In order to survive in the competition created by the Australian food sector in the level playing ground initiated by CECA, the existing Indian agricultural value-chain needs to be reformed.
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The signing of the Economic Cooperation and Trade Agreement (ECTA) by Australia and India on 2 April 2022 is another example of India's recent enthusiasm for accessing free trade agreements (FTAs). The interim agreement appears to be a guarantor of the Australia-India Comprehensive Economic Cooperation Agreement (CECA), which the two nations began negotiating in May 2011.
ECTA is expected to reduce or eliminate certain barriers to trade goods and improve market access to specific goods and sectors. It will take a more comprehensive form under CECA which will include most of the traded goods, various products, resources and services in the sector, investment, government procurement and other areas such as intellectual property. With the implementation of ECTA, bilateral trade (trade and services) between India and Australia is expected to almost double. Significant reductions in tariff and non-tariff barriers over the next decade, as well as the facilitation of skilled workers and the promotion of trade in services through investment, will further improve CECA. On the issue of market access, Australia has agreed to provide preferential market access on almost all tariff lines, including its labor-intensive areas.
Food sector: Opportunity
India is looking forward to investments from Australian companies to improve agricultural techniques in the areas of agriculture and food (agro-food sector), information cultivation, resource conservation, food technology and processing and dairy sector. The rationale for technology and investment cooperation, spending and logistics aimed at improving grain management in India will be crucial for the growth of the sector.
With the implementation of ECTA, bilateral trade (trade and services) between India and Australia is expected to almost double.
Food from Australia can also offer significant competition to the Indian agricultural ecosystem. However, opportunities are only in threats. Either the current Indian system will face a major revolution from production to marketing and procurement, or it will be destroyed. Despite achieving self-sufficiency in food production, India has failed to meet the emerging challenges in its agro-food systems, to ensure efficiency in the use of resources and at the same time to be inclusive and sustainable. The competitiveness of the system depends on building a modern scientific farming system, developing infrastructure and strengthening the agro-food supply chain. This change is necessary to meet two major strategic objectives: doubling the income of farming communities and doubling India's share in global agro-food trade from 1 to 2 per cent. The combination of the two strategic objectives is the growing demand for food, the concern pushed forward by the growing population, and more importantly the growing middle-income population, which is demanding more value-added products. From fresh food to premium products (high nutrition with low chemical residues). India, with a population of 1.4 billion, is evolving into a unique market for various products. As a result, demand for grains, oilseeds, cereals, horticultural products, value-added dairy products and premium meats is increasing. With a population of 4 billion, it is evolving into a unique market demanding a variety of products.
India is an important market for Australian horticulture, wheat and pulses. Still, there is potential for further growth in the range of cereals, pulses, oilseeds and horticultural products. However, Australia-India grain trade has not grown to its potential due to tariffs, domestic price support, subsidies on crop inputs and other protectionist measures India has imposed on its imports. The Interim FTA proposes to remove most of these protectionist measures in time and in the range of food products. Prices of mutton, wool, lentils, horticulture and wine are likely to be reduced or eliminated. The current five per cent duty on wool will be completely abolished by the end of this year, while the 30 per cent import duty on mutton is likely to be completely reduced. Rates on lentils will be reduced from 30 per cent to 15 per cent, So rates on faba beans will be brought down to zero in the next seven years. In addition, the charges on the range of horticultural products will also be reduced to zero, while the charges on wine will be gradually reduced.
Tariffs, support for domestic prices, subsidies on crop inputs and other protectionist measures imposed by India on imports have prevented Australia-India grain trade from growing to its potential.
In addition to tariff reductions and quota reductions, CECA will offer research, innovation and the possibility of collaborating on a scale that can transform agriculture in India, particularly value addition, commercial scale and climate resilience. Australia has strong technical capabilities and expertise in agriculture, post-harvest technology, food processing, skills development and building flexible supply chains. These are the objectives that India seeks to achieve through the adoption of science, technology and innovation (STI) in agro-food systems. The use of STIs on agro-food systems is considered important in terms of achieving inclusive nutrition and food security; Reducing the emergence of new infectious diseases and invasive pests that usually infect the entire agro-food system (about 30-35 per cent of India's annual crop production is wasted by pests); Mitigating the risks associated with climate change; Creating climate smart farming; And the transition from subsistence to commercial agriculture.
The market size introduced by India - a commitment to a technology-led revolution in agriculture - is an opportunity for Australia to build up-to-date agricultural technology, develop infrastructure and build long-term partnerships to provide premium food products to India's middle class. High-income population. To prevent such risks, Australia is helping India build knowledge about biosecurity treatments. It has a comprehensive biosafety system that can adapt to a rapidly evolving environment. The National Grain Biosecurity Surveillance Strategy works for early detection and surveillance related to market penetration in its grain industry. As economic ties strengthen, India can improve its ability to use biosecurity treatments for its exports and imports, which will eventually boost bilateral trade with Australia.
The need for value-chain reforms
The discussion of liberalization of Indian agriculture has been going on for decades. But still, this area has been heavily insulated, protected and pampered with many measures. Any attempt to improve this area with modern best practices has only met with stiff opposition. It is important to note that food shocks in India are still met by neo-Keynesian methods: Risk management response from the government by distributing buffer stocks through the public distribution system. During the epidemic, the government used various distribution systems to make food available to all. As such, high reliance on government agencies to bring organic efficiency into the agricultural marketing process through the use of market-based tools never allows. In many parts of the world (e.g., Papua New Guinea) public procurement and the creation of buffer stocks and buffer standards have failed, And agriculture often fails to realize that marketing, purchasing, and global best practices do not meet the criteria. Delivery
As economic ties strengthen, India can improve its ability to use biosecurity treatments for its exports and imports, which will eventually boost bilateral trade with Australia.
In 1996, the United Nations Council on Trade and Development published a report underlining the importance of risk management for India's agricultural value-chain, a fact that forced the Indian agricultural sector to face the competition created by the world of globalization. Agricultural trade liberalization. In the process, the report emphasizes the need for market-based risk management tools and institutions. Around the same time, a committee headed by KN Kabra had recommended resumption of futures trading in 16 agricultural commodities. In the new millennium, the main purpose of establishing demutualized multi-commodity derivative exchanges was to provide a platform for hedging (risk management) and price finding in agricultural commodities.
The big question so far is: despite two decades of operation in India, have commodity derivative exchanges been able to play this role? The answer seems largely negative. These markets could not provide alternatives to scattered agricultural material markets or provide efficiency in the process of agricultural marketing, especially in food items. Due to the fragmented nature of agricultural markets in India and the widespread digital segmentation, recent interventions such as All India Electronic Spot Markets (i.e. e-nam) have not been able to emerge as a platform for market integration. However, foreign competition in the food sector will guarantee to bring value-chain efficiency. Otherwise, the existing Indian value-chain will not be able to withstand the competition created by the Australian food sector in the level playing field initiated by CECA. In such a case, We can only expect that food imports from Australia will have a negative impact on players in India’s existing food value-chain, not on Australian investment in the food sector. Both will be counterproductive to "Make in India" and / or "Self-reliant India".
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