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.

1
 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.

2
 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

3
 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.

4
 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

QTY(Mt) Value(` Cr)

Product
(2008-2009) (2008-2009)

Cucumbers & gherkins, provisionally

108,081.48 30,207.48
preserved

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

27,475.82 14,317.14
powder but not further prepared

Mushrooms of the genus agaricus, Dried

38.13 1,314.11
but not further prepared

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

QTY(Mt) Value(` Cr)

Product
(2008-2009) (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

QTY(2008-2009) Value(2008-2009)
Product
(Mt) (` Cr)

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

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 Exports To Other Countries

Product Export Destination Approx. Exports

Bangladesh, Malaysia, UAE,

Onions `1900 cr.
Sri Lanka, Pakistan

Other Fresh Vegetables

Pakistan, UAE, UK, Nepal,
(Potato, Tomato, Cauliflower, ` 700 cr.
Saudi Arabia
Cabbage, Peas, Okra)

UAE, UK, Bangladesh,

Mango ` 170 cr.
Kuwait, Saudi Arabia, USA

Netherlands, UK,
Grapes
Bangladesh, UAE, Belgium ` 320 cr.

Other Fresh Fruits( Banana, UAE, Bangladesh,

Guava, Sapopa, Apple, Netherlands, Saudi Arabia, ` 450 cr.
Papaya etc.) Nepal

Dried and Preserved US, France, Spain, Belgium,

Vegetables Russia ` 500 cr.

Other Processed Fruits & US, Russia, Netherlands,

` 1400 cr.
Vegetables Saudi Arabia, UAE, Canada

Source: APEDA

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 EXPORT VOLUME

Exports

2006 - 07 2007 - 08 2008 - 09

Product
Value (Rs. Value (Rs. Value (Rs.
Qty in Mt. Qty in Mt. Qty in Mt.
Cr) Cr) Cr)

Fresh
13,78,373 1,163 10,08,607 1,036 16,70,186 1,828
onions
Other
fresh 2,76,825 433 3,50,235 489 5,05,284 680
vegetables
Dried &
preserved 1,19,270 428 1,25,726 430 1,47,861 496
vegetables
Processed
fruits and 3,18,068 956 3,11,756 963 3,87,126 1,372
vegetables

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

Growth in
_ _ -14.16 -2.08 50.89 49.96
exports

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 Value of Exports for Vegetables

30000 28211.9
25141.5 25223.8
25000 23254.6

20000 17245.8

15000

10000

5000

Year
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

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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

Value of Import (million Rs.)

60000 56748.8
50000 45786 47670.9
40000
28230.4
In Million Rs.

30000 20187.3
20000
10000
0

Year

Value of Import (million Rs.)

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.

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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.

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