The year 2020-21 is a top contender for being one of the worst periods in India’s history. But export numbers for 2020-21 show that it could well be the year India fed the world.Overall, exports have kept hopes up, even as the country’s domestic demand is suffering due to the pandemic. Since March, India’s exports have been on a positive trajectory. The numbers jumped over 60% year-on-year to $34.5 billion in March and clocked $30.63 billion in April, a gigantic growth of 195.72% YoY. In May, exports grew 67.4% to $32.2 billion against $19 billion in May 2020, a growth of 69.35%. The first week of June alone saw exports rising 52.4%, at $7.1 billion.The rebound signs indicate demand is picking up in the West, and the Indian economy has an opportunity to ride this wave. Small and medium industries could gain as categories such as engineering goods and gems and jewellery are seeing pent-up demand.But it is the significant jump in exports of corn, rice and wheat that stands out.According to a report by the Agricultural and Processed Foods Exports Development Authority (APEDA), 2020-21 rice exports (basmati and non-basmati) almost doubled to 17.7 million tonnes (mt) from the previous period, creating a record. Rice exports in 2019-20 were 9.5 mt and in 2018-19 were 12 mt. Similarly, wheat exports surged to 2.1 mt in 2020-21 compared with only 0.22 mt in the previous period, and 0.23 mt in 2018-19, a record 861% increase YoY. That was the highest since FY15.A low base effect is bound to show a spurt in exports this year, particularly as trade and commerce had come to halt last year. So to get a better picture, a comparison with 2018-19 has also been done.As the pandemic hit production globally, countries wanted to ensure they had enough food, and this led to the jump in exports, say experts. 83767938“There was an increase in demand from the international market for rice and wheat. They wanted to take care of their food security,” M Angamuthu, Chairman, APEDA, tells ET Digital. “In many countries, production has also been affected. Since we had good agricultural production, India could fulfil the rising export demand.”The RBI had last year stated that India had a foodgrain surplus and the main challenge was managing this bounty. Total foodgrain production reached a whooping 296.65 mt in 2019-20, a 4% increase from 2018-19. At the same time, horticulture production, which holds a 40% share of gross value added (GVA) in the farm sector, also reached an all-time high of 320.48 mt, 3.13% higher than the previous year.Apart from the surplus grain production, a boom in commodity prices also fuelled the exports. Taranjeet Singh Bhamra, CEO, AgNext Technologies, says rice and wheat are being traded at competitive prices in the international markets. “For instance, Indian wheat is available at $280-$285 per tonne, against Australia’s $298, EU’s $304, USA’s $323 and Canada’s $339 per tonne.” Moreover, India's bumper harvest and the presence of a large surplus even after government procurement ensured that the authorities did not impose any export restriction, he adds.Explaining how other factors also helped, Angamuthu points out that the government’s Pradhan Mantri Garib Kalyan Yojana, launched to provide foodgrain to the poor during the pandemic. Huge quantities of foodgrain were offered for free under the scheme. The massive distribution suppressed the demand for rice and wheat in the domestic market. This led to prices falling in the domestic market, while ensuring large quantities were available for export. 83767991Since May 2014, the Food and Agricultural Organization’s Food Price Index - which measures the monthly change in international prices of a basket of food commodities - has been at its highest, and the price of wheat and rice in many major exporting countries continue to remain higher than in India. Both Angamuthu and Bhamra say they expect this trend to continue this financial year as well. “I expect consistent growth in production and exports, in part due to a favorable monsoon forecast by the India Meteorological Department, and in part due to the rise in FAO’s Food Price Index,” Bhamra says.Another foodgrain that saw its highest exports since 2013 was corn, which also saw a dip in global production and a surplus in the domestic market. According to a Reuters report, Indian corn is being quoted at $295-$300 a tonne, including cost and freight. Meanwhile, South American corn is being quoted at $330 a tonne, C&F. Besides, Indian exporters are preparing to sell around 400,000 tonnes of corn in June-July to animal feed producers in Sri Lanka, Malaysia, Vietnam and Bangladesh.Tailwind for other goodsThis April also saw a sudden surge in sectors such as engineering goods and gems and jewellery. The reason behind this being the low base effect kicking in February.According to a report by the Engineering Exports Promotion Council of India (EEPC India), exports of 32 of 33 engineering goods commodities such as steel, iron, non-ferrous metal products and industrial machinery witnessed a positive growth in March 2021. The report stated that exports to 21 of 25 top markets saw a rise in shipments from India during this period. A year-on-year jump was seen in nine key countries in February. Industry machinery that saw a boost in exports included boilers (64.49%), pumps and valves (61.72%), internal combustion engines and parts (51.94%) and industrial machinery for dairy (57.22%), among others, in March 2021 compared with last year. 83768008Overall, India’s engineering exports were valued at $8.7 billion in March 2021 and $5.3 billion in March 2020. This number was at $9.2 billion in March 2019. EEPC reported that the 42% decline in March 2020 was due to the pandemic biting the global economy and lockdowns beginning that month around the world. February 2020’s number had reported a YoY increase of 3.5% at $6.7 billion.The demand for gems and jewellery has also returned. In April 2021, shipments in this segment reached Rs 22,226.11 crore year-on-year, according to a report by the Gem and Jewellery Export Promotion Council (GJEPC). While the sector declined by 25.71% in 2020-21, it saw a demand pickup after November. A significant growth of 12.73% was seen in the January-March quarter.“Last year, from November onwards, once things started getting better, demand came back pretty strong,” says GJEPC Chairman Colin Shah. “There was a lot of pent-up demand because of the lockdown. Once things opened up, people went shopping.”The exports of gems & jewellery in March 2021 stood at $3.4 billion, a jump of 78.22% from last year ($1.9 billion) and $2.9 billion in May 2021, recording a growth of 179.32% from last year ($1 billion). The numbers stood at $3 billion in March 2019 and $3.7 billion in May 2019. The exports will reach pre-pandemic level soon and will get stronger by Diwali, he asserts.This favourable growth in exports, albeit supported by the base effect, indicates better supply response towards demand from key markets. Imports in May, too, grew 68.54% to $38.53 billion. Owing to the enhanced exports, the trade deficit in May plummeted to $6.32 billion from $15.1 billion in April. The numbers have raised hopes of helping India meet its export targets.Last month, Commerce Secretary Anup Wadhawan had confidently said that the second wave of Covid had not impacted the exports trajectory and India’s external trade would continue with its encouraging performance.However, many issues continue to hinder export growth, the latest one being Covid restrictions such as travel bans and state lockdowns. This has hurt manufacturing. GJEPC’s Shah says it is extremely important that manufacturing resumes to the full extent soon. 83768027It is the travel ban to certain countries, especially to those in the Middle East, which has perturbed Ashish Pethe, Chairman, All India Gem and Jewellery Domestic Council. “The travel ban will surely worsen the situation, as buyers will start looking for alternative sources in South Asian or Southeastern countries. Do not forget, China has always been our biggest competitor in exports.”The gems and jewellery industry contributes 6-7% to our GDP. In 2019-20, its exports contributed $35.81 billion, he says. The chairman of the domestic council emphasises on the need to grow exports in the sector. “Handmade Indian jewellery has a higher percentage of value addition. If concerted efforts are put in to grow exports to $50 billion, it will have a cascading effect on the domestic industry too. This will help the nation reach its $1 trillion export target,” he adds. APEDA’S Angamuthu says agricultural exports too need a boost. It can help achieve the Prime Minister’s vision of doubling farmers’ income. The sector contributes 12-13% to India’s exports. But for that to happen, certain bottlenecks should be removed.Bhamra of AgNext Technologies says the immediate issue is the pandemic. “Some concerns remain due to increasing penetration of Covid in rural populations. It increases the possibility of production and trade being hit,” he points out.In the longer term, proper food storage facilities and reliable food quality assessment solutions will play a major role in increasing agri exports. Over the years, food import rules across the world have become stringent in terms of quality. There is also increasing emphasis on traceability of food products to the farm level to ensure adherence to production norms.“India lacks adequate infrastructure to support these requirements consistently. We need better and highly scalable post-harvest management & food storage solutions to ensure quality and shelf life of agri-commodities are maintained. Better warehousing solutions, cold storage facilities for transport and rapid food quality assessment solutions are critical to scale India’s agri-exports,” Bamra adds.(Editing by Ram Mohan. Illustrations by Mohammad Arshad)
from Economic Times https://ift.tt/3x0mfKB
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