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'Grow in India’ might have a greater chance of success for now than ‘Make in India’

Despite the Covid-19 pandemic, India achieved a significant milestone last financial year. India's agricultural exports rose by about 20% to $50.21 billion, the highest ever. With the world in the midst of a commodity boom, India is now in a unique position to capitalise and become a serious player in agriculture exports. The pandemic, supply chain chaos and the conflict between Russia and Ukraine have provided the country a foot in the door to become a significant agri exporter.

If we look at the composition of agri exports last year, rice was the top forex earner at $9.65 billion, growing by 9.35%. Wheat exports jumped to $2.2 billion in 2021-22 against $567 million in the previous period.

At Davos, Commerce Minister Piyush Goyal said India was never a traditional player in the international wheat market and didn't export wheat until two years ago. The exports then were 2 million tonnes. Last year, the number reached 7 million tonnes.

So, does the rally in commodity prices and the conflict in Europe provide a new opening for Indian exporters?

The boom

The global price of wheat, which was already seeing huge spikes in price following the war, has already touched highs of $453 per tonne in May, with prices surging around 60% this year. Soybean at $17 and corn at $8 in the futures market came perilously close to the all-time highs, seen in 2012. The highs that wheat registered after India banned exports expose the fragility of food supplies as India is not even a major exporter of wheat, something that Goyal mentioned at Davos.

Siraj A Chaudhry, MD & CEO, National Commodities Management Services Limited (NCML), says the war has merely brought the commodity crisis to a tipping point. Global easing of monetary policy that started during the pandemic primarily fuelled high commodity prices. The war has now added fuel to that fire. “There is a saying in the commodity market that the cure for high prices is high prices. High prices encourage a farmer to produce more to earn more profits, but this eventually leads to higher supply and fall in prices in a year or two. Typically, high-price cycles are shorter than low-price cycles. But what we have now is a perfect storm where you have commodity prices already high, weather disruptions, a never-ending supply chain chaos and then comes a war,” he says.

The good news, Chaudhry says, is that historically, India has been a self-sufficient country, unlike China, which is heavily dependent on imports for their food needs. Barring edible oils, and to a certain extent pulses, India is well secured when it comes to domestic demand-supply.

This was clear during the pandemic, when the government could give out free food to a section of the population without causing a ripple in the supply situation. “What this current situation has done is that countries dependent on Ukraine and Russia for their food supplies suddenly found themselves in a shortage. When they looked around, they found a country that had surplus stock of some key commodities like wheat, maize and sugar. These are the commodities that started finding traction, and this is an opportunity for India, although I would say this is a limited-time opportunity,” says Chaudhry.

Finding winners

Pankaj Khandelwal, MD and Chairman of horticulture company INI Farms, says a surge in commodity prices has been driven by rising supply chain costs like packaging and logistics. The consumer is paying much higher, but the price pressure is on the farmer and the price realisation at the farm gate is seeing a downward trend. There are, however, clear winners.

Giving an example, he says that when it came to fruits like bananas, traditional players like Indonesia and Ecuador suffered immensely because of supply chain disruptions. “The opportunity for India was huge, and the industry grew over 100% y-o-y, becoming one of the large players in the Middle Eastern market. This is a commodity where we were not a player earlier. In some cases, supply disruptions have created a once-in-a-lifetime opportunity,” says Khandelwal.


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