Vishleshan for Regulatory Exams, 12th August 2025: Farm Exports: An Unsung Driver of India’s Growth

Want to get ready for the UPSC, RBI, SEBI, or NABARD exam? If yes, you have to stay updated about key economic and regulatory updates. In today’s edition of Vishleshan, we’ll discuss Farm Exports: An Unsung Driver of India’s Growth. These issues are highly relevant for all the upcoming competitive exams mentioned above. Keep reading to stay ahead with a clear understanding of these current updates.

Farm Exports: An Unsung Driver of India’s Growth

Context: The country’s merchandise exports are flat, if not declining, while agri exports are set to touch a new high this year. A lot, however, hinges on the Trump tariffs going ahead. If trends hold, farm exports could even touch $55 billion in 2025-26, crossing the previous record of $53.2 billion in 2022-23.

Link to the Article: Indian Express

India’s overall merchandise trade experienced a virtually flat growth of 0.1% in 2024-25, with exports reaching $437.4 billion. In contrast, the agricultural sector demonstrated remarkable resilience, with farm exports growing by 6.4% to $51.9 billion. While India remains a net exporter of agricultural produce, its trade surplus in this sector has more than halved since 2013-14 due to imports rising at a faster pace than exports. This trend is driven by a strong rebound in agricultural production and a lifting of export restrictions, but it now faces potential headwinds from new US tariffs.

India’s Exports and Imports in FY2024-25

• Overall Merchandise Trade:
  • Exports: India exported goods valued at $437.4 billion in 2024-25, which was a marginal 0.1% increase over the previous year. The country’s overall merchandise exports have witnessed “virtually flat growth”.
  • Imports: Imports for the same period were $720.2 billion.
  • Trade Deficit: This resulted in a total merchandise trade deficit of $282.8 billion during 2024-25.
• Agri and Allied Sectors Contribution:
  • Agricultural Exports: These registered a 6.4% growth, rising from $48.8 billion in 2023-24 to $51.9 billion in 2024-25. This performance stands in sharp contrast to the “virtually flat growth” in overall merchandise exports.
  • Agricultural Imports: These amounted to $38.5 billion in 2024-25.
  • Agricultural Trade Surplus: Unlike the overall merchandise trade deficit, India’s agricultural sector had a trade surplus of $13.4 billion in 2024-25.

Analysis of the Article and Decoding the Agri-Trade Issue

The article analyses the performance of India’s agricultural trade, highlighting its recent resurgence, the factors driving it, and the potential challenges that lie ahead.

1. Resurgence of Agricultural Exports:

• Historical Trend: Farm exports saw a strong surge from $7.5 billion in 2003-04 to $43.3 billion in 2013-14. They fell thereafter until 2020-21 before picking up to hit a record high of $53.2 billion in 2022-23.
• Drivers of Recent Growth:
  • Monsoon-aided Rebound: The recovery is attributed to a monsoon-aided agricultural production rebound in 2024-25, which eased domestic inflationary pressures. A “second consecutive above-normal monsoon this year should enable the Modi government to also lift the export restrictions on sugar”.
  • Lifting of Export Curbs: The government has gradually relaxed curbs on commodities like wheat, rice, and sugar, which were imposed in response to rising domestic food inflation.
  • Global Shortfalls: Indian exporters of coffee and tobacco have benefited from output shortfalls in Brazil, Vietnam, and Zimbabwe.
  • Q1 FY26 Performance: In the first three months of FY26, farm exports posted a 5.8% year-on-year increase over April-June 2024. Major items showing impressive growth include marine products, non-basmati rice, buffalo meat, coffee, tobacco, and fruits & vegetables.

2. A Declining Agri-Trade Surplus:

• Trade Balance: While India remains a net exporter of farm produce, its agricultural trade surplus has “more than halved from $27.7 billion in 2013-14”.
• Imports Rising Faster: This decline is because imports are “going up at a faster pace than exports”.
• Major Import Items: India’s farm imports are concentrated in a few commodities. More than two-thirds of the import value in 2024-25 came from vegetable oils, pulses, and fresh fruits.
  • Pulses: Imports scaled a new high of 7.3 million tonnes (valued at $5.5 billion) last fiscal, driven by the 2023-24 El Niño-induced drought and a government decision to slash import duties.
  • Other Items: Imports of vegetable oils, cotton, and natural rubber continue to rise because domestic production is unable to meet increasing demand.

3. The US Tariff Threat as a Major Headwind:

• Trump’s Tariff Threat: Union Commerce Minister Piyush Goyal acknowledged the “likely disruptions to global trade from US President Donald Trump’s tariff attacks, including the slapping of a 50% duty on Indian goods” year than last year”. This was notwithstanding the likely disruptions to global trade from US President Donald Trump’s tariff attacks, including the slapping of a 50% duty on Indian goods.]. The “50% prospective tariffs on Indian goods from August 27” may cause exports to “come under pressure”.
• Sectors to be Impacted: The maximum impact of the tariffs would be on marine products, where the US accounts for 35% of India’s exports in this category.
• Secondary Effects: The US has also imposed a 50% import duty on goods from Brazil. If coffee is not exempted, the resulting surplus could depress prices in other markets, in turn hurting Indian shipments.
• Resilience to Date: Despite the tariff threats, agricultural exports to the US have been “buoyant,” growing by 24.1% in January-June 2025.

In conclusion, India’s agricultural sector has shown strong growth and resilience, driven by a domestic production rebound and a relaxation of export restrictions. While this has allowed India to maintain a net exporter status, the agricultural trade surplus is shrinking due to a faster rise in imports of key commodities. The sector’s current momentum faces a significant and looming threat from new US tariffs, which could particularly impact key export items like marine products and disrupt global commodity prices.