ICRIER’s Dr. Arpita Mukherjee opines that cereals are exported more than fruits and vegetables because of a variety of reasons which include lack of export-oriented production in case of fruits and vegetables; lack of awareness among farmers about importing country requirements and standards. Horticulture export can grow by attracting private players into the sector through right incentives.
IBT: How have India’s horticulture exports progressed in the global market over the years? Which are the major product categories where India has been able to penetrate global markets?
Dr. Arpita Mukherjee: India is the second largest producer of fruits and vegetables in the world. It is the topmost producer of banana, mangoes, lime, lemon, papaya and okra. According to the Department of Agriculture, Cooperation and Farmers Welfare, India’s horticulture production is estimated to be 320.48 million tonnes in 2019-20. In the same year, India exported fruits and vegetables worth around US$ 1,277.09 million. Indian horticulture exports accounts for over 35 percent of the total exports of agricultural commodities, and the exports have increased overtime.
Indian horticulture produce is exported to over 70 countries; primary among them is countries in the Middle East, Southeast and South Asia, the UK, EU member states and the US. By country, India’s top three export destinations are UAE (16 percent), Bangladesh (13 percent) and Netherlands (9 percent). More recently exports to African countries have increased. Exports to some markets like the US shows a fluctuating trend.
By product categories, there are differences across export markets. For example, in Middle East, UAE is a major importer of fruits and vegetables like papaya, pineapples, pumpkins and lemon.
IBT: What markets are we serving presently and what potential markets can be explored for exports? What are the challenges to expanding in these markets?
Dr. Arpita Mukherjee: As mentioned above, Indian horticulture produce is exported to over 70 countries but there are a few issues. First, despite being one of the largest producers, Indian share in global exports is less than 2 percent for horticulture produce. Second, although different varieties of fruits and vegetables are grown in India, only some of these varieties are exported. For example, India is yet to harness the potential of exporting products like onion, genus capsicum, coconut, and banana to the US. Despite being one of the largest producers of beans, India faces issues in exporting it to developed markets like the EU. Third, India primarily exports fresh fruits and vegetables, and value addition and exports of processed produce is low, unlike countries such as Thailand.
In most of the developed markets, tariffs are low but Indian exports face food safety and standards related issues commonly known as sanitary and phytosanitary measures, which includes permissible maximum residue levels, risk assessment of pest and diseases, etc. Fruits flies in fruits like mangoes and pests in products like brinjal and okra has led to rejection of exports in key markets like the EU. In the past, this has also led to temporary bans (for example mangoes in the EU).
Today, Indian exports are mainly to the developing country markets. Of late, India has been facing stiff competition in markets such as the EU from many ASEAN and African countries.
IBT: Major changes in global trade of horticulture post-COVID?
Dr. Arpita Mukherjee: The outbreak of the COVID-19 pandemic and the sudden lockdown has led to the disruption of the supply chains for horticulture. India also went into a sudden lockdown due to which the perishable export supply chain was disrupted, leading to wastage. Air freight globally went through significant disruption and that adversely affected horticulture exports. While government across countries have tried to minimize the disruptions in food supply chains, some have started implementing more rigid food safety measures.
Food demand is steady during the pandemic, but some country level studies show that global economic downturn could impact demand for higher value products, including some high-value horticulture produce. There is a shift to staples and less processed products, which can be an advantage for India as its exports are primarily fresh fruits and vegetables. There is also a shift in demand towards organic produce.
Trade relations have also changed. For example, China is importing a number of horticulture produce but there are geo-political tensions with India.
IBT: What are the opportunities for value addition, and what are the constraints exporters face in this regard?
Dr. Arpita Mukherjee: Indian government has allowed 100 percent FDI in food processing and has come up with a variety of schemes and policies to promote value addition in India. The country has a variety of agriculture produce and more recently a number of countries would like to diversify their sourcing destination to minimize risk due to supply chain disruption.
The level of food processing in India is low, and quality varies widely due to some issues:
(i) Many schemes such as Mega Food Park schemes have not resulted in growth of agro-processing clusters. These schemes need to be reviewed.
(ii) Due to small and marginal farmers, production is in smaller quantity with variable quality. Traceability to farms is difficult. It is also difficult for small and marginal farmers to adopt modern technology.
(iii) Food processing, which is labour intensive has limited modern technology required to maintain social distancing and other COVID-19 related norms.
(iv) There is high incidence of use of chemical fertilizers and pesticides, which can lead to export rejections.
(v) Manufacturing suffers from high inputs costs like high cost of power and high logistics costs vis-a-vis China and other ASEAN countries.
(vi) Food processing also requires imported raw materials and India has one of the highest tariffs in the world along with non-tariff barriers. There are multiple barriers to imports which discourages foreign investors to set up processing units in India.
(vii) India does not have mutual recognition of standards for products like organic for processed produce. Export markets like EU has given unilateral recognition only for raw materials in case of organic.
(viii) Our export linked subsidies have been challenged in the WTO and the government is yet to design WTO-smart subsides.
(ix) India has not been able to efficiently use the joint capacity building programmes with importing markets like the EU for horticulture exports as has been done by some African countries for horticulture products and Cambodia for rice exports.
(x) The government has not done detailed value chain analysis studies by product categories and markets, which is needed to promote horticulture exports. Very few existing studies focus on importing country requirements and how these can be met. Overall, India has received limited domestic and foreign investment in food processing and supply chain, which is needed for value addition in the country.
IBT: Albeit India produces more fruits & vegetables over cereals, it is the latter which are exported primarily by India? Why is that the case? How can Indian exporters be encouraged to take up horticulture exports?
Dr. Arpita Mukherjee: According to Ministry of Agriculture and Farmers’ Welfare, for 2019-20, India’s cereals production was around 272.66 million tonnes (rice was 117.94 million tonnes, wheat was 107.18 million tonnes and coarse cereals was 47.54 million tonnes). Comparatively, horticulture production was around 320.48 million tonnes. According to Agricultural & Processed Food Products Export Development Authority (APEDA), in 2019-20, India’s exports of cereals was US$ 6611 million and for fruits and vegetables the exports was USD 1277.09 million.
Cereals are exported more than fruits and vegetables because of a variety of reasons which include lack of export-oriented production in case of fruits and vegetables; lack of awareness among farmers about importing country requirements and standards; excessive use of pesticides; infrastructure gaps in terms of capacity of pack houses, cold storages, refer vehicles, etc., for perishable produce; lack of organic and pest/disease free zones; absence of new plant varieties as in case of table grapes; and high costs of air freight for perishable produce.
Horticulture export can grow by attracting private players into the sector through right incentives. The government should promote farms for third-party certified organic produce, by supporting them during the conversion of land from conventional to organic farming as is done by countries such as the UK.
There is need for stringent monitoring of fertilizers and pesticides and only the registered pesticides should be allowed to be used. It is important to create organic and pest free zones for fruits and vegetables. There is need to use technology to ensure traceability to farms and technology and training facility should be provided to farmers to improve productivity and for exporters for proper packaging, cold storage and transportation of fresh fruits and vegetables. There is need for investment in development of state-of-the-art cold chain infrastructure and there should be a well-defined quality assurance process. There should be dedicated centers for perishable cargoes with integrated post-harvest handling facilities and green channels at the airports for fast track clearances. Since agriculture is a state subject, there is need to work closely with the state horticulture departments and engage stakeholders at state levels.
IBT: Which are the top exporters in the world and what can we learn from other countries to boost its horticultural exports?
Dr. Arpita Mukherjee: According to United States Department of Agriculture (USDP), top three global exporters of fresh fruits and vegetables are United States, Mexico and China. To boost horticulture exports India needs to set up a robust technology driven supply chain and have proper equipment and training at the farm level as has been done by these countries.
There should be well-defined export targets and plans. India should develop capacity to supply produce of uniform quality in large volumes and create organic and pest free zones. The supply chain must be integrated and barriers to import of plant varieties and seeds needs to be looked into. India should focus on the quality of produce and on uplifting the domestic food safety and hygiene standards as has been the focus of some of the developing countries.
Barriers to exports of products like onions have to be addressed and there is need for data collection, monitoring and analysis of the gaps in the entire value chain. Exporters across India should be able to access various resources available at government level and there need for a detailed study on export related infrastructure. Joint capacity building funds with key markets such as the EU should be used for research, monitoring of the supply chain gaps and for learning from the best practices.
Partnership with companies from countries such as Netherlands will help to get best practices. The Department of Commerce should do product-specific value chain studies for exports to 4-5 markets, which can also examine the strength of key competitors and best practices that they have adopted. There is need for research to see if some global best practices can be replicated in India.
Dr Arpita Mukherjee is a Professor at ICRIER. She has several years of experience in policy-oriented research, working closely with the Government of India and policymakers in the EU, US, ASEAN and in East Asian countries. She has conducted studies for international organizations such as ADB, ADBI, ASEAN Secretariat, FCO (UK), Italian Trade Commission, Konrad-Adenauer Stiftung (KAS), OECD, Taipei Economic and Cultural Centre (TECC), UNCTAD and the WTO and Indian industry associations such as NASSCOM, FICCI, IBA, IDSA and EICI. Her research is a key contributor to India’s negotiating strategies in the WTO and bilateral agreements. The views expressed here are her own.
