AN ECONOMIC INQUIRY INTO GROWTH AND INSTABILITY OF INDIA'S AGRICULTURAL EXPORTS

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1 Indian J. Agric. Res.. 35(1): AN ECONOMIC INQUIRY INTO GROWTH AND INSTABILITY OF INDIA'S AGRICULTURAL EXPORTS Khem Chand, V.C. Mathur- and Shalander Kumar- CAZRI, Regional Research Station, Pali Marwar , India ABSTRACT The present study deals with the temporal changes, growth & exports of agricultural commodities from used to instability in the The exponential function was compute the growth rates and instability indices. The growth in export of fruits and vegetables, oilseeds, fish and fishery products and feeding stuff for animals have been remarkable in early nineties as compared to previous decade ( ). The export 01 cereals and cereal preparations, and sugar and honey were observed to be most volatile in the last two decades. Both total merchandise and agricultural sector trade are showing deficit since but trade in agricultural sector turned to surplus of $ 1349 million in , indicating positive impact 01 new Iiberalised trade policies. INTRODUCTION Notwithstanding the importance of selfreliance and economic independence. mutual interdependence is an important and imperative condition in the world economy. Thus international trade is not only important but also essential from the point of view of economic development, especially for the less developed countries. In the context of India, liberalisation and globilisation policies. with the emphasis on stabilising the balance of payment position of the country, exports need to be assigned prime importance. There exists an intimate relationship between exports. national income and investment. Fluctuations in exports and export earnings generate fluctuation in domestic activity which makes the process of planned development complicated. uncertain and reduce the efficiency with which investment resources are allocated (Massell 1970; Kumar and Singhal 1989). Division of Agricultural Economics. lab!. New Delhi... CIRG (lcar). Mdkhdoom (Mathura). Severa! agricultural and agro-based products produced in India have a huge export market. As per the Agriculture Policy Resolution 1993, India has natural comparative advantage in its exports on account of lower import needs of inputs, low level Cost and diverse agroclimatic conditions. This advantage has to be maximised by giving a special thrust to specific commodities which have a potential in the world market (Sood 1993). Under the global agriculture. our country has a large scope for the exports of processed foods which have a great demand in the developed countries, especially USA, UK. Japan and Canada (Singh and Vasisht. 1995). However, in order to evolve a strategy for promoting ag,icultural exports, it is imperative to examine how the exports of agricultural commodities have performed in the past. The present study is. therefore. an attempt to examine (1) The temporal changes in the exports of the agricultural sector. (2) To estimate the compound rate of growth of agricultural exports over the last three

2 26 INDIAN JOURNAL OF AGRlaJLTURAL RESEARCH decades, and (3) To estimate the extent of instability of agricultural exports. MATERIAL AND METHODS,. The data on India's exports have been taken from various issues of the FAD Trade Year Book. Data on the values of exports are in terms of US dollars. Since fluctuations in the value of trade due to change in the price vector are less if it is measured i'n U.S. dollars than in rupees, the trade has been measured in terms of US dollars. For computing growth rates and instability indices, exponential function of the following form was fitted: Y I = bo(bl or log Y I = log b o + t log(b\) Annual compound growth rate, r, was computed as: = (Anti log (b\) - 1) x 100 The Instability Index (I) was constructed as follows: Where, ~~ I '" i= 1 n-k e. = Value of residual of ith observation I n = Number of observations, and k = Number of variables The exponential time trend was fitted to the data on value of exports using four yearly moving average of data, for the period 1962 to The four yearly length of moving average was used to even out the probable effects of weather cycle which affects the exports of agricultural commodities through its effect on domestic crop output. The data series based on four yearly moving average gave better fit (based on value of R 2 ) as compared to three and five yearly moving average. RESULTS AND DISCUSSION Composition of Agricultural Exports: The values of agricultural exports during the period 1962 to 1994 is presented in Table 1. The analysis is based on comparison among the quadrennia. The commodities of the agricultural sector are grouped under the heads, ag~icultural products, fish and fishery products, forest products and agricultural requisites. The annual exports of total agricultural products increased more than four times during the years to (Table 1). The increase was more than double during the period as compared to Although, the exports of this group stagnated in eighties, it got boost in the nineties and increased to $ million, which may be due te the impact of new economic policies. Fish and Fishery products have shown a remarkable increase in their exports, the increase was about double during the period as compared to The export of coffee, tea, cocoa and spices and tobacco showed a remarkable increase till eighties but declined in This decline may be because of absence of adequate exportable surpluses and increased competition in the world tea market from Sri Lanka and China. The export earnings of fruits and vegetables and textile fibres (except ) have shown continuous increase and reached at $ million and $ million in , respectively. The value of export of sugar and honey is continuously decreasing from its peak $ million (1974-"7"7\ to $61.29 million ( ) due to country' inability to generate sufficient exportable surplus in sugar on durable basjs.

3 Vol. 35. No.1, Table 1. Value of exports of selected agricultural commodities/groups and their share in total value of exports of agricultural sector, ([n million US $) Average value of the item Item TOTAL AGRICULTURAL PRODUCTS (97.53) (95.52) (9022) (90.12) (87.82) (85.86) (83.84) (80.00) Cereals and cereal preparations (012) (039) (3.30) (126) (10 18) (7.57) (879) (10.09) Fruits and vegetables (912) (1399) (12.15) (960) (866) (11 70) (13.40) (13.11) Sugar and honey (5.35) (3.55) (3.66) (16.53) (4.41) (312) (0.34) (1.59) Coffee, tea, cocoa and spices (4453) (4310) (33.27) (30.12) (33.13) (31.12) (31.47) (1910) Feeding stuffs for animals (1021) (10.36) (12.05) (9.63) (7.06) (6.01) (7.84) (13.71) Tobacco (6.49) (6.48) (7.55) (632) (6.76) (9.82) (9.69) (3.71) Oilseeds (0.95). (0.77) (116) (3.17) (1.19) (1.60) (120) (1.81) Textile fibres (833) (6.71) (5.88) (305). (4.09) (4.13) (3.10) (4.95) Fixed vegetable oil (3.27) (1.18) (2.44) (2.17) (2.32) (3.13) (U5) (2.36) 2. Fish and Fishery products (1.59) (3.35) (7.51) (8.22) (10.88) (12.58) (13.72) (1732) 3. Forest products (0.78) (1.03) (2.10) (1.44) (0.93) (0.60) (0.74) (0.79) 4. Agricultural requisites (0.10) (0.10) (0 17) (0.22) (0.37) (0.96) (1.70) (1.89) 5. Total' Agricultural Sector (100) (100) (100) (100) (100) (100) (100) (100) ( ) Note: 1. Figures in parenthesis indicate percentage to total agricultural sector exports. 2. The sum of individual'items/sub-groups may not equal the group total as some of the items of minor importance have not been included in the Table. In percentage terms, the share of agricultural products in total agricultural sector exports decreased from 98 per cent in steady rate, the share of forest products to 80 per cent in , remained constant. Except sugar and while share of the fish and fishery products honey, tobacco, textile fibre and fixed and agricultural requisites mcreased at a vegetable oil, the share of all other

4 28 INDlAN JOURNAL OF AGRICULTURAL RESEARCH commodities increased in total agricultural sector export. Growth and Instability in the Exports of Agricultural Commodities : The annual compound growth rate and instability indices of Indian exports are presented in Table 2. Except for sugar and honey, there IS a positive growth rate in the export of all other commodities during the period The overall growth rate of agricultural sector was 8 per cent. Although the overall annual compound Table 2 Commoditywise growth rates 'and instability indices of the Indian exports Annual Commodities Annual compound growth growth Instability Index rate (%) rate (%) ! / Total agricultural 7047* 15.01" products Cereals and 26.61' 32.11' , cereal preparations Fruits and vegetables 8.09' 8.91* 5.66' Sugar and honey " ' Coffee, tea, cocoa 6.11' 7.57*" 1041" and spices Feeding stuffs 560' 12.03' 3.33'" for animals Tobacco 9.26' 12.52' Oil seeds 11.20' 19.00' -4.16'" Textile Fibres 4.67* 4.71'" -3.88'" Fixed vegetable oil 9.19' 17.29' Fish and 16.65' 24.25' 3.27' fishery products 3. Forest products 5.61' 8.92' Agricultural 22.20' 25.68' 22.58' requisites 5. Total agricultural 8.12' 15.67* -0.50'" : sector ( ) 6. Total merchandise 10.48' 16.31" 7.00' exports Significant at 1% level Significant at 5% level... Significant at 10'\" level growth rate of agricultural sector declined in (-q.50%) from (15.67%), the annual growth rate increased to 5.821l'h in after introduction

5 Vol. 35, No.1, of modified Export-Import policy. All the commodities included in agricultural sector had a positive growth rate in seventies, however, in eighties sugar and honey, oilseeds, tobacco, textile fibre, fixed vegetable oil and forest product recorded negative growth rate. After liberalisation of Indian trade in nineties, fruits & vegetables, oilseeds, cereal and cereal preparations, fish and fishery products and fixed vegetable oil indicated very high growth rate as compan~d to previous decade. The export of cereal and cereal preparations, sugar and honey, oil seeds, textile fibre and forest products have witnessed high volatility as reflected by the instability indices ( ). The decade wise analysis showed that cereal & cereal preparations and sugar and honey remained the most volatile commodities. Agricultural Sector Vs. Total Merchandise Trade : A trade deficit in agricultural sector was observed from , however, trade.surplus of $ 1349 million was recorded in (Table 3). An increasing trade deficit in total merchandise trade was observed during all the years except Table 3. Exports, imports and trade deficit of agricultural sector 'and total merchandise trade in India, (In million US $) Average value of the item 1. Total merchandise trade Exports Imports \ :l Trade Surplus/ \ Deficit 1.4 Export as per \ cent 01 imports 2 Agricukural sector 21 Exports \ \ Imports \ \ Trade surplus/deficit Export as per cent of imports 3. Ag. export as per cent 01 total merchandise export In total merchandise trade deficit varied from $ 204 million ( ) to $ 5738 ( ). In agricultural sector, it varied from $ million ( ) to $ million ( ). The agricultural sector export as percentage of total merchandise export varied from 18 per cent ( ) to 44 per cent ( ). The share of agricultural sector export in total merchandise export

6 30 INDIAN JOURNAL OF AGRIQJLruRAL RESEARCH continuously shows a decreasing trend. This is indicative of the diversification of India's export basket and decreasing reliance on the export of primary products. CONCLUSIONS India is continuously increasing its share in total world production of various agricultural commodities. Fruits and vegetables, coffee, tea, cocoa and spices, fish and fishery products, feeding stuf~s for animals, textiles fibres, and tobacco are the leading commodities/groups in the total agricultural sector exports. The growth in export of fruits and vegetables, oilseeds, fish and fishery products and feeding stuff for animals have been remarkable in e~rly nineties as compared to previous decade ( ). The export of cereals and cereal preparations, and sugar and honey were observed to be most volatile 'in the last two decades. Both total merchandise trade and agricultural sector trade are showing deficit since but trade in agricultural sector turned to surplus of $ 134~ million in indicating positive impact of new liberalised trade policies. For achieving the desired break through in farm exports. the agricultural policy measures have to give due consideration to generate exportable surpluses not only in traditional commodities like co ffee, tea, spices, tobacco, textile fibres but would also' have to exploit the large export market in the non-traditional CQmmodities like fruits and vegetables, fish and fishery products, meat and meat products by creating appropriate storage and processing facilities. in the new world trade regime more emphasis must be given on the improvement of quality, packaging and value addition in export commodities in order to realise higher share in world agricultural trade. REFERENCES Anonymous (1993). Farm exports hit by faulty. Government policies. Monthly Commentary on Indian Economic Conditions, The Indian Institute of Public Opinion. 35 (5): Food and Agriculture Organization of the United Nations (FAa), FAa Trade Year Book, Rome (various issues). Kumar, N. and Singhal, k.c. (1989). Indian Eco.J. 36 (3): Massell, B.F. (1970). Am. Eco. Rev. 60 (4): Singh, C. and Vasisht, A.K. (1995): Agric. Econ. Res. Rev.. 8 (2): Sood, Surinder (1993). Yojana, 37 (14):