1. FROM COMPETITION AT HOME TO COMPETING ABROAD: A CASE STUDY OF INDIA’S HORTICULTURE Aaditya Mattoo, Deepak Mishra, Ashish Narain THE WORLD BANK

2. The Indian farmer is globally competitive but Indian agriculture is not. Why? Source: UN COMTRADE, 2005

3. Previous diagnoses of the problems of Indian agriculture High costs of production Poor infrastructure Protectionist standards Foreign trade barriers

4. The 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

5. Commodities Surveyed Source: Value Chain Survey, The World Bank

6. States Covered Source: Value Chain Survey, The World Bank

7. Factors Impeding India’s Exports

8. Logistics and intermediation costs dwarf production costs Source: Value Chain Survey, The World Bank Farmer’s share in retail price India:15-20% Thailand, US: 30-40%

9. India’s international transport costs are higher than those of competing countries Source: UN COMTRADE, 2005

10. Why? 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

11. The 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

12. Trade 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

13. Trade Barriers

14. The 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.

15. Key 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