1

SYMBIOSIS INSTITUTE OF MANAGEMENT STUDIES (SIMS)

(Constituent of Symbiosis International University)

India’s Foreign Trade Policy

Assignment: Export of Vegetables From India

1

INTRODUCTION

The fiscal year 2009-10 began as a difficult one. There was a significant slowdown in the

growth rate in the second half of 2008-09, following the financial crisis that began in the

industrialized nations in 2007 and spread to the real economy across the world. The growth

rate of the gross domestic product (GDP) in 2008-09 was 6.7 per cent, with growth in the last

two quarters hovering around 6 per cent. There was apprehension that this trend would persist

for some time, as the full impact of the economic slowdown in the developed world worked

through the system.

The real turnaround came in the second quarter of 2009-10 when the economy grew

by 7.9 per cent. As per the advance estimates of GDP for 2009-10, released by the Central

Statistical Organisation (CSO), the economy is expected to grow at 7.2 per cent in 2009-10,

with the industrial and the service sectors growing at 8.2 and 8.7 per cent respectively. This

recovery is impressive for at least three reasons. First, it has come about despite a decline of

0.2 per cent in agricultural output, which was the consequence of sub-normal monsoons.

Second, it foreshadows renewed momentum in the manufacturing sector, which had seen

continuous decline in the growth rate for almost eight quarters since 2007-08. Indeed,

manufacturing growth has more than doubled from 3.2 per cent in 2008-09 to 8.9 per cent in

2009-10. Third, there has been a recovery in the growth rate of gross fixed capital formation,

which had declined significantly in 2008-09.

A major concern during the year 2009-10, especially in the second half, was the

emergence of high double-digit food inflation. On a year-on-year basis, wholesale price index

(WPI) headline inflation in December 2009 was 7.3 per cent but for food items (primary and

manufactured) with a combined weight of 25.4 per cent in the WPI basket, it was 19.8 per

cent. Thus, unlike the first half of 2008-09 when global cost-push factors resulted in WPI

inflation touching nearly 13 per cent in August 2008, with inflation in primary and

manufactured products just below the overall average and that in the fuel and power group at

over 17 per cent, the upsurge in prices in the second half of 2009-10 has been more

concentrated and confined to food items only.

India is second largest producer of vegetables after China. It accounts for about 15%

of the world's production of vegetables from which only 2% is exported. Around 6.2 million

hectares which is about 3% of the total area of India is under cultivation. There are about 12

select vegetables which account for about 65% of exports. 20-25% of the total vegetables are

lost due to poor post harvesting practices.

Less than 2% of the total vegetables produced in the country are commercially processed as

compared to 70% in Brazil and 65% in USA. Onions account for about 93% (in volume) of

the total export of fresh vegetables from India. The other major items of export are

potato,tomato, brinjal, beans, carrots, chillies, capsicum. The major export markets are Gulf

Countries, UK, Sri Lanka, Malaysia and Singapore.

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STRENGTHS

1) The vegetable industry is large.

2) It gives employment to a large number of people, especially in the rural India.

3) The sector experiences a constant demand.

a. Internal demand has always been high as the Indian prefer the fresh vegetables

to processed foods

b. External demand as India is a leading producer of fruits and vegetables. To an

extent that it is also known as the fruit and vegetable basket of the world. (a

leading exporter of onions)

4) Advances in technology and government initiatives support the development of the

sector

5) Onion is the fourth most important commercial vegetable crop

6) The export of Onion products has increased from Rs 1035.78 Crores in 2007-08 to Rs

1827.52 Crores in 2008-09.

7) Major Export Destinations (2008-09):Bangladesh, Malaysia, UAE, Sri Lanka,

Pakistan

8) India’s export of other Fresh vegetable has increased from Rs. 489.49 Crores in 2007-

08 to Rs 680.2 Crores in 2008-09.

9) India also exports dried vegetables for example: cucumber, onion, potatoes,

mushrooms, garlic asparagus etc.

3

WEAKNESS

1) Lack of government support.

2) Shift of labour force from agriculture to non-agriculture in India is peculiarly slow: rigid

labour laws in both the agricultural and industrial sectors.

3) Reforms in agriculture, in particular: trade liberalization, export promotion strategies.

4) Level of spending on agriculture does not translate into a significantly higher sectoral

performance

5) Inadequate road linkages remain a major constrain for the development of well-functioning

agricultural markets.

6) A continuing fragmentation of: Land-holdings, Poor maintenance of existing irrigation

systems, declining soil fertility in some areas are other factors.

7) Seasonality and the fact that agricultural sector output heavily depends on the annual

monsoon

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OPPORTUNITIES

1) Grow white & yellow onions to export to European markets increase share in Malaysia,

Singapore & Gulf Improve packaging

2) Export Asparagus, Celery and baby corn to other countries.

3) Special package can be given to farmers for growing high value vegetables.

4) Reduction in air freight and adequate cargo space.

5) Better cold storage facilities, hygienic and vacuum packs

6) Canned, bottled and dehydrated vegetable export.

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THREATS

1) Value addition to food fortification: 7% India, 23% China, 45% Philippines, 188% UK.

2) External liberalisation poses threats of stiffer competition under a new world trade order.

3) Advances in bio-technology have enabled production of Genetically Modified (GM) foods.

4) Poor global marketing- Indian brands have yet to acquire an image in the international

markets.

5) No suitable insurance schemes for such exports of perishables. Hence, The banks face

considerable credit risks.

6) Poor marketing, transport and communication infrastructure.

7) Some issues like different MRL by member countries for pesticide, drugs and other

contaminants.

8) Highest Taxes on processed food in India.

9) Excise duty, Sales tax, octroi, mandi samiti, entry tax and customs duty, levied by the

Central/State/Local bodies.

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Data Exports: Preserved Vegetables

Product QTY(Mt)

(2008-2009)

Value(` Cr)

(2008-2009)

Cucumbers & gherkins, provisionally

preserved 108,081.48 30,207.48

Onions, dried, whole/cut/sliced/broken/in

powder but not further prepared 27,475.82 14,317.14

Mushrooms of the genus agaricus, Dried

but not further prepared 38.13 1,314.11

Green Pepper in Brine 1,535.26 1,003.40

Potatoes, Dried 6,459.13 669.57

Other Vegetables dehydrated, dried 688.15 497.38

Other 1,221.88 458.36

Dehydrated Garlic Powder 582.84 301.31

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Data Exports: Dried Vegetables

Product QTY(Mt)

(2008-2009)

Value(` Cr)

(2008-2009)

Mushrooms of the gensus agaricus 479.54 266.13

Marjoram Oregano 250.03 247.43

Assorted Canned Vegetables 305.41 127.62

Dehydrated Garlic Flakes 158.33 78.56

Other Mushrooms & Truffles

Provisionally Preserved 196.14 69.8

Olives, provisionally preserved 300 43.76

Garlic, Dried 69.7 32.53

Asparagus, Dried 19.36 6.91

Dehydrated garlic powder 0 0

Dehydrated garlic flakes 0 0

Dried garlic 0 0

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Data Exports: Fresh Vegetables

Product QTY(2008-2009)

(Mt)

Value(2008-2009)

(` Cr)

Onions,fresh/chilled 1,670,186.29 182,752.21

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Exports To Other Countries

Product Export Destination Approx. Exports

Onions Bangladesh, Malaysia, UAE,

Sri Lanka, Pakistan `1900 cr.

Other Fresh Vegetables

(Potato, Tomato, Cauliflower,

Cabbage, Peas, Okra)

Pakistan, UAE, UK, Nepal,

Saudi Arabia ` 700 cr.

Mango UAE, UK, Bangladesh,

Kuwait, Saudi Arabia, USA ` 170 cr.

Grapes Netherlands, UK,

Bangladesh, UAE, Belgium ` 320 cr.

Other Fresh Fruits( Banana,

Guava, Sapopa, Apple,

Papaya etc.)

UAE, Bangladesh,

Netherlands, Saudi Arabia,

Nepal ` 450 cr.

Dried and Preserved

Vegetables

US, France, Spain, Belgium,

Russia ` 500 cr.

Other Processed Fruits &

Vegetables

US, Russia, Netherlands,

Saudi Arabia, UAE, Canada ` 1400 cr.

Source: APEDA

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EXPORT VOLUME

Exports

Product

2006 - 07 2007 - 08 2008 - 09

Qty in Mt. Value (Rs.

Cr) Qty in Mt.

Value (Rs. Cr)

Qty in Mt. Value (Rs.

Cr)

Fresh onions

13,78,373 1,163 10,08,607 1,036 16,70,186 1,828

Other fresh

vegetables

2,76,825 433 3,50,235 489 5,05,284 680

Dried & preserved vegetables

1,19,270 428 1,25,726 430 1,47,861 496

Processed fruits and vegetables

3,18,068 956 3,11,756 963 3,87,126 1,372

Total 20,92,536 2,980 17,96,325 2,918 27,10,458 4,376

Growth in exports

_ _ -14.16 -2.08 50.89 49.96

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0

5000

10000

15000

20000

25000

30000

17245.8

25141.5

28211.9 25223.8

23254.6

Value of Exports for Vegetables

1) Production of vegetables has grown at an CAGR of 3.34 %

2) Production of processed products has increased at an CAGR of 11.25%

3) Capacity of fruit & vegetable processing units increased by 8.5%

4) The industry has been able to utilize only half of the installed capacity.

5) Dried & processed vegetables ranked 1st in India’s total export in value terms

6) In quantity terms, pickles & chutneys occupied first position.

7) Share in world exports very low

8) Needs to be increased by taking R&D policies and relaxing the constraints

9) Capitalized on the shortage of onion by exporting at a record Rs. 23/kg

10) Significant rise in the growth rate since liberalization and withdrawal of excise duty

11) The Indian food market projected to grow at a CAGR of 7.5 % during 2009-13

12) Should touch US$ 330 billion by 2013.

13) India exported agricultural products worth US$ 6.53 billion between Apr-Feb 2009-

2010

Year

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ORGANIC PRODUCTS

1) India exported 86 items in last year total volume 37533 MT. Export realization was around

US $100.4 million.

2) Organic products exported to EU, US, Australia, Canada, Japan, Switzerland, South Africa

and Middle East.

3) Cotton leads among the products exported (16,503 MT).

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Import of Vegetables by India

1) India mainly imports:

a. Preparations of vegetables

b. Prepared/preserved tomatoes

c. Prepared/preserved frozen potatoes

2) Exports had a negative annual growth of 22.27 per cent during 2007-08, even though

imports continued to grow at 9.91 per cent over the previous year

3) Import of fresh fruits has grown by 217 per cent from 2004-05 to 2007-08(Apples top

the list)

4) India is a net importer of fruits and vegetables with imports exceeding exports by over

1.7 million tons

5) Indian processing industry is acquiring strengths so trend is towards a scenario where

India imports raw materials and exports value added products.

In M

illio

n R

s.

0

10000

20000

30000

40000

50000

60000

20187.3 28230.4

45786

56748.8

47670.9

Value of Import (million Rs.)

Value of Import (million Rs.)

Year

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PROBLEMS FACED

1) The average yield for various vegetables is low.

2) Land ceiling has been a major deterrent for large scale cultivation.

3) Field conditions vs green houses.

4) Good quality planting material and low use of hybrid seeds.

5) Poor farm management.

6) Manual harvesting practices.

7) Cold chain lacking.

8) Road connections/infrastructure

9) Extensive use of Pesticides/fertilizers.

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SOLUTIONS

1) Vegetables would continue to be harvested manually

2) Quality of planting material would improve in the long run due to selection and

hybridization.

3) Extensive education and training for the growers.

4) Cooperative and contract farming.

5) Fungicides/pesticides and chemical preservatives would be phased out.

6) Precooling (cold chain) and surface coating are expected to dominate.

7) CA/MA packaging and irradiation technologies are expected to emerge.

8) Organized direct sourcing supermarkets

9) Dehydrated products, fruit juices, pickles and other forms of preserves are likely to emerge

as popular processed products.

10) In next 10 years, 15-20% of fruits and vegetables may be processed

11) Road connectivity and electricity.