What do India’s massive agricultural exports imply in 2022?

India is a large agricultural country in Asia and agriculture has always occupied a dominant position in the national economy. In the past 40 years, although India has been vigorously developing industries such as industry and information technology, to this day, about 80% of India’s population still relies on agriculture for their livelihood, and the net value of agriculture accounts for more than 30% of the net domestic output. It can be said that the growth rate of agriculture determines the growth rate of Indian national economy to a large extent.

India has the largest area of arable land in Asia with 143 million hectares. Judging from this figure, India can be called a major agricultural producer. Meanwhile, India is also a major exporter of agricultural products, exporting around 2 million tons of wheat each year alone, and leading the world in exports of several other important agricultural products, such as beans, cumin, ginger and chilli.

The massive export of agricultural products has always been a powerful tool for India to create the foreign exchange. However, this year, subject to the international situation, India’s agricultural products are faced with great difficulties in both domestic output and export. The previous policy of “selling and selling” has also brought about problems in domestic economy, people’s livelihood and other aspects.

In 2022, the conflict between Russia and Ukraine, two of the world’s leading grain exporters, slashed wheat exports and increased demand for Indian wheat as a substitute in the market. According to Indian domestic agencies’ forecasts, India’s wheat exports are likely to reach 13 million tons in the 2022/2023 fiscal year (April 2022 to March 2023). This appears to have been a huge boon for India’s agricultural export markets, but it has also led to a spike in food prices at home. The Indian government announced a slowdown and even a partial ban on wheat exports in May this year on the grounds of “food security”, but official data showed that India still exported 4.35 million tonnes of wheat in the first five months of the fiscal year (April to August), an increase of 116.7% year-on-year. With the steep increase in agricultural exports, prices of basic crops and processed products such as wheat and wheat flour in the domestic market have risen sharply, resulting in severe inflation.

The diet of the Indian population is dominated by grains, and only a small portion of income is spent on fruits and vegetables which are expensive foods. As a result, in the face of rising food prices, the ordinary people’s living situation is much more difficult. What made matters worse was that farmers have chosen to stock up in the hope that their crops will increase in price as living costs rise. In November this year, officials from the Cotton Association of India stated publicly that the new season’s cotton crop has been harvested, but many farmers were reluctant to sell, hoping that these crops continue to rise in price as before. Last year, farmers received record prices for cotton, but this year’s new cotton prices are unlikely to match last year’s levels, as domestic production has increased and international prices have fallen. The price of Indian cotton, which hit a record high of 52,140 rupees per bale (170 kg) in June due to soaring international prices and domestic production cuts, is now down nearly 40 percent from its peak. A cotton farmer in Gujarat said the price of seed cotton was 8,000 rupees per quintal (100 kg) when it was sold last year, but it has since risen to 13,000 rupees per quintal. This year they do not want to sell cotton early and will not sell at prices below 10,000 rupees per quintal. According to an analysis by India’s Commodity Research Institute, cotton farmers are using earnings from previous years to expand warehouses to store more cotton. This kind of hoarding mentality has undoubtedly further aggravated the inflation of the Indian agricultural market.

India has formed a policy dependence on a large number of exports of agricultural products, and has become a double-edged sword affecting the Indian economy. This problem is clearly exposed in the context of the complex and volatile international situation this year. If you look at the underlying reasons, the dilemma has something to do with a long-standing domestic reality in India. Specifically, India’s food production is large in total while less per capita. Although India has the largest area of arable land in the world, it has a large population and a small area of arable land per capita. In addition, India’s domestic agricultural modernization level is relatively backward, with the lack of advanced irrigation facilities and disaster prevention facilities, relying heavily on human resources yet with low dependence on agricultural equipment, fertilizers as well as pesticides. As a result, the harvest of Indian agriculture is greatly affected by the arrival of the monsoon almost every year. According to statistics, India’s per capita grain production is only around 230 kg, which is far below the general international standard of 400 kg per capita. So it seems that India still has a certain gap with the conventional perception of the image of a big agricultural country.

In recent times, India’s domestic inflation has slowed down along with the banking system has gradually returned to normal, and the national economy has recovered somewhat. Is it the time to continue to export large quantities of agricultural products to preserve foreign exchange? Or should the policy be tilted to the farmers as the majority of the general public to stabilize the livelihood of the people? It is worthwhile for the Indian government to weigh the matter again and again.