FROM%20COMPETITION%20AT%20HOME%20TO%20COMPETING%20ABROAD:%20A%20CASE%20STUDY%20OF%20INDIA

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FROM COMPETITION AT HOME TO COMPETING ABROADA
CASE STUDY OF INDIAS HORTICULTURE
Aaditya Mattoo, Deepak Mishra, Ashish Narain
THE WORLD BANK
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The Indian farmer is globally competitive but
Indian agriculture is not. Why?
Source UN COMTRADE, 2005
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Previous diagnoses of the problems of Indian
agriculture
Foreign trade barriers
Protectionist standards
High costs of production
Poor infrastructure
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The first integrated supply chain analysis from
farm to retail

• Based on primary surveys of 10 horticultural
  products
• Covered 1400 farmers, 200 commission agents, 65
  exporters across 16 major Indian states
• Detailed interviews with major stakeholders

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Commodities Surveyed
Source Value Chain Survey, The World Bank
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States Covered
Source Value Chain Survey, The World Bank
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Factors Impeding Indias Exports
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Logistics and intermediation costs dwarf
production costs
Farmers share in retail price India15-20 Thaila
nd, US 30-40
Source Value Chain Survey, The World Bank
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Indias international transport costs are higher
than those of competing countries
Source UN COMTRADE, 2005
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Why?

• Air Transport
• Unpredictability and low volume (shadow prices)
• Excessively high taxes on fuel and airport
  charges
• Restrictions on ownership and entry
• Inadequate and under-utilized infrastructure
• Maritime Transport
• Inflexible functioning of major ports
• Lack of multi-modal transport
• Cost-plus tariff policy

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The Standards Gap

• Some foreign standards are protectionist
• But weakness in domestic standard setting
  legitimize foreign barriers
• And mandatory official standards are becoming
  less important than quality standards imposed by
  buyers

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Trade Barriers

• Average tariff is low but that can be deceptive
• Minimum entry price
• Seasonal variation of tariffs
• Tariff quotas
• Preferential access, e.g., Turkey in the EU,
  Mexico in the US, Everything but Arms deal for
  Africa.
• Tariff escalation Higher tariffs on processed
  products than on fresh fruits

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Trade Barriers
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The combined effect of three factors is far
greater than the sum of their parts

• Poor logistics lead to delays and wastage, and
  weaken farmers incentives to improve quality.
• Limited standardization makes physical inspection
  a must before any transaction, further adding to
  costs.
• A protected domestic market can increase
  transport costs for exporters because low imports
  mean that exporters must not only bear the cost
  of the outward journey, but also the unutilized
  capacity on the way into the country.
• High delivery costs increase the burden of
  foreign tariffs because they are imposed on the
  final product price.

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Key Priorities

• Creating an integrated and competitive supply
  chains for agriculture
• Radical reform in transport, storage and
  distribution services
• Pro-active engagement in international trade
  negotiations