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

Indian J. Agric. Res.. 35(1): 25-30. 2001 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-306 401, India ABSTRACT The present study deals with the temporal changes, growth & exports of agricultural commodities from 1962-94. 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 (1980-90). 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 1962-65 but trade in agricultural sector turned to surplus of $ 1349 million in 1990-94, 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

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 1990. 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 1962-65 to 1990-94 (Table 1). The increase was more than double during the period 1974-77 as compared to 1970-73. Although, the exports of this group stagnated in eighties, it got boost in the nineties and increased to $ 3081.66 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 1990-94 as compared to 1982-85. The export of coffee, tea, cocoa and spices and tobacco showed a remarkable increase till eighties but declined in 1990 94. 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 1986 89) have shown continuous increase and reached at $504.93 million and $190.48 million in 1990-94, respectively. The value of export of sugar and honey is continuously decreasing from its peak $310.96 million (1974-"7"7\ to $61.29 million (1990-94) due to country' inability to generate sufficient exportable surplus in sugar on durable basjs.

Vol. 35. No.1, 2001 27 Table 1. Value of exports of selected agricultural commodities/groups and their share in total value of exports of agricultural sector, 1962-94. ([n million US $) Average value of the item Item 1962-65 1966-69 1970-73 1974-77 1978-81 1982-85 1986 89 1990-94 1 TOTAL AGRICULTURAL 707.50 608.18 79062 169533 227538 2290.10 2385.85 3081.66 PRODUCTS (97.53) (95.52) (9022) (90.12) (87.82) (85.86) (83.84) (80.00) Cereals and cereal 0.85 248 2895 23.78 263.74 201.77 250.09 388.82 preparations (012) (039) (3.30) (126) (10 18) (7.57) (879) (10.09) Fruits and 66.13 89.05 10646 18055 224.46 31213 381.32 504.93 vegetables (912) (1399) (12.15) (960) (866) (11 70) (13.40) (13.11) Sugar and 38.80 22.60 32.04 310.96 114.27 83.12 9.68 61.29 honey (5.35) (3.55) (3.66) (16.53) (4.41) (312) (0.34) (1.59) Coffee, tea, cocoa 323.03 274.43 291.60 566.6 85841 830.12 89553 73923 and spices (4453) (4310) (33.27) (30.12) (33.13) (31.12) (31.47) (1910) Feeding stuffs for 74.08 65.98 105.60 181.14 18295 160.29 223.08 528.13 animals (1021) (10.36) (12.05) (9.63) (7.06) (6.01) (7.84) (13.71) Tobacco 47.05 41.25 66.14 11883 17511 262.00 19804 143.09 (6.49) (6.48) (7.55) (632) (6.76) (9.82) (9.69) (3.71) Oilseeds 6.90 4.93 10.20 59.67 30.80 42.57 34.13 69.60 (0.95). (0.77) (116) (3.17) (1.19) (1.60) (120) (1.81) Textile fibres 60.40 42.75 51.54 57.35 106.08 110.12 88.11 19048 (833) (6.71) (5.88) (305). (4.09) (4.13) (3.10) (4.95) Fixed vegetable oil 23.75 7.53 21.40 4080 60.20 83.64 52.60 91.03 (3.27) (1.18) (2.44) (2.17) (2.32) (3.13) (U5) (2.36) 2. Fish and Fishery 11.55 21.35 65.85 154.55 28205 335.53 390.55 666.97 products (1.59) (3.35) (7.51) (8.22) (10.88) (12.58) (13.72) (1732) 3. Forest products 5.65 6.58 65.36 27.01 23.97 16.05 21.14 30.37 (0.78) (1.03) (2.10) (1.44) (0.93) (0.60) (0.74) (0.79) 4. Agricultural 073 0.60 1.53 430 9.68 25.47 48.36 72.95 requisites (0.10) (0.10) (0 17) (0.22) (0.37) (0.96) (1.70) (1.89) 5. Total' 72543 63672 876.36 1881.19 2591.08 2667.15 2845.90 3851.95 Agricultural Sector (100) (100) (100) (100) (100) (100) (100) (100) (1+2+3+4) 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 1962-65 to 80 per cent in 1990-94, 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

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 1962-90. 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 (%) 1962-90 1970-79 19!10 90 1991-94 1962-90 1970 79 19/10-90 1.Total agricultural 7047* 15.01" -0.03 5.19 0.21 0.09 0.03 products Cereals and 26.61' 32.11' 0.06 3.57 0.72 0,35 0.58 cereal preparations Fruits and vegetables 8.09' 8.91* 5.66' 11.72 0.06 0.05 0.04 Sugar and honey -0.50 22.40" -31.66' -21.55 1.07 0.71 0.41 Coffee, tea, cocoa 6.11' 7.57*" 1041" 3.22 0.22 0.31 0.04 and spices Feeding stuffs 560' 12.03' 3.33'" 17.49 0.22 0.15 0.16 for animals Tobacco 9.26' 12.52' -2.19-14.87 0.23 0.08 0.15 Oil seeds 11.20' 19.00' -4.16'" 27.74 0.67 0.42 0.22 Textile Fibres 4.67* 4.71'" -3.88'" -19.31 0.26 0.19 0.18 Fixed vegetable oil 9.19' 17.29' -1.23 26.12 0.44 0.24 0.15 2. Fish and 16.65' 24.25' 3.27' 12.46 0.34 0.10 0.03 fishery products 3. Forest products 5.61' 8.92' -0.29-19.21 0.42 0.17 0.12 4. Agricultural 22.20' 25.68' 22.58' -7.42 0.18 0.08 0.07 requisites 5. Total agricultural 8.12' 15.67* -0.50'" 5.82 0.21 0:08 0.03 sector (1+2+3+4) 6. Total merchandise 10.48' 16.31" 7.00' 15.30 0.14 0.06 0.06 exports Significant at 1% level Significant at 5% level... Significant at 10'\" level growth rate of agricultural sector declined in 1980-90 (-q.50%) from 1970-79 (15.67%), the annual growth rate increased to 5.821l'h in 1991-94 after introduction

Vol. 35, No.1, 2001 29 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 (1962-90). 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 1962-90, however, trade.surplus of $ 1349 million was recorded in 1990-94 (Table 3). An increasing trade deficit in total merchandise trade was observed during all the years except 1990-94. Table 3. Exports, imports and trade deficit of agricultural sector 'and total merchandise trade in India, 1962-1994. (In million US $) Average value of the item 1. Total merchandise trade 1962-65 1966-99 1970-73 1974-77 1978-81 1982-85 1986-89 1990-94 11 Exports 1638.68 1687.75 2305.78 4969.96 727588 9110.38 12982.02 21068.43 1.2 Imports 2533.74 251 \.48 2509.92 5925.20 11540.:l0 14848.11 1843398 23933.35 1.3 Trade Surplus/ -895.08 823.73-204.14-955.24-426.42-5737.73-545\.96. -2864.92 Deficit 1.4 Export as per 64.67 67.20 9 \.87 83.88 63.05 61.36 70.42 88.03 cent 01 imports 2 Agricukural sector 21 Exports 725.43 636.71 876.36 1881.19 259\.08 2667.15 284590 385\.94 2.2 Imports 824.60 154\.05 130 \.30 2488.36 2670.79 3208.32 2914.37 2502.93 2.3 Trade surplus/deficit -99.17-904.34 424.94-607.17-79.71-541.17-68.47 1349.01 2.4 Export as per 87.97 41.32 6734 75.60 97.01 8313 9765 153.90 cent of imports 3. Ag. export as 44.27 37.73 38.01 37.85 35.61 29.28 2192 18.28 per cent 01 total merchandise export In total merchandise trade deficit varied from $ 204 million (1970 73) to $ 5738 (1982-85). In agricultural sector, it varied from $ 68.47 million (1986-89) to $ 904.34 million (1966-69). The agricultural sector export as percentage of total merchandise export varied from 18 per cent (1990-94) to 44 per cent (1962 65). The share of agricultural sector export in total merchandise export

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 (1980-90). 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 1962-65 but trade in agricultural sector turned to surplus of $ 134~ million in 1990-94 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): 27-29. 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): 72-79. Massell, B.F. (1970). Am. Eco. Rev. 60 (4): 618-630 Singh, C. and Vasisht, A.K. (1995): Agric. Econ. Res. Rev.. 8 (2): 18-28. Sood, Surinder (1993). Yojana, 37 (14): 66-69.