International Trade and Competitiveness of Indian Horticulture

Abstract

Horticulture is an important component of agriculture accounting for a very significant share in the Indian economy. Rising consumer income and changing lifestyles are creating bigger markets for high-value horticultural products in India as well as throughout the world. Among these, the most important high-value export products are fruits and vegetables. This study was conducted to analyze the comparative advantage and competitiveness of pomegranate and gherkin which are the important foreign exchange earner among fruit and vegetable crops exported from India.

The primary data was collected from Tumkur and Bijapur district of Karnataka, India and secondary data was collected from concerned government institutions, APEDA and also from exporters of fruits and vegetables. The Policy Analysis Matrix (PAM) was selected as the analytical tool to analyse the export competitiveness, comparative advantage, and the degree of government interventions in the production and export of gherkin and pomegranate. The policy distortions were measured through indicators of PAM. Garret ranking technique was used to analyse the constraints in the production and export of the selected crops.

EPC of Gherkin (0.5) and pomegranate (0.45) values which found to be less than one indicates that producers are not protected through policy interventions. Whereas DRC (0.27 & 0.28) and PCR (0.43 & 0.59) values of Gherkin and Pomegranate respectively shows positive, social as well as private profit which indicates that, India has a competitive and comparative advantage in their production. The result for Garret ranking in case of gherkin shows that skilled labour and lack of superior quality are the major constraints in production and export of gherkin respectively. In case of pomegranate non availability of skilled labour, high incidence of pest and diseases, lack of transportation facilities, high residual effect of pesticide are the major constrain in production and export.

The overall result shows that the cultivation as well as export of gherkin and pomegranate is economically profitable and efficient.

Key Words: Gherkin, Pomegranate, PAM, EPC and DRC

List of Acronyms

1. Introduction

1.1 Background

Indian agriculture is vested with the herculean responsibility of feeding over more than one billion people. Out of total, 72% of India’s population live in rural areas, further three-fourth of the rural populations depend on agriculture and allied activities for their livelihoods. The present growth in agriculture in India is hassle with problems most importantly, agricultural growth slowed down to 2.1% between 1998-99 and 2004-05. It is largely due to a decline in the food grain sector that grew at merely 0.6%. Given the high dependence of the poor on agriculture, the stagnation in this sector is currently threatening to stall poverty reduction in India (Reddy, 2007).

Given the present scenario, the immediate question to be addressed is how agricultural growth can be accelerated. The question can be answered through by diversifying the consumption pattern towards high value agricultural commodities in general and high value horticultural products in particular such as fruits and vegetables. In recent years there has been a great deal of interest among policymakers and trade analysts in the role of horticultural products as a principle means of agricultural diversification and foreign exchange earnings in developing countries. Horticultural products have high income elasticity of demand as income goes up the demand raises rapidly. It grows especially in middle and high income developing countries. As people are more cautious on health and nutrition, there is a paradigm shift from high fat, high cholesterol foods such as meat and live stock products to low fat and low cholesterol foods such as fruits and vegetables. As a result, the world has changed its attention towards high value agricultural products. Hence, it is crucial to be competitive in the world market to reap the potential gains of increased and growing world demand for horticultural products such as fruits and vegetables. Thus, the purpose of the present study attempts to evaluate the consequences of international trade and competitiveness of Indian horticulture with special reference to pomegranate and gherkin crops. In the recent past, these two crops got high export potential and earned good foreign exchange.

1.2 Studies on export of fruits and vegetables

There are many studies related to export of horticultural crops especially fruits and vegetables from India. Chiniwar (2009) explained the numerous opportunities and challenges of the horticulture sector and observed that there is a tremendous potential for Indian pomegranates in the global market. He examined the growth of pomegranate exports from India. The study revealed that the growth of pomegranate exports from India is moderate in comparision to the potential for its exports. Tamanna et al. (1999) examined the export potential of selected fruits from India by using Nominal Protection Coefficient (NPC). The results indicate that the exports of Indian fruits are highly competitive in the world market. Nalini et al. (2008) observed that India has made tremendous progress in the export of cucumber and gherkin products during the past 15 years (1990-2005). The export has increased by about 129 times with an impressive annual compound growth rate of 37.46 percent, as against only 4.38 percent in the world market. An increasing and high value of Revealed Comparative Advantage (RCA) and a positive and increasing value for Revealed Symmetric Comparative Advantage (RSCA) have indicated high potential for their export. One percent increase in volume of international trade in cucumber and gherkin may increase the demand from India by 5.96 percent. This indicates that India is highly competitive in the export of cucumber and gherkin. It has ample scope to further increase its export. Gulati et al. (1994) analyzed the export competitiveness of selected agricultural commodities and identified the constraints in the export of fresh fruits, vegetables, processed fruits and vegetables.

The above studies are related to export performance, growth, and constraints of fruits and vegetables. Most of these studies focused on aspects pertaining to export of fruits and vegetables. There are no studies on export policy especially related to efficiency and comparative advantage in world market. Therefore, the aim of the present study is to analyze the export competitiveness of pomegranate and gherkin by using Policy Analysis Matrix (PAM). The study has a high scope because competitiveness has become a key issue in the international market for export development of fruits and vegetables.

1.3 Research objectives

In the present study, the export competitiveness of high value horticultural crops of India is analyzed. To be very precise, the study analyzes the competitiveness of gherkin and pomegranate in the world market. It also compares the advantages and constraints in the export of these crops with the following objectives and proposed hypothesis, which will be tested based on the results and conclusion.

Specific objectives

1. To assess the export competitiveness of Gherkin and Pomegranate
2. To examine the production and export constraints of Gherkin and Pomegranate

Hypothesis

1. – Export of gherkin and pomegranate are competitive in international markets

1.4 Structure of the thesis

The study contains the results of the analysis of export competitiveness of horticultural crops in India. In the present study, opportunities are analyzed, constraints in production and export of gherkins and pomegranates from India. We further analyze the competitiveness and comparative advantage of these two crops in international market. The detailed information of this analysis is discussed in the following sections of the study.

The first section of the thesis gives us an introduction and background on the nature of the problem, facts on the dynamics and underlying causes diversifying the consumption pattern of high value horticultural commodities. Further, a brief overview of existing studies on Indian agricultural and horticultural growth, export performance, and constraints will be discussed. The research question is broken down into specific objectives and a possible hypothesis has been put forth.

The second section of the thesis will give a general overview of fruit and vegetable scenario in the world as well as in India. The section also explains the importance of selected fruit and vegetable by considering production, export and foreign exchange earnings which will help us to understand the export competitiveness of these crops from India.

The third section deals with methodological framework which deals with the concepts and competitiveness of high value horticultural crops from India focusing on the application of PAM model for the study. In the same chapter, the current literature and outline of the major definitions for competitiveness and comparative advantage are studied. The above proposed model will be used as a tool to address the research objectives followed by data description.

Fourth section highlights the findings of the research from the proposed model using collected information on pomegranate and gherkin cultivation, and their export. Finally, the proposed hypothesis is tested and the results inferred.

The final section summarizes the whole research findings and provides meaningful policy implications.