With exports beating imports and global prices slumping, desi farming goes global

By: Ashok Gulati

Ten years ago, nobody could have imagined that India would be the largest exporter of rice and guar gum, and the second-largest exporter of beef and cotton.

In fact, in 2012-13, India exported 22 million tonnes (mt) of cereals, which it has never done in history. But India is also one of the largest importers of edible oils, importing more than 10 mt worth $11 billion in 2012-13, constituting about 55 per cent of domestic consumption. India’s farm exports in 2012-13 were more than $41 billion vis-à-vis imports of $20 billion, a net surplus of more than $21 billion.

Similar, or even larger, surplus in farm trade is expected in 2013-14.

The Balassa index of Revealed Comparative Advantage for Indian agriculture is 1.68 compared to 0.98 for manufacturing in 2012-13, indicating that Indian farming is more competitive than the manufacturing sector. How did India achieve this?

One of the prime movers behind this is the globalisation of Indian farming. In 1990-91, India’s agri-trade (exports plus imports) was only 5 per cent of farm GDP, which rose to more than 18 per cent by 2012-13.


The sharp rise in global farm prices from 2007-08 helped India exploit several export opportunities: from guar gum to grapes, cotton to cereals, and mango to fish.

Better incentives for farmers induced them to adopt better technologies and farming practices, invest more in agriculture — especially irrigation and farm machinery — raising overall productivity and production. New production peaks are being scaled in 2013-14: grains 263 mt, horticulture 269 mt, milk 139 mt and oilseeds 34 mt. Though other policies helped in achieving this, the trigger came from global prices, which percolated to domestic markets.

Cereal Killer

The case of cereals is interesting. In 2006-07, India imported about 6 mt of wheat and its grain production stood at 217 mt. We imposed a ban on export of wheat and common rice in September 2007, when global food prices were erupting. However, it raised the minimum support prices (MSPs) of wheat and rice by more than 30 per cent, to compensate farmers for the loss of global markets and incentivise production at home.

The National Food Security Mission was also launched in 2007, to increase grain production by 20 mt within five years. By 2011-12, actual grain production increased by 42 mt, touching 259 mt. Government stocks increased to an unprecedented 80 mt on July 1, 2012. The government opened up exports of wheat and rice in September 2011, and in 2012-13, we emerged as the largest exporter of rice, with more than 10 mt of exports.

We also exported 6.5 mt of wheat and 4.5 mt of maize, and little quantities of other cereals, all totalling 22 mt. In 2013-14, it could be a little less, but over both 2012-13 and 2013-14, it seems that India is set to export about 40 mt of cereals. If cereals export was banned, it would have led to a crash in domestic prices, or government stock would have crossed 100-mt mark by now.