NEW DELHI: The domestic prices of key agricultural commodities were below the export-parity prices during most of the time in the decade 2004-2014, according to a new study by ICRIER and World Bank.
However, the export/import opportunities were not always used as restrictive trade policies played spoilsport; for instance in the 2007-08 global food crisis, though rising global prices made many Indian products export-competitive, rice and wheat exporters among others were prevented from fully exploiting the trade opportunity.
In the decade mentioned above, 72% of the time domestic prices of 15 commodities, including wheat, rice, maize, potato, mango, buffalo meat and banana, were ‘exportable’, while only 11% of the time they were above import-parity prices and were therefore competing within imports.
In the remaining 17% of the period, these domestic commodities were in the ‘non-tradable’ zone as their prices were between the relevant exportable/importable reference prices, according to the study titled ‘Price distortion in Indian agriculture.’
It has stated in case of commodities like rice, groundnut, cotton, buffalo meat, onion, banana and potato, the Indian prices were 90% to 100% of the time below their corresponding export parity prices. “For sugar and skimmed milk power, domestic prices were above import parity prices in most of the years. Soyabean, maize and wheat prices were largely in the non-tradable band,” it noted.
On the positive impact of the global food crisis of 2007-8, the study has stated that it made many Indian products very export-competitive. “In case of rice and wheat, the restrictive trade policy prohibited the exporters from fully exploiting the trade opportunity, but for other agri-commodities like buffalo meat, onion and groundnut, the crisis translated into greater export opportunities,” according to the study.
Pointing towards inconsistency in India’s agricultural exports policy that in most years for majority of products, the policymakers used restrictive export policies to keep domestic prices low.
However, for fruits and vegetables and livestock, trade is highly sensitive to transport and handling costs and increased opportunities to neighbouring Countries — Bangladesh, Nepal, Sri Lanka etc have triggered Indian exports.