News Analysis

India’s buffalo meat and cotton have fewer takers outside

Rajalakshmi Nirmal BL Research Bureau | Updated on June 16, 2019 Published on June 16, 2019

Currency woes, quality issues, poor policies blamed for shrinking agri trade surplus

While India is a net exporter of agri commodities, with about $38.49 billion of exports and $19.46 billion of imports in 2018-19, the agri trade surplus has contracted in the last five years.

Retaliatory tariffs on imports from the US on items such as apples, almonds, shrimps and chickpeas could peg back growth in agri imports, but the problem with the shrinking surplus may not alter materially.

This is due to issues plaguing exports. The CAGR (compound annual growth rate) in agri exports in the period between 2013-14 and 2018-19 is a negative 2.1 per cent, led by a drop in cotton and buffalo meat exports. This contrasts starkly with the strong growth between 2009-10 and 2013-14, when agri exports grew from $17.92 billion to $42.86 billion. On the other hand, in the last five years, agri imports have increased at the rate of 6.7 per cent a year, resulting in a lower trade surplus.

A less competitive currency, quality issues and poor policy decisions are behind the shrinking agri trade surplus, say experts.

Exports fall

India’s basket of export commodities is not well diversified. In 2018-19, six items — marine products, rice (basmati and non-basmati), buffalo meat, spices and raw cotton together made up 60 per cent of total agri exports. Of these, while marine products and spices have reported growth, others exports have either shrunk or growth has been tepid.

 

In raw cotton, for instance, exports from India have fallen from $3.6 billion in 2013-14 to $2.1 billion in 2018-19. This was due to quality issues with Indian cotton, say sources from the textile industry in Tirupur and Coimbatore in Tamil Nadu. In India, cotton is hand-picked by farmers, resulting in higher contamination. Trash in Indian cotton is about 3 per cent; globally, it is 1-1.5 per cent, making buyers turn to West African countries and Australia.

Also, in recent years, Indian cotton has been pricier than competing countries such as Brazil (due to depreciation of the real vis-à-vis the US dollar and higher MSP for cotton in India). So, large buyers such as China have switched loyalty. Further, a poor monsoon in recent years and pink bollworm and other pest attacks, too, have reduced acreage and the exportable surplus.

India’s buffalo meat exports have also fallen in the last five years. While in 2013-14, buffalo meat exports were $4.3 billion, last year, they stood at $3.5 billion. In 2017-18, they totalled $4.03 billion.

The country has exported less buffalo meat to all its traditional customers — Vietnam, Malaysia, Egypt, Saudi Arabia and UAE — in recent years.

Fauzan Alavi, spokesperson for the All India Meat & Livestock Exporters Association, said: “The drop in exports is because large buffalo meat buyers are now buying from Brazil. Depreciation in the real has brought their meat prices closer to those of India’s…”

 

 

It needs mentioning here that Indian buffalo meat exports to China have been illegally routed through Vietnam since 2001, when China banned buffalo meat from India after an outbreak of foot-and-mouth disease here.

But over the last year, after African swine fever was discovered in China in buffalo shipments that came from Vietnam, China has put stricter control on its borders, thus completely shutting down illegal meat imports into the country. Vietnamese buyers are hence no longer buying from Indian sellers. Alavi says that India buffalo meat exporters have been losing to competition from Brazil and Australia as there are no incentives given under the MEIS (Merchandise Exports from India Scheme).

If duty-free export of raw buffalo hide is allowed, the industry could increase its exports significantly, he added.

Some uptick

India’s agri exports showed a pick-up in momentum between 2015-16 and 2017-18. From $32.08 billion in 2015-16, agri exports inched up to $38.21 billion in 2017-18. This is thanks to higher exports of marine products and basmati rice. India’s frozen shrimp and frozen fish found more takers due to government measures.

However, in 2018-19 exports sagged again. Sharply lower buffalo meat exports and a drop in export of marine products saw the country’s exports remain flat at $38.49 billion.

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