EXPORT PERFORMANCE, COMPETITIVENESS, AND STABILITY ANALYSIS OF INDIAN WHEAT 3297
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Date
2021-08
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JAU, JUNAGADH
Abstract
India is the world’s second-largest wheat producer but only a marginal exporter.
In the context of erratic participation of India in the global wheat market despite having
bumper harvests, the present study has analyzed the export performance, decomposition
of export growth, direction of trade, stability analysis, competitiveness, and
comparative advantage of Indian wheat, besides forecasting the supply, export and
demand scenario onward period of the same for the period from 1985-86 to 2019-20
which was in turn categorized into pre-WTO (1985-86 to 1994-95), trans-WTO (1995-
96 to 2009-10) and post-WTO period (2010-11 to 2019-20). The findings revealed that
India had registered a significant growth rate of 2.59 per cent per annum in production
and 12.23 per cent per annum for the export volume in the overall study period. Among
all the sub-periods, the growth rate in export volume (10.22 %/ annum), export value
(12.00 %/ annum) was found to be highest in Period I and export price was highest
(4.32 %/ annum) in Period II. In the overall period, the nominal and real values of
growth rates of domestic wholesale price such as 7.04 per cent per annum, 0.05 were
found to be below their nominal (7.40 %/ annum) and real values (0.39 %/ annum) of
growth rates of international price counterparts revealing the lack of price
competitiveness for India’s wheat exports. In the overall period, when MSP increased
significantly with a growth rate of 0.60 per cent per annum, the average wholesale price
had an annual increase of 0.05 per cent only. The overall period instability levels for
wheat production, export volume, and import volume were found to be at 6.61 per cent,
138.83 per cent, and 139.69 per cent, respectively.
The growth of export value was decomposed using Constant Market Share
analysis and it was observed that only the market share effect (2432.24) and market
distribution effect (3032.31) had a positive influence on the growth of wheat exports in
the overall period. The retention share analysis using Markov Chain revealed that Nepal
was the most loyal market during the post-WTO period with a retention percentage of
88.04 of India’s wheat exports. Bangladesh and Jordan were least stable during this
period with a retention percentage of 22.50 and 21.16, respectively of current period
exports of Indian wheat. The gravity model estimation was used to determine the
direction of trade of Indian wheat exports using the Feasible Generalized Least Square
(FGLS) method. It was found that the GDP of India and trade partners, trade openness
and presence of common border between and trade partners had determined the
direction of flow of wheat exports, whereas the distance between the two countries had
a significant negative effect on the trade between India and the export partners.
The Nominal Protection Coefficient (NPC) under the exportable and importable
hypotheses and a bunch of comparative advantage indices (RCA, RSCA and RC)
showed that India neither had a competitive edge or a comparative advantage in
exporting wheat in most of the years under the study period. The state-wise NPC
analysis revealed that a few major wheat-producing states witnessed price
competitiveness even in those periods when the country as a whole was not competitive
in exporting wheat. The log-log form of regression was used to factor in the
determinants of wheat exports and it was revealed that the Indian wheat export was
positively influenced by the stock of wheat in the country and exchange rate, while the
world wheat export registered a negative impact. The forecasts for the supply and
exports for the country were carried out using Box Jenkin’s Auto-Regressive Integrated
Moving Average (ARIMA) model, wherein ARIMA (3,1,2) and ARIMA (2,1,2)
models were the best fit models for forecasting supply and exports respectively. The
ARIMA(3,1,2) model forecasted an increasing trend in the production of wheat from
108.03 mt in 2020-21 to 114.58 mt in 2024-25 whereas ARIMA (2,1,2) model projected
an increase of exports from 0.948 mt in 2020-21 to 1.452 mt in 2024-25. In addition,
the destination wise forecasts for the onward period 2020-21 to 2024-25, made based
on Transitional Probability Matrix (TPM) suggested that the exports to the major
destination would be stable for the next five years and Nepal is ascertained the chief
market for Indian wheat exports in near future. The demand forecasting for the onward
period 2020-21 to 2024-25 suggested that there would be a sufficient exportable surplus
of wheat left after meeting the direct and indirect demand of India. The demand for
wheat was projected to increase from 66.35 mt in 2020-21 to 74.39 mt in 2024-25, with
a growth rate of 2.90 per cent leaving an exportable surplus projected at 28.72 mt for
2020-21 and 27.23 mt for 2024-25