Agricultural Trade Policy and Export Strategy

A STYLISED version of the changes in agricultural trade pattern during the course of economic development will suggest that with the growth of an economy not only does the share of agriculture in GDP decline so does the share of agricultural exports to the total merchandise exports. As the economy gets diversified nonagricultural commodities acquire greater importance in the product mix, and also in exports. Part of the explanation for the relative decline in agricultural commodities in the developing countries also lies in the rising share of processed agricultural products. On the imports side, with larger share ofpurchased inputs in the input base of agriculture, the quantum of imports of inputs such as fertilisers, pesticides, farm machinery, etc, rises. However, as the import intensity of agricultural production is low the earnings from exports outpace the outlay on imports. Most of the developing countries maintain a favourable trade balance in agriculture. India is no exception to these general trends, with a few special features. During last two decades India's agricultural exports as a part of total merchandise exports have continued to decline from the preponderant position they occupied in the pre-independence period and in the early years of independence. Their share in the merchandise exports of the country in recent years (1991-97) ranges between 15 to 18 percent. But with.theachievement ofself-sufficiency in foodgrains and some other major agricultural commodities, which used to account for a large portion of the import bill, the overall imports of agricultural commodities have sharply declined. The outlay on agricultural imports as a proportion of earnings from agricultural exports has progressively declined, and the overall balance has become progressively more favourable. Contribution of agricultural exports to foreign exchange earnings is critical for a country such as India which faces a chronic balance of payment problem. With the growth in economy, specially with the growth of more import intensive sectors such as 'industry' the need for foreign exchange earnings from agricultural exports becomes increasingly more important. Expanding export opntunities also mean bigger markets and higher v 'te for their output. However, while thinking about exports of agricultural commodities in a poorcountry like India the implications of export growth on domestic availability of agricultural produce, especially the foodgrains, cannot be overlooked. The moot question, therefore, is: how to augment export earnings withoutjeopardising the basic objective of food security. Discussion on these issues has, naturally, to take into account the new trade regime evolved after the Uruguay Rounds as the stated objective of the trading partners is to achieve economic efficiency and international competitiveness through increased reliance on market forces.