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India has a large agricultural base. Yet its share in global agriculture exports is insignificant and its domestic market is increasingly protected. In global trade negotiations, India’s efforts have been directed more towards retaining the right to protect than towards eliminating distortions at home and abroad.
This report addresses the dilemma by studying the horticulture sector, one of the most dynamic segments of Indian agriculture and international trade. It undertakes an integrated analysis of the sector—from farm to retail—based on primary surveys of farmers, agents, and exporters across fifteen different Indian states. The study identifies three major impediments to exports:
· The ‘logistical tax’ imposed by high farmer-to-consumer delivery costs, which erodes the production cost advantage enjoyed by Indian farmers;
· The ‘standards gap’ between the stringent health, safety, and quality requirements of governments and buyers, especially in richer countries, and assessment mechanisms in India; and
· Trade policy barriers that Indian exporters face in foreign markets.
Providing clear policy prescriptions the report recommends eliminating both the logistical tax and the standards gap. This will require the creation of an integrated and competitive domestic agricultural market, along with improved communication, transport, storage, distribution, and agricultural support services. Radical reform in services is, therefore, desirable not just for its own sake but for the transformation of India’s agricultural trade. Furthermore, the report advocates that providing farmers access to efficient services will strengthen the political case for agricultural trade liberalization and subsequent economic gains. A willingness to reform its own trade regime will enable India to take a more forceful position in the WTO negotiations, seeking not just significantly lower levels of foreign protection, but also much greater transparency, simplicity, and predictability in foreign trade regimes.
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