Title: FROM%20COMPETITION%20AT%20HOME%20TO%20COMPETING%20ABROAD:%20A%20CASE%20STUDY%20OF%20INDIA
1FROM COMPETITION AT HOME TO COMPETING ABROADA
CASE STUDY OF INDIAS HORTICULTURE
Aaditya Mattoo, Deepak Mishra, Ashish Narain
THE WORLD BANK
2The Indian farmer is globally competitive but
Indian agriculture is not. Why?
Source UN COMTRADE, 2005
3Previous diagnoses of the problems of Indian
agriculture
Foreign trade barriers
Protectionist standards
High costs of production
Poor infrastructure
4The 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
5Commodities Surveyed
Source Value Chain Survey, The World Bank
6States Covered
Source Value Chain Survey, The World Bank
7Factors Impeding Indias Exports
8Logistics 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
9Indias international transport costs are higher
than those of competing countries
Source UN COMTRADE, 2005
10Why?
- 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
11The 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
12Trade 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
13Trade Barriers
14The 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.
15Key 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