Examine the importance of harmonizing India’s import policy with the minimum support policy for agricultural commodities. (10M, 150 words) [GS-3: Agriculture]

Introduction

India’s agricultural imports in 2023-24 witnessed a decline of 8%, from $35.7 billion in 2022-23 to $32.8 billion in 2023-24.
The average annual growth rate (AAGR) of agricultural imports over the past decade reduced from 14% between 2004-05 and 2013-14 to 9% between 2014-15 and 2023-24.

The significant drop in agricultural imports in 2023-24 is mainly due to a 28.5% decrease in edible oil imports, falling from $20.8 billion to $14.9 billion within a year.

Body

Edible Oil Imports:

• India imports approximately 55 to 60% of its edible oil consumption, with palm oil constituting over 50%, followed by soybean and sunflower oils.
• The decline in import values is primarily due to the reduction in international palm oil prices.

Diverse Agricultural Imports:

• India’s agricultural imports encompass a variety of goods, including edible oils, pulses, fresh fruits and vegetables (F&V), sugar, spices, and cashew nuts.
• The import of pulses experienced fluctuations, from a peak of $4.2 billion in 2016-17 to $1.9 billion in 2022-23, then rising to $3.7 billion in 2023-24.

Protection of Domestic Pulse Production:

• To safeguard domestic pulse production, the Indian government imposed a 30% import tariff on lentils, pigeon pea/tur, and chickpea, along with quantity restrictions.
• Despite these measures, the combination of import constraints and sluggish domestic output growth has led to rising inflation.

Inflation Management:

• The Reserve Bank of India (RBI) has successfully kept consumer price inflation within the target range of 4+/-2%.
• The RBI has collaborated closely with the government, particularly the Ministry of Finance, to ensure high GDP growth while maintaining inflation within mandated limits.

Conclusion

Sensible Trade Policy Integration:

• A calibrated approach to import duties is essential instead of abrupt reductions to zero.
• Ensuring that the landed price of imports is not below the Minimum Support Price (MSP) of major pulses is crucial.
• If domestic prices fall below MSP, agencies like NAFED should undertake large-scale procurement at MSP to replenish buffer stocks.
• A similar policy should be adopted for edible oils/oilseeds, ensuring that the landed price of edible oils does not fall below the domestic MSP of oilseeds converted into oil.
• The fundamental lesson is that trade policy, particularly import liberalisation, must be well integrated with domestic MSP policy. This is especially important for crops like pulses and oilseeds, which require less water and fertiliser.

Examples in Indian Context

Pulse Tariffs and Inflation:

• The imposition of a 30% import tariff on lentils, pigeon pea/tur, and chickpea exemplifies the government’s efforts to protect domestic farmers.
• Despite these tariffs, the rise in pulse imports from $1.9 billion to $3.7 billion in 2023-24 indicates the ongoing challenges in balancing import policies with domestic production and inflation control.

Edible Oil Price Management:

• The significant drop in edible oil import values, from $20.8 billion to $14.9 billion, demonstrates the impact of international price fluctuations on India’s import costs.
• Ensuring that the landed price of edible oils does not fall below the MSP of domestic oilseeds can help stabilise the market and support local farmers.
• By integrating import policy with MSP policy, India can better manage agricultural imports, protect domestic agriculture, and control inflation, fostering a balanced and resilient agricultural sector.