self-reliance, not by levying high import duties, but by creating a competitive advantage through augmenting productivity and increasing the recovery ratio of oil from oilseeds and in case of palm oil, from fresh fruit bunches.
Need of the hour:
- Offer similar incentives (on the lines of rice etc) for exports of high-value agri-produce like fruits and vegetables, spices, tea and coffee, or even cotton, as we do for rice and sugar.
- Self-reliant in the production of edible oil: While mustard, sunflower, groundnuts, and cottonseed have a potential to increase oil output to some extent, the maximum potential lies in oil palm.
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