“Trade shows help exporters capture market demand and standards”
Dr Pralok Gupta, Associate Professor, Centre for WTO Studies, IIFT, discusses ways to improve India’s farm exports in this interaction with TPCI.
TPCI: Indian policy makers trying to incentivize processed over raw. How will this escalate farmer’s income?
Dr Pralok Gupta: Processed foods definitely fetch more value in the market as compared to raw exports of agricultural products. But we have to see the issue from two perspectives. One is that of the value fetched in the market. So from that perspective yes, having more focus on processed food and beverages is a good idea. But if the perspective is whether it will be escalating farmers’ income, we need to understand how small farmers are integrated with the processed industry and whether they have the power to bargain for higher prices for their produce. If the farmers are not in a situation to bargain for better prices at which they are selling to the processing industry, the industry will be benefitted from higher value of processed food, but this may not be percolating down to the farmers. So from the perspective of doubling farmers’ income, it is important to analyse how farmers are integrated with processing industry, their bargaining power and whether they are able to adopt practices that are able to generate more and more exports of processed food.
TPCI: Can farmers be incentivized to diversify into food processing to improve their incomes?
Dr Pralok Gupta: It can definitely be done. Processing is also of two types – primary processing and secondary processing. Primary processing is for products like rice, wheat, sugar, etc. These are relatively lower value products. On the other hand, secondary processing involves horticulture products, organic farming, etc. Secondary processed foods carry more value in the market. Our processing industry is more tilted towards primary products like rice and wheat. If the farmers are incentivised to diversify their crops towards those products which are used in secondary processing, there will be more value which will also percolate down to farmers.
TPCI: How is the acceptance of processed Indian F&B products in mainstream foreign markets beyond the diaspora?
Dr Pralok Gupta: If you see global data, the top importers of major F&B products are US, UK, EU, Japan, etc. But, when you see India’s data, the main exports markets for F&B products are US, Middle East, Vietnam, Malaysia, etc. So, there is some mismatch between the countries that are the major importers and the markets in which we are exporting these products. It indicates that we are not exporting as much as we should be able to do to the major import markets. There is a significant market that is still untapped as far as processed food is concerned. So, we should definitely try to tap that market.
TPCI: How do focussed trade shows help Indian F&B exporters enhance their reach in foreign markets?
Dr Pralok Gupta: These are certainly very helpful. They not only reduce the frictions between buyers and sellers in terms of their approachability and the market access barriers, but they also help address the cultural barriers, because an exporter sitting in India may not be able to see the barriers or the cultural nuances, which are operating in a particular export market. But with buyer-seller meets, the buyers can talk about the standards they follow, market trends, tastes and preferences of consumers, demand, etc. So these shows help to capture not only the market demand but also the barriers in a very realistic and practical way.
TPCI: When it comes tough standards in major markets like US and EU, what should be the policy approach to tackle them?
Dr Pralok Gupta: It is important for us to work on the standards. The government is very actively looking at standards related aspects, as visible in the Standards Conclaves, organized by the government each year and devoted to these issues. However, there are infrastructural issues like availability of labs, skilled manpower, use of appropriate technology to check for various standards and parameters. These issues are affecting the right kind of adoption of standards not only in the agriculture sector but also in other industries. This is definitely one area where we need to improve, if we want to increase our exports to relatively untapped markets.
TPCI: What is your view on the progress towards global convergence in Codex standards? When is it likely to happen?
Dr Pralok Gupta: Theoretically it is obvious that a global alignment in Codex standards should be there and will benefit everybody – buyers, sellers, etc. But with the kind of protectionist tendencies that the world is now witnessing, standards are becoming a very important tool of protecting the domestic market. So considering that, there is a vested interest in not converging to the standards or not to have the same set of international standards. In the absence of convergence, a country can impose its own standards or some special kind of parameters to prevent imports from other countries. So I do not see much faster resolution on this aspect.
TPCI: Would more FTAs improve the utilization rate? Which markets can be explored?
Dr Pralok Gupta: FTAs provide preferential treatment, so they are supposed to be helpful. But then you also need to provide preferences to the partner country. So, it is important to analyze the kind of preferences the partner countries are seeking and potential effect of such preferences on net exports. The second important aspect is how the issue of NTBs and standards is being addressed in these FTAs. Even if there is zero tariff, NTBs become an important means of protecting the domestic market. The world is increasingly using NTBs rather than the conventional tool of tariffs to protect domestic industry. If India is unable to tackle these NTBs in FTAs, then these FTAs may not be helpful in increasing exports.
Dr. Pralok Gupta is currently working as Associate Professor (Services and Investment) at the Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi since May 2012. Earlier, he has served in the UP State Civil Services and Industrial Finance Corporation of India. Dr. Gupta has a Ph.D. in Economics and Social Sciences from Indian Institute of Management (IIM), Bangalore and has also been a visiting and full-time faculty to various institutions in India.