India's Foreign Trade


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India's Foreign Trade

  1. 1. ―The government o India has responded swiftly to theinitiative of the Indian business community by identifying south Africa as a thrust market for realizing larger exports from the country‖The bilateral relations between the Republic of India and the Republic of SouthAfrica have grown strong since the end of apartheid in South Africa in 1994. Bothnations have since developed close strategic, cultural and economic ties.India and South Africa also share an extensive energy partnership. In 2010, Indiaimported 1.4 million tonnes of South African coal in February, making it the largestpurchaser of coal from the country. Ties with further solidified with South Africas2011 acceptance into the BRICS group.Economic tiesBilateral trade grew exponentially from USD 3 million in 1992-93 to USD 4 billion in2005-06, and the two governments have targeted increasing bilateral trade to USD12 billion by 2010. Gold bullion constitute one-third of Indias imports from SouthAfrica, while India polishes and processes diamonds from South African mines.South Africa has promoted signing a free trade agreement with India andthe Southern Africa Customs Union (SACU), whichincludes Botswana, Lesotho, Namibia and Swaziland along with South Africa.Bharti Airtel was scheduled to acquire MTN to make one of the worlds largesttelecommunications companies, and also touted as step in South-South cooperation.The deal was, however, rejected by the South African government of Jacob Zuma onthe grounds that MTN would not be as South African anymore amid concerns ofdual-listing on the Indian and South African stock exchanges.Military tiesIndia and South Africa have also developed military cooperation, trading arms andjoint exercises and programs to train forces.IBSAOn June 6, 2003 India and South Africa signed an agreement with Brazil, known asthe Brasília Declaration, establishing "South-South" cooperation, based on thepremise of the three nations being regional powers of South Asia, SouthernAfrica and South America. The declaration called for extensive tripartite cooperationon strategic, commercial and cultural affairs, development of a tripartite free tradeagreement and a united front in negotiating with Western nations in the World TradeOrganization (WTO), calling for reform of the U.N. Security Council and supportingeach others bid for permanent membership with veto rights. The IBSA DialogueForum was created to promote cooperation and consensus on issues of trade,poverty alleviation, intellectual property rights, social development, agriculture,climate change, culture, defence, education, energy, health-care, information
  2. 2. society, science and technology, peaceful nuclear energy, tourism andtransport. The fourth summit was held in Brasília. The three nations pledged to boosttrilateral trade to USD 15 billion by 2010. The three nations have also expandedmilitary cooperation and conducted joint naval exercises in 2008. President Pratibha Patil said she is confident that trade between India and SouthAfrica will reach USD 15 billion by 2015 as the two have become important tradingpartners.Patil and South African President Jacob Zuma appreciated businesses in both thecountries for having reached the earlier target of USD 10 billion by 2012, a yearahead of the schedule.Meanwhile, the two sides also called for various steps to facilitate business includingeasier visa regime for Indian ICT companies and greater transparency for SouthAfrican businesses in the Indian market.Minister of State for Communications and IT Sachin Pilot, called for a change in theSouth African visa regime to allow easier entry. He said Indian ICT companiesconsider Africa as an important market.On the other hand, Business Unity South Africa President Futhi Mtoba said thatamong the challenges, amid increasing investment in India, was a need for greatertransparency in Indias tariff schedules, especially in the agricultural sector."We want India to be an open market for South African foreign direct investment,"Mtoba said.Addressing business forum from both countries as part of her week-long state visit toSouth Africa, Patil said South Africa had become one of Indias most importanttrading partner."The economic and commercial exchange between our two countries is at the coreof our bilateral ties," she said."I am happy that Indian companies work closely with the priorities of the SouthAfrican government and they are also seeking to add value to raw materials throughbeneficiation locally," Patil added.Indian companies have not only entered into partnerships with their South Africancounterparts, but also view it as a gateway to the Southern African region.Patil said, "Our confidence in the South African economy is reflected in the fact thatseveral major Indian banks are present in South Africa. We are also happy thatmany companies form South Africa have established their presence in India."She said that on average at least one South African business delegation visited Indiaevery month.Calling on business to find complementarities in various fields such as energy andgasification of coal for partnerships, the president also highlighted the co-operationbetween the two countries in space exploration so that they were not left out in thisarea.Zuma in turn called on Indian business to take advantage of the huge opportunitieson the Africa continent with its priorities that infrastructure and communication.
  3. 3. Apart from oil and natural resources, India engages with Africa in agriculture, health,information and communication technology (ICT), education and skills transfer, toname a few. Going forward, the sectors to focus on would be Agriculture, Small andMedium Enterprises, Finance and Tourism. Cooperation in Social Development andcapacity building would be another area of cooperation given that both the countriesare young societies keen to translate the demographic dividend into effective growth.To further increase the engagement, the Minister spoke of negotiations with SouthAfrica Customs Union (SACU) for a PTA, and the setting up of the India AfricaBusiness Council to develop a road map for business partnership. He concluded hisaddress by saying that engaging with the LAC and African regions will give furtherimpetus to the growth and synergetic opportunity for all. Challenges such as a widening current accounts deficit made it move away from theearlier-held view of exports as a phenomenon of surplus. It recognized that exportswere an essential economic activity with a wider and greater impact on the country’seconomy. This, coupled with the recognition that the conventional approach andtraditional markets would not work anymore, the Department of Commerceformulated a strategy keeping in mind issues such as market diversification andproduct diversification.Giving the industry’s perspective, stressed on the need to move beyond conventionalmarkets. He said that today, South-South Trade has become a beacon of hope inthese trying times. There is tremendous potential as can be seen in the way India-Africa trade has grown over the years: from US$ 967 million in 1991 to US$ 50 billionin the first quarter of 2011. India’s economic engagement has been growing beyondgold and oil, which India imports, and a host of manufactured goods that it exports toAfrica. Several Indian companies such as the Godrej Group, Bharti Airtel, Vedantahave acquired companies or have other business interests in Africa and severalother companies such as L&T, NIIT are looking to follow in their footsteps.
  4. 4. ―The strategy for export of Marine products from Indiapre – supposes strengthening of the production base on the one hand & adopting an effective marketing arrangement on other‖.Asia Economy Watch June 2008  India’s seafood exports, which stagnated few years back, are likely to touch over $3.5 billion from current level of $2.2 billion by 2009, provided a key thrust area include value-addition, expansion of aquaculture, technological upgradation and tapping unexplored resources.  In a paper brought out by Associated chambers of commerce & industry of India (ASSOCHAM) on ―Market of Seafoods in India‖, it has been projected that India’s Seafood exports, which remained at $1.6 billion in 2005-06 and is anticipated to reach around $2.2 billion in 2007-08, have potential to accelerate faster in view of their growing demand in trading blocks like the EU, Middle East, China, Canada, Russia.The Marine Industry – Some Facts  Exported to more than 90 countries.  India has one of longest Coastline of 8118 Km.  Global Share of India is 4.2% at second Position, while China has 69% share.  Has one of largest area under Estuaries, backwaters and Lagoons, which are highly conductive for developing capture as well as culture fishes.  Employees 30 Lac people, contributes 1% to Indian GDP and 4.5 % to Agriculture and Allied products.  Indian Fishing Industry got a major boost after the declaration of EEZ (Exclusive Economic Zone) in 1977.  Major Exporting States are AP, Kerala, Tamil Nadu, West Bengal.  Potentially Unexplored states are Gujarat, Orissa, Maharashtra.  Major products are Shrimps, frozen fish, cuttlefish, squid and dried items.Trends in ExportsMarine product exports has steadily grown over the years; from a mere Rs.3.92crore in 1961-62 to Rs.8363.53 crore in 2006-07 , 1.4% of the total exports fromIndia.  Until 1960  Products were Dried Shrimps and Dried Fish  Market was neighboring countries.  From 1960 – 1977  Products were Frozen Shrimps
  5. 5.  Major market beside neighboring countries were USA, Japan. USA emerged as single largest buyer. 1977 – 2001  Japan Emerged as single largest buyer followed by Western European Countries. 2001 – 2004  USA again topped the charts as Single largest importer of Indian Marine Products. 2005 – till date  European union became largest importer importing 33% of Products  Japan 16.18%  USA 16.12 %  China 13.83%  South East Asia 7%  Middle East Asia is New emerging Market.  The product preference is shifting from Frozen Shrimps to Processed Products and other marine products. Meager utilization of natural gift. Total production  Potential – 15 Million Tonnes  Production – 2.5 Million Tonnes Fresh waters and Ponds  Total Available – 2.4 Million Hectares.  Utilized – 1.5 Million Hectares. Production Per Hectare (Pond Culture)  Potential – 5 Tonnes per Hec.  Production – 2 Tonnes per Hec. Production Per Hectare (Reservoirs and Tanks)  Potential – 600 Kg per Hec.  Production – 100 Kg per Hec. Marine Export Items Traditional Items:  Shrimps - Oyster - Tuna Fish  Squids - Lobster - Frozen Fish  Cuttlefish - Shark - Squids Value Added Items.  Cultured Shrimp  Battered Shrimp  Cook Shrimp  Fish Fillet.
  6. 6. Year Export V2002-03 Q 467297 4 V 6881.3 9 $ 1424.9 12003-04 Q 412017 -5 V 6092 -7 $ 1330.8 -92004-05 Q 461329 4 V 6646.7 5 $ 1478.5 12005-06 Q 512164 5 V 7245.3 5 $ 1644.2 12006-07 Q 612641 1 V 8363.5 1 $ 1852.9 2ITEMS % APR- AP Share MAR MA to 2006- 200 Total 07 06Frozen 22 Q 137397 145Shrimp 53.88 V 4506.08 427 53.84 $ 997.64 970 UV$ 7.26 6.6Frozen 44 Q 270751 182Fin 17.37 V 1452.88 998Fish 17.38 $ 321.95 225 UV$ 1.19 1.2Frozen 9 Q 55701 496Cuttle 9.53 V 797.37 549Fish 9.49 $ 175.75 124
  7. 7. UV$ 3.16 2.5 Frozen 8 Q 47252 523 Squid 6.8 V 568.32 575 6.81 $ 126.25 130 UV$ 2.67 2.4 Dried 4 Q 24293 141 items 2.19 V 183.16 132 2.2 $ 40.75 30. UV$ 1.68 2.1 Live 0 Q 2478 256 items 0.77 V 64.06 61. 0.77 $ 14.22 13. UV$ 5.74 5.4 Chilled 1 Q 7200 506 items 1.4 V 117.3 81. 1.44 $ 26.63 18. UV$ 3.7 3.6 Others 11 Q 67571 608 8.06 V 674.35 574 8.08 $ 149.72 130 UV$ 2.22 2.1 TOTAL 100 Q 612641 512 100 V 8363.53 724 100 $ 1852.93 164 UV$ 3.02 3.2 What to Export - Tradition so far Shrimp –  20% of world’s imports.  Mainstay in India’s Exports 65.88% (2004), 53% (2008) 200 world class Seafood processing factories. Kerala has 40 percent of the total processing Industries, followed by AP, Tamil Nadu and Gujarat. Changing Trend The India’s exports of Shrimps and frozen Squid are declining year on year. One major reason of decline is Export of Cheaper Vannamei Shrimps from neighboring countries. The trend is shifting towards Value Added Products and Processed Shrimps. New Potential Species are  Mud Crabs,  Tuna Fish,
  8. 8.  Sea brass,  Mullets, and Pearl Spot fishes. India - A Seafood Processing Hub The government has allowed import of raw materials required for processing plants. More Thrust is given on ―Ready to Eat‖ and ―Ready to Cook‖ kind of processed items. First seafood processing zone was developed in Kolkata, with investment of Rs 480 million. The processing zone started with 10 large scale private sector processing units. New Products - Tuna Fish New Fish to Fry Tuna fish is third most traded Fish internationally. Tuna fish exports are targeted to reach 400 million dollar by 2010. Andaman and Nicobar Island holds 25-30 per cent of tuna potential. New products – Mud Crabs Technology for hatchery seed production of Mud Crabs and Sea Bass fish has recently been developed by CIBA (Central Institute of Brackish Water Aquaculture) and MPEDA . Potential sites spotted for this are Tamil Nadu and Andhra Pradesh. Mud Crab is identified as best substitute of Shrimps. By using the technology 1 lakh tonnes of Mud Crabs can be produced giving revenue of Rs. 2000 Crores. New products – Sea Bass Fish High valued Sea Bass Fishes can tolerate wide variation in environmental conditions. It can be produced in vast coastal region example Andhra Pradesh, Tamil Nadu, Kerala, Maharashtra. The technology has been perfected in Southeast Asia, and is in nascent stage in India. One kilogram of Sea Bass fish can give a revenue of Rs 100. Ornamental Fish – New Fish in Town Most popular among Hobbyist. Used in Aquariums around the World. Major Exporters Singapore, Hong Kong, Malaysia, Thailand, Philippines, Sri Lanka, Taiwan, Indonesia and India.
  9. 9.  Major Importers USA, Japan and Europe. China and South Africa are Emerging Markets. Global Trade of $5 Billion annually, growing by 6%. India Exports worth Rs 1.58 Crores, growing at 20% annually. The tropical ornamental fishes from North eastern and Southern provinces of India are in great demand in the hobbyists market . Loaches, Eels, Barbs, Catfish, Goby How to Export? Chennai Port handles 24% in terms of Value, but the carriage is declining over the years, the emerging high capacity ports are  Haldia  Tuticorin  Kochi MPEDA – Marine Products Exports Development Authority Head Quatered – Kochi (Kerela) 6 Regional/ 4 Sub- Regional Offices 2 International Offices – New York and Tokyo. Our vision is to achieve the export of 5 Billion US $ worth marine products by 2014-15 that too with the 75% contribution of value added items. Schemes Logo Scheme – to gain wide market acceptance. Active participation in 15 International Trade Fairs. A delegation consisting of Indian Exporters were send to Japan to address the quality issue. The exporters made series of presentations in major cities of Japan. Challenges Impose of Anti-dumping duty by US in 2004. Japan and EU imposed strict quality control standards on Indian Marine Products. Indian Exports are Single Product (Shrimp) and Single Market (USA and Japan) oriented Industry. Diesel accounts for 75% of Input cost, escalating diesel prices i.e. from Rs 5 in 1991 to Rs. 40 present is major challenge to overcome. The Global imports of Shrimp are declining and demand towards processed food is increasing. Low scale Indian Exporters lack Risk Taking capacity to jump into technology Sophisticated Processed food Industry. As a result of Above, the financial institutions have lost confidence in Small and Medium Players dominated Indian Fisheries Industry.
  10. 10. Export Strategy It is necessary to treat marine products as technology Intensive sector. “Value addition has been considered as the thrust area. Indian seafood processing units will be encouraged to go in for value addition and export through setting up new units, expanding their capacity and diversifying their current activities. Foreign collaboration, investments, tie ups in marketing of value added products and fish import for further processing and export in value added forms will be encouraged.” - G. Mohan Kumar Chairman, MPEDAIndian Logo – MPEDA logo scheme Products  Mud Crabs  Tuna Fish  Sea Brass  Ornamental Fish Markets  Vietnam  Belgium  Canada  Germany  Hong Kong  China
  11. 11. ―The services sector is critical to the future growth of our country‖ India stands out for the size and dynamism of its services sector. The contribution of the services sector to the Indian economy has been manifold: a 55.2 per cent share in gross domestic product (GDP), growing by 10 per cent annually, contributing to about a quarter of total employment, accounting for a high share in foreign direct investment (FDI) inflows and over one-third of total exports, and recording very fast (27.4 per cent) export growth through the first half of 2010-11. i) The importance of the services sector can be gauged by looking at its contributions to different aspects of the economy. Services GDP The share of services in India’s GDP at factor cost (at current prices) increased rapidly: from 30.5 per cent in 1950-51 to 55.2 per cent in 2009-10. If construction is also included, then the share increases to 63.4 per cent in 2009-10. The ratcheting up of the overall growth rate (compound annual growth rate [CAGR]) of the Indian economy from 5.7 per cent in the 1990s to 8.6 per cent during the period 2004-05 to 2009-10 was to a large measure due to the acceleration of the growth rate (CAGR) in the services sector from 7.5 per cent in the 1990s to 10.3 per cent in 2004-05 to 2009-10. The services sector growth was significantly faster than the 6.6 per cent for the combined agriculture and industry sectors annualoutput growth during the same period. In 2009-10, services growth was 10.1 per cent and in 2010-11 advance estimates—AE) it was 9.6 per cent. India’s services GDP growth has been continuously above overall GDP growth, pulling up the latter since 1997-98. It has also been more stable.II) Ministry of Commerce and Industry, Government of India, with a view togive proper direction, guidance and encouragement to the Services Sector,has set up an exclusive Export Promotion Council for Services in the name ofServices Export Promotion Council (SEPC). SEPC was registered under theSocieties Registration Act in November, 2006. DGFT, vide GazetteNotification dated 5/3/2007, included SEPC in the list of the recognisedExport Promotion Councils. SEPC has been mandated to promote export ofservices in the following sectors:-
  12. 12. Healthcare services including1 services by nurses, physiotherapist 8 Environmental Services and paramedical personnel2 Educational Services 9 Maritime Transport Services Entertainment services including3 10 Advertising Services Audio-visual services Marketing Research and Public4 Consultancy Services 11 Opinion Polling Services/Management Services Architectural Services and related5 12 Printing & Publishing Services services6 Distribution Services 13 Legal Services Accounting/Auditing and Book7 14 Hotel and Tourism related services Keeping ServicesMinistry of Commerce & Industry administers a scheme known as MarketDevelopment Assistance (MDA) Scheme for the promotion of exportsincluding services exports. Service Exporters, who are members of SEPC, areeligible for financial assistance under MDA scheme for participating overseas“Buyer Seller Meet” or in any international conference to showcase theirservice capability.With the new Foreign Trade Policy (2009-14), the Government of India hasaimed to accelerate growth in export of services so as to create a powerfuland unique „Served from India‟ brand. Services providers who have a totalforeign exchange earnings or earning in Indian rupees which are otherwiseconsidered as having been paid for in free foreign exchange by RBI, of atleast Indian rupee 10 lakhs in the current financial year shall be eligible toqualify for duty credit scrip. They shall be entitled to duty credit equivalentto 10 percent of the foreign exchange earned by them in the current
  13. 13. financial year. Duty credit entitlement may be used for import of any capitalgoods including spares, office equipment and professional equipment, officefurniture and consumables, provided it is part of their main line of business.III) FDI in Services in IndiaThe measurement of the share of services in FDI inflows encounters problems as itis difficult to clearly differentiate activities between services and goods in sectorssuch as computer hardware and software, telecommunications, and construction.Nevertheless, the share of the four sectors combined (services [financial andnonfinancial], computer hardware and software, telecommunications, and housingand real estate), predominantly consisting of services, in FDI equityinflows in April2000–December 2010 is around 44 per cent. If construction is included then theshare rises to 51 per cent. The financial and non-financial services sector which fallspurely in the services category is the largest recipient of FDI equity inflows with a 21per cent share. This is followed by the other two sectors, namely computer softwareand hardware, and telecommunications each with 8 percent share. Housing and realestate, and construction with 7 per cent share each were next in importance.The year 2009-10 has seen a drying up of FDI inflows to India due to the global crisiswith a fall of 5.5 per cent. Mirroring this trend, FDI inflowsin the services sector alsofell by 29.1 per cent (in US dollar terms). The first nine months of 2010-11 have alsonot shown any improvement on the FDI front, overall and in services sectors. in theservices sector also fell by 29.1 per cent (in US dollar terms). The first nine monthsof 2010-11 have also not shown any improvement on the FDI front, overall and inservices sectors.
  14. 14. Agriculture sector in INDIA.AgricultureOverview:Agriculture is the backbone of Indian Economy. About 65% of Indian populationdepends directly on agriculture and it accounts for around 22% of GDP. Agriculturederives its importance from the fact that it has vital supply and demand links with themanufacturing sector. During the past five years agriculture sector has witnessedspectacular advances in the production and productivity of food grains, oilseeds,commercial crops, fruits, vegetables, food grains, poultry and dairy. India hasemerged as the second largest producer of fruits and vegetables in the world inaddition to being the largest overseas exporter of cashews and spices. Further, Indiais the highest producer of milk in the world.Climate:India has Monsoon climate in which a year has been divided into two distinctseasons of summer and winter. Rainfall occurs mainly in summer.Weather Forecasting System:India has a strong weather forecasting system developed and maintained by IndianMeteorological Department (IMD). Apart from weather forecasting and severeweather warning, it also gives agro meteorological services to farmers in India.Agro Climatic Zones:India has diverse agro-climatic zones from north to south and from east to west. Ithas been divided into fifteen different agro-climatic zones, which signifies itsdiversified agricultural production from tropical to temperate crops.Major Crops:Rice, Wheat, Sugarcane, Oilseeds, Pulses, Cotton, Jowar, Bajra, Ragi, Tea, Coffee,Coconut, Cashew, Rubber, Spices, Cauliflower, Onion, Cabbage, Mango, Banana,Sapota, Acid lime.Farm Size:Indian Agriculture is characterized by small and marginal operational holdings. About85% of total cultivated land has been fragmented into less than 10-hectare land.About 60% of farmland is less than 4 hectare in size.Production Trend:
  15. 15. All the production figures are in million tones. Mechanization in Indian agriculture isstill at rudimentary stage showing regional variation. But it is increasing over theyears. Power availability for carrying out various agricultural operations, which is oneof the indicators of mechanization, has been increased from 0.3 kilowatt per hectarein 1971-72 to 1.4 kilowatt per hectare in 2003-04.Plantation:Tea, Coffee, and Natural rubber are the main plantation crops in India that contributein Indian export to a considerable extent. India is the largest producer and consumerof tea in the world. It contributes 4% to global coffee production and enjoys a nichemarket byproducing both arabica and robusta coffee. In rubber also, it ranks third inproduction and fourth in consumption of natural rubber in the world.Horticulture:India has a great potential in the production of horticultural crops, which includesfruits, vegetables, spices, floriculture, and plantations. Acreage under horticulture isaround 20 million hectares. India is the second largest producer of both fruits andvegetables in the world. It occupies first position in the production of cauliflower,second in onion, and third in cabbage.Dairy:India ranks first in the world in milk production, which was around 100 million tonesin 2006-07.Strong networks of Milk Cooperatives, have been instrumental in thisphenomenal performance of dairy sector in India. Presently, 1.13 lakh village levelcooperative societies spread over 265 districts in the country form part of thenational Milk Grid. This Grid links milk producers throughout India and consumers in700 towns and cities. De-licensing of dairy sector in 1991 has directed considerableamount of private funds both from inside and outside country in this sector especiallyin manufacturing facilities while investment in cooperative sector are concentratedlargely in procurement and processing of milk.Livestock:Livestock sector contributes about 27% of the G.D.P. from agriculture and alliedactivities. This sector has excellent forward and backward linkages, which p-promotemany industries and increase the incomes of vulnerable groups of the society suchas agricultural labourers and small and marginal farmers. India possesses thesecond largest livestock population in the world. Production and export of poultryproducts have shown considerable growth in the recent decades. Export of suchproducts to countries including Bangladesh, Srilanka, Middle East, Japan, Denmark,USA, and Angola augers well for this industry.Fishery: Fishing, aquaculture and a host of allied activities are a source of livelihood to over14 million people and a major source of foreign exchange earner. In 2005-06, thissector contributed about 1% of G.D.P. and 5.3% of G.D.P from agricultural
  16. 16. sector.8,118 k.m. of coastline gives geographical basis for the development ofmarine fishery sector and cultural factor boosts the inland fishery sector in India.Agricultural FinanceCredit: Availability of adequate credit is vital for every sector and agriculture is not anexception. In India, Commercial Banks, Cooperative Banks, and Regional RuralBanks ( RRBs) are responsible for smooth flow of credit to agricultural sector. But ahuge unorganized market exists for credit to agricultural sector in India, whichprovide timely fund to this sector but at the exorbitant rate of interest. Amongorganized credit disbursement to agriculture commercial banks play a vital role witha share of about 70% where as cooperative sector and RRBs contribute 20% and 10% respectively.Kisan Credit Card (KCC) scheme was introduced to provide adequateand timely support from the banking system to the farmers for their cultivation needs.This scheme has made rapid progress and more than645 lakh cards issued up toOctober 2006.The Farm Credit Package announced by the Government of India in June 2004stipulated doubling the flow of institutional credit for agriculture in ensuing threeyears. Annual targets for this package are being surpassed in the two consecutiveyears from its introduction and it is likely to surpass in the third year also.Insurance: Insurance is a prime necessity to mitigate uncertainty that persists inagriculture. In India, agriculture is still affected by such factors, which are beyondcontrol of human being. So, there is a great need for agricultural insurance in India.Keeping this in mind, Government of India in coordination with the GeneralInsurance Corporation of India (GIC), had introduced National Agricultural InsuranceScheme (NAIS) from rabi 1999-2000 season. The main objective of this scheme is toprotect the farmers against losses suffered by them due to crop failure on account ofnatural calamities. Agricultural Insurance Company of India (AICIL) which wasincorporated in December 2002 took over the implementation of NAIS.AICIL introduced Rainfall Insurance Scheme called Varsha Bima during 2004southwest monsoon period. Varsha Bima provided for five different options suitingvaried requirements of farming community:1. Seasonal rainfall insurance based on aggregate rainfall from June to September.2. Sowing failure insurance based on rainfall between June 15 and August 15.3. Rainfall distribution insurance with the weight assigned to different weeks Juneand September.4. Agronomic index constructed on the basis of water requirements of crops.5. A catastrophe option covering extremely adverse deviation of 50% and above inrainfall during the season.
  17. 17. During kharif 2006, this Varsha Bima scheme is being implemented in around 150districts covering 16 states across the country. AICIL is also piloting another weatherrelated insurance product for mango and coffee.Rural Infrastructure Development Fund (RIDF): RIDF was announced by theGovernment of India in 1995-96 to boost public sector investment in agriculture andrural infrastructure. The Fund is raised from the commercial banks to the extent oftheir short fall in agricultural lending as priority sector. The activities, which havebeen made eligible for loans from RIDF, include rural roads and bridges, irrigation,mini and small hydel projects, community irrigation wells, soil conservation,watershed development and reclamation of waterlogged areas, flood protection,drainage, forest development, market yard, godowns, apna mandi, rural haats andother marketing infrastructure, cold storages, seed/agriculture/horticulture farms,plantation and horticulture, grading and certifying mechanisms such as testing andcertifying laboratories, fishing harbors/jetties, reverine fisheries, animal husbandry,modern abattoir, drinking water supply, infrastructure for rural educationalinstitutions, public health institutions, construction of toilet blocks in existing schoolsand pay and use toilets in rural areas, village knowledge centers, desalinationplants in coastal areas, infrastructure for information technology in rural areas, andconstruction of anganwari centers.Micro Finance: Micro finance scheme has been introduced by National Bank forAgriculture and Rural Development (NABARD), the apex bank for agriculture andrural development in India, to improve the access of the rural poor to formalinstitutional credit and other financial products. In all 547 banks, which include 47commercial banks, 158 RRBs, 342 cooperative banks are now actively involved inthe operation of Self Help Group (SHG)- Bank Linkage Programme to spread thefacility of micro finance to the needy small and marginal farmers and tinyentrepreneurs. The programme has enabled nearly 329 lakh poor families in thecountry to gain access to micro finance facilities from the formal banking system.Capital Formation in Agriculture: The share of the agriculture sectors capitalformation in G.D.P. declined from 2.2% in the late 1990s to 1.9% in 2005-06.Stagnation or fall in the public investment in irrigation is partly responsible for thisfall. However there is indication of a reversal of this trend with public sectorinvestment in agriculture accelerating since 2002-03.The share of public investmentin gross investment in agriculture increased by 6.5 percentage points from 1999-2000 to reach 24.2% in 2005-06.Marketing of Agricultural Products Form of Markets exists in India: Agricultural markets in India are dominated by theexistence of unorganized and unregulated agricultural mandies with the presence ofa large number of middlemen and widespread prevalence of malpractices. Absenceof proper warehousing facilities in the villages, lack of proper transportation facilitiesand infrastructure such as rails and good quality all weather roads and ignoranceabout the market prices of their products are some of the important factors forexploitation of farmers from middle men. They are forced to sell their products tothese middlemen at the farm gate at throwaway prices.
  18. 18. Agricultural Market Reforms in India: Ministry of Agriculture had formulated a modellaw on agricultural marketing in consultation with State/Union territory Governmentsto bring about marketing reforms in line with emerging trends. This model actenables establishment of private markets/yards, direct purchase centers,consumers/farmers markets for direct sale, and promotion of public-privatepartnership (PPP) in the management and development of agricultural markets in thecountry. It also provides for exclusive markets for onion, fruits, vegetables, andflowers. Regulation and promotion of contract farming arrangement has also beenmade a part of this legislation. A provision has also been made for constitution ofState Agricultural Produce Standard Bureau for promotion of grading,standardization, and quality certification of agricultural produce.