Lecture 18: India’s Agricultural Trade and Foreign Trade Policy

Econ 2203 | International Trade and Policy in Agriculture

Nithin M

Department of Development Economics

2026-08-22

Opening Reflection

Eighteen weeks ago, we asked:

Why do countries trade? And what does that mean for the 600 million Indians who depend on agriculture for their livelihoods?

Today, we can answer this with theory + data + institutions + policy.

What we built (in 5 blocks)

Weeks 1–2: Why trade? Gains and features
Weeks 3–6: Core theory (Ricardo → H–O → new trade)
Weeks 7–8: Protectionism tools (tariffs, quotas, subsidies)
Weeks 9–12: BoP + exchange rates (macro context)
Weeks 13–18: WTO/AoA/SPS + export procedures + India strategy

The Full Chain: Course Synthesis Diagram

Course Synthesis: International Trade Logic Chain

Comparative Advantage → countries gain from specialisation
Gains from Trade → mediated by terms of trade
Trade Policy → tariffs, quotas, subsidies shape distribution
BOP & Exchange Rates → macro context for trade flows
International Institutions → WTO, AoA, SPS discipline policy
India’s Strategy → Export promotion + selective protection

Every lecture has been one step in this chain.

The central tension of the entire course:

Free trade maximises efficiency — comparative advantage theory, consumer gains, global welfare.

But agriculture is not like other sectors — food is existential, farming communities are politically powerful, and market failures (information asymmetry, price volatility, public goods in R&D) are pervasive.

The discipline of agricultural trade economics is, fundamentally, the study of how societies navigate this tension.

India’s Foreign Trade Policy: Key Milestones

Figure 1: India’s trade policy evolved from the 1991 LPG reforms through WTO accession and successive FTPs, culminating in the landmark FTP 2023-28 targeting USD 2 trillion by 2030. Source: DGFT, Ministry of Commerce and Industry, GoI.

India’s agricultural trade (FY2024): headline numbers

Exports: $43.7B
Imports: $28.2B
Surplus: $15.5B
Global rank: ~9th largest agri exporter (WTO)
Agriculture ≈ 11% of India’s merchandise exports

FY2024 is lower than the FY2022 peak, but still among India’s highest-ever export years.

Why FY2022 was a record year

Global food commodity prices spiked post-pandemic
Russia–Ukraine war disrupted major suppliers
Strong basmati demand (Gulf)
Marine exports expanded (high aquaculture output)

Why FY2024 fell from the peak

Rice export restrictions tightened from 2023 (credibility + volumes)
Global commodity prices corrected from highs
Cotton profitability weakened (cost + pest pressure)

Export composition (FY2024): where the dollars come from

Marine products (~17%): India’s single largest agri export category
Non-basmati rice (~15%)
Basmati rice (~13%)
Processed foods (~11%)
Spices (~9%)

Rice is ~28% of agri exports in FY2024 → market power, but also concentration risk.

Rice concentration: market power vs credibility

When India restricts rice exports, global prices can spike
Many countries rely on Indian rice for food security
Export controls create credibility risk for India as a supplier
Export earnings become more volatile (policy shocks)

Geographic Distribution: Where India Exports

India’s agri export destinations (FY2024, approximate shares):

USA (~13%): marine, processed food, spices
UAE (~10%): rice, meat, fruits, spices
Bangladesh (~9%): rice, onion, sugar, cotton
China (~7%): castor oil, cotton, marine
Saudi Arabia (~5%): rice, meat, fruits

Emerging markets to watch

Japan & South Korea: premium + organic; high unit value
East Africa: rice and pulses; urban demand rising
Gulf (Oman, Qatar, Kuwait): processed food + dairy demand
Southeast Asia: marine + spices + rice; fast-growing middle class

Case: India–UAE CEPA (May 2022)

What CEPA did (agriculture examples):

Preferential tariffs for basmati, seafood, fruits, and processed foods (select lines)
Early outcome: India–UAE agri trade up ~28% (FY2023)

Takeaway: FTAs with meaningful agricultural chapters can raise market access and incentivise quality upgrading.

Import Profile: India’s Agricultural Dependencies

India’s biggest agricultural import exposure is edible oils.

Edible oils (palm + soy + sunflower): ~$14B+ annual bill; ~60–65% of consumption imported
Pulses: ~$2–3B; key sources include Canada, Myanmar, Australia
Other items (fruits, cashew, spices) are smaller and less macro-critical

Key point: edible oils are the single largest driver of India’s agri import vulnerability.

Why edible oil dependence is a structural vulnerability

Household inflation sensitivity: global edible oil prices pass through quickly
External vulnerability: export bans and war shocks can create sudden shortages
Persistent gap: demand growth has outpaced domestic oilseed productivity

Policy response: NMEO–OP (2021)

Goal: expand oil palm and raise domestic edible oil output
Constraints: land availability, 3–4 year gestation, crop-choice incentives
Implication: dependence likely remains a medium-run constraint even with policy push

The Value Addition Opportunity

India often exports raw / semi-processed products. Value addition raises earnings per tonne.

Value addition = processing + branding + standards + cold chain
Big gains are in processed foods, nutraceuticals, and ready-to-cook formats
Binding constraints are typically quality compliance, scale, and logistics

Example 1: Cashew (raw vs processed)

India produces raw cashew, but much processing happens abroad
Processed grades + packaging command multiples of the raw price
Domestic processing = jobs + higher export value + brand ownership

Example 2: Turmeric (raw vs extracts)

Raw turmeric is a bulk commodity
Extracts/curcumin and finished supplements capture most of the margin
Needs certification, R&D, and consistent quality

Example 3: Shrimp (commodity vs value-added)

Commodity exports: raw frozen shrimp
Value-added: breaded / marinated / ready-to-cook formats (price premium)
Requires cold chain, HACCP compliance, and processing capacity

FTP 2023–28: what it implies for value addition

Prioritise processed food and RTE/RCC categories
Build compliance: FSSAI-aligned plants, traceability, lab testing
Use branding tools: ODOP + GI where appropriate

Foreign Trade Policy (FTP) 2023–2028: overview

Released March 31, 2023 (Ministry of Commerce)
Vision: total exports (goods + services) reach $2T by 2030
Shift: from export subsidies → tax remission (RoDTEP)
Emphasis: collaboration + paperless, faster processes
New: explicit e-commerce export push (target $200B by 2030)

FTP 2023–2028: what matters for agriculture

Districts as Export Hubs (DEH) (district-level export plans)
ODOP branding for district “signature” products
Millets + organic positioned as emerging export areas
GI promotion to earn price premia and protect brands
TMA + APEDA expansion to support logistics and market access

FTP 2023-28: Sector Export Targets vs FY2024 Actuals

Figure 2: India’s FTP 2023-28 targets USD 2 trillion in total exports by 2030. Agri and Allied targets USD 100B, more than doubling the FY2024 actual of USD 43.7B. Log scale used for wide value range. Source: DGFT, Foreign Trade Policy 2023-28.

MEIS vs RoDTEP: India’s Export Incentive Schemes

Figure 3: RoDTEP covers more products and exporters than MEIS but at lower outlay, reflecting its design as a WTO-compliant tax remission rather than a direct subsidy (MEIS was challenged at WTO as DS541). Source: DGFT; WTO DS541 dispute record.

Millets: why they matter for trade

2023 International Year of Millets put “Shri Anna” on the global agenda
Nutrition demand: high fibre, gluten-free, “health food” positioning
Climate resilience: lower water needs than rice/wheat
India advantage: large producer base + varietal diversity
Export constraint: processing, packaging, certification, and consistent quality

India’s millet portfolio (examples)

Bajra (pearl millet): Rajasthan, Gujarat, Haryana
Jowar (sorghum): Maharashtra, Karnataka
Ragi (finger millet): Karnataka, Andhra Pradesh
Foxtail millet: Telangana, Andhra Pradesh
Kodo millet: Madhya Pradesh, Chhattisgarh

APEDA and the millet export push

Target: $100M exports by FY2025 (from ~$64M in FY2023)
Market creation via global events and buyer outreach
Product formats: flour blends, snacks, pasta, RTE porridge
Winning requires: branding + lab testing + traceability
Market size: $11B by 2028 (health-food growth)

Geographical Indications (GIs): why they matter in trade

A GI protects a product name tied to a place (legal brand protection)
Creates a price premium by signaling authenticity/quality
Works best when producers coordinate on standards + traceability
Economically: a collective geographic monopoly on a name

GI policy is also distribution policy: it decides who captures the premium.

India’s agri GI examples (selected)

Darjeeling Tea
Basmati Rice
Alphonso Mango (Ratnagiri)
Malabar Black Pepper
Alleppey Green Cardamom

Case: the Basmati GI battle (EU)

India: basmati should be limited to designated districts
Pakistan: claims co-ownership for basmati varieties
Stakes: EU market access + price premium (large revenue implications)
Status: decision pending (2024–25)

Challenges India Must Overcome

Three binding constraints:

SPS compliance: residues/contamination and border rejections block premium markets
Value addition gap: too much bulk export, low unit values
Policy credibility: sudden export restrictions weaken India’s reliability

Challenges (cont.)

Edible oil dependence: import bill + vulnerability to supply shocks
Cold chain + logistics: losses and high logistics costs
Market concentration: shocks in one product/market reverberate widely

The meta-challenge

India must reconcile:

Food security + farmer welfare objectives
Export competitiveness + trade reliability objectives

Opportunities for India’s Agricultural Exports

Demand-side tailwinds:

Rising global food demand
Indian diaspora demand for Indian foods (often premium segment)
Organic / “clean label” markets
Millets and other “superfoods” (brand + first-mover advantage)

Opportunities (cont.): market access and geography

FTAs with agricultural chapters (CEPA; UK/EU negotiations)
ASEAN middle-class growth: processed foods + spices + marine
Africa’s rice gap: scale potential if logistics improves

Opportunity is real, but requires quality compliance, infrastructure, and policy stability.

Core policy dilemma (1): MSP vs export competitiveness

Higher MSP raises farm incomes but can make exports uncompetitive
Example (wheat, 2023–24): MSP ₹2,275/quintal (~$274/MT) vs world price ~$220/MT
If exports still happen, it often requires subsidies or special channels
Political economy: farm support is sticky; export markets are price-sensitive
Result: policy must balance income support and market access

Core policy dilemma (2): food security vs export reliability

When domestic food prices rise, export bans/taxes protect consumers
But restrictions reduce farmers’ export premium and incomes
Trade partners face supply shocks and search for alternative suppliers
Repeated bans weaken India’s reputation as a reliable exporter
Long-run cost: lost market share even after restrictions end

Core policy dilemma (3): fiscal + WTO constraints

Food subsidy bill (FY2024): ₹2.05 lakh crore (procurement + PDS + stocks)
Support shows up as WTO domestic support (AMS / Amber Box)
Compliance pressure increases as procurement expands
Reforms face strong political resistance
Bottom line: policy space is constrained by budget + WTO rules

Trade-offs cheat sheet

Farmer income → high MSP → fiscal cost + weaker export competitiveness
Consumer welfare → export restrictions → farmer loss + reputation damage
Export growth → remove export taxes → possible domestic price rise
WTO compliance → reduce AMS → farmer lobby resistance
Food security → import restrictions → higher domestic prices

Key insight from Econ 2203

Trade policy in agriculture distributes gains and losses among farmers, consumers, traders, and government.

Economics helps by making these trade-offs explicit before we choose.

Course Synthesis

What Eighteen Weeks Has Taught Us

Revisiting each major module through the lens of India’s agricultural trade reality

Course synthesis (1): Theory → policy → BoP

Trade theory (L1–L6): comparative advantage shapes India’s export basket
Trade policy (L7–L8): tariffs + incentives + MSP determine who gains/loses
BoP constraint (L9–L10): agri exports earn forex that finances key imports
Unifying idea: outcomes depend on incentives + constraints
India lens: agriculture is both a livelihood sector and a forex-earning sector

Course synthesis (2): Forex → WTO/AoA → SPS

Forex (L11–L12): INR moves change export realisation and import costs
WTO/AoA (L13–L14): rules constrain support but provide flexibilities (S&DT)
SPS (L15): compliance is the entry ticket to premium markets
Unifying idea: market access increasingly depends on standards and credibility
India lens: coalitions (G-33/G-20) protect policy space in agriculture

Course synthesis (3): Institutions + procedures

Institutions (L16–L17): APEDA/MPEDA/Boards/EIC operationalise exports
Documentation: contracts + certificates + customs make trade executable
Quality infrastructure: labs, traceability, cold chain reduce rejection risk
Policy without implementation fails
Implementation without credibility fails

Export vision 2030: target and what it implies

Target: $100B agri + food exports by 2030
Baseline: $43.7B (FY2024)
Implied growth: ~12.5% CAGR (stretch)
Realistic waypoint: ~$70B with the right policies
Success needs quality investment + credibility (avoid repeated export bans)

Pillars for growth (I)

Diversify beyond rice (processed food, fruits/veg, organic, millets)
New markets + FTAs (Africa, ASEAN, UK/EU access)
Quality investment (cold chain, labs, GAP training)
Value addition (RTE/processed/functionals)
GI + branding to earn price premia

Pillars for growth (II)

Reduce edible oil import dependence (saves forex)
Use WTO-compliant support (remission, not subsidies)
Strengthen SPS systems and traceability
Keep policy predictable (credibility = market share)
Coordinate public + private actors across the chain

Scenarios for FY2030

Conservative (5% CAGR): $58B
Base case (8% CAGR): $69B
Ambitious (12% CAGR): $86B
Stretch ($100B): needs FTAs + processing clusters + no credibility shocks
Takeaway: the direction (higher value, diversified, compliant) is right

Final Thought: why this subject matters

Better export prices can raise farm incomes
Value addition creates rural jobs (processing, cold chain, logistics)
Export earnings support macro stability (forex + current account)
Credibility + quality compliance build long-run market access

Agricultural trade policy is about growth, distribution, and food security at the same time.

A kilo of tur dal: tracing the chain

Permissions: IEC + registration (RCMC)
Contract & finance: pricing (FOB/CIF) + payment terms (e.g., LC)
Compliance: SPS / certificates + documentation
Institutions: boards / agencies + logistics
Economics: comparative advantage + rules (WTO)

Key Takeaways for the Examination and for Life

Five messages to carry beyond this classroom:

Comparative advantage, not absolute advantage, drives specialisation — India need not be the cheapest in everything; it only needs a relative cost advantage in what it exports. This is Ricardo’s enduring insight.
Free trade maximises efficiency, but food security requires nuanced policy — the tension between these goals is real, legitimate, and never fully resolved. The best economists acknowledge the trade-offs rather than pretending they do not exist.
WTO rules constrain AND protect India’s agricultural policy space — India must simultaneously defend its right to support farmers and work to ensure global rules are fair for developing country agriculture. Both are valid positions.
SPS compliance is the critical bottleneck for India’s agri export growth — not tariffs, not logistics, not finance. The moment India’s spice, seafood, or fresh produce consistently meets the safety standards of the EU, USA, and Japan, billions of dollars of additional export value become accessible.
Value addition, not raw commodity exports, is the path to $100 billion — India must move from exporting raw cashew to exporting cashew butter; from raw turmeric to curcumin capsules; from frozen shrimp to ready-to-cook seafood meals. That transition is the work of the next decade.

Examination Information

Final Examination — Econ 2203

Part A: 20 short answers (2 marks each) — 40 marks
Part B: 4 essays from 6 choices (15 marks each) — 60 marks
Total: 100 marks; Duration: 3 hours

Exam emphasis (what to know)

Trade theory + diagrams (Ricardo, H–O, ToT)
Protectionism tools (tariffs, quotas, ERP, optimal tariff)
WTO + AoA (three pillars; boxes)
SPS concepts (MRL, risk assessment; India cases)
BoP + forex (current account, J-curve; pass-through)

Revision strategy (simple 2-week plan)

Re-read all 18 lecture decks (definitions + institutions)
Practise 3 “core diagrams”: tariff welfare, ToT, J-curve
Do past papers and rework numerical problems (ERP, DWL, pass-through)
Revise India-specific facts used in class (FY2024 headline numbers)

A final word

You have worked hard across 18 weeks on a subject that matters.

Thank you. Good luck. Go well.

Appendix

Additional Resources

Further reading

Lecture notes + APEDA / WTO official documents
APEDA Annual Report 2023–24
RBI, DGCI&S, APEDA databases for latest data

Key data sources

DGCI&S: India’s merchandise trade
RBI: balance of payments data
APEDA: agricultural export statistics
WTO: tariff + trade databases