India, an emerging country of opportunity
To speak of India is to speak of the second largest fruit and vegetable producer in the world, behind China, with a production that has grown at an annual rate of 7% in the last decade, currently standing at around 275 million tonnes, of which 65% is vegetables.
Since the green revolution that began in the 1960s, India has transformed this sector, which was a merely rural occupation, into a trading activity, driven by the increase in internal demand to 1.3 billion people, but also by external demand, oriented towards export, selling fruit and vegetables worth about US$3 billion (€2.7 billion), mainly in the Gulf countries and Southeast Asia.
India is under strong protectionist measures, “which means that numerous regulations are imposed on imports and, at the same time, self-sufficiency in this market is encouraged,” according to ICEX Spain Export and Investment in its sectoral reports on the country.
In spite of this, imports are also growing gradually, at a rate of 10% in the case of vegetables, amounting together with fruit to purchases of close to US$7 billion (€6.285 billion). India imports vegetables primarily from Canada, Myanmar, Australia and Russia, as well as fruit from the United States, Ivory Coast and Guinea.
“The weight of Spain in Indian imports is insignificant,” states the Economic and Trade Bureau at the Spanish Embassy in New Delhi. According to the international trade statistics database (Comtrade) of the United Nations, Spain ranks 27th among the main suppliers of vegetables to India. In fruit, it ranks 42nd, the same sources show.
“Exports to India only represent 0.01% of the Spanish fruit and vegetable export,” says Begoña Jiménez, director of Communication and International Relations of the Spanish Federation of Associations of Export Producers of Fruit, Vegetables, Flowers and Live Plants (Fepex) , who, nevertheless, underlines the positive evolution in Spanish and EU shipments in recent years and until 2017, because “in 2018 there was a drop”.
“In 2014, Spanish exports to India stood at 582 tonnes for a value of €546,058, rising to 2,335 tonnes and €2.5 million in 2017, with a growth of 301% in volume and 358% in value,” says Begoña Jiménez. Regarding Europe, the increase in those years was 416% in quantity and 309% in turnover, with sales that in 2018 reached 60,557 tonnes and €46.7 million. While Spanish shipments were mainly of stone fruit, specifically plums, at European level, the sale of apples, the main exported product with 40,269 tonnes and €32 million, stood out.
However, after four years of considerable growth, in 2018 the Spanish and European fruit and vegetable exports to India were drastically reduced. Spain closed the year with sales of 1,839 tonnes and about €1.8 million, which shows a decrease of more than 20% in volume and close to 30% in value, compared to the positive figures for 2017. As for Europe as a whole, the year ended with global shipments of 20,958 tonnes that brought in €20.8 million, in this case reducing sales by more than 65% in quantity and 55% in turnover.
“We currently have no explanation to justify the drop in exports in 2018,” states the Spanish Embassy in New Delhi. Nor can the Fruit Business Association of Catalonia (Afrucat), the main Spanish exporting region to India, confirm the causes. “Based on our experiences in other markets such as China, exports over such long distances are still difficult, especially for fragile goods such as plums and cherries,” says its CEO, Manel Simón. “The procedure in other markets is that the export protocol is opened and that someone feels encouraged to export and then the quality or price results obtained are not attractive enough to repeat let alone consolidate the attempt,” he adds.
His counterpart at the Association of Fruit Growers of Extremadura (Afruex), Miguel Ángel Gómez-Cardoso, points out among the causes the requirements which the exported product must meet. “They require a pre-shipment cold treatment and that is practically impossible for fresh fruit, so in order to export to India again, a modification of the protocol that allows cold treatment during transit is needed,” argues the second-largest autonomous region exporting to the Asian country.
To the foregoing barriers, Begoña Jiménez adds the strict legislation in the health field that governs Spain and Europe and prevents the use of certain active materials which are “very important for treatments required by perishable products on long trips”. “On the other hand, these active materials are indeed operative in other non-EU producer countries, giving European production a competitive disadvantage,” argues the Fepex representative.
Thus, the obligation to fumigate products in the country of origin with methyl bromide is a truly significant brake on Spanish exports, since its use is prohibited in EU territory. In 2014, as an exceptional and temporary measure, the Indian government authorised fumigation at destination, but with a penalty that multiplied by five the rates applied in customs, which were already high, being more than 30% of the value of the merchandise.
Another key obstacle for Spanish exporters has to do with the products allowed. “India applies a positive list system for the authorisation of imports of plant products and each new fresh product must be contained in what is known as the Quarantine Plan, which is the basic legislative framework, in force since 2003,” explains the Economic and Trade Bureau at the Spanish Embassy in New Delhi.
The Quarantine Plan therefore includes the products authorised for importation, as well as the conditions for each country of origin. Those that are not included must be negotiated bilaterally, by each individual country. “The procedure for the approval of new products requires an enormously laborious risk analysis process that can be extended for up to three years,” says the Spanish Embassy in New Delhi.
As regards Spain, sales are currently limited to onions, garlic, parsley, partially preserved peas and vegetables (cucumbers and pickles, mushrooms and truffles, sweet corn, capers and other vegetables or mixtures). In the fruit section, the Quarantine Plan allows the Spanish export of citrus, table grapes, apples, stone fruit and persimmons.
Despite the existing trade barriers, European fruit and vegetables, especially those from Spain, have an excellent reputation for quality, according to the Spanish Embassy in New Delhi. “There is a growing interest in some products that are not produced in India and have great potential, including broccoli, yellow and green varieties of peppers or capsicum, cherry tomatoes, iceberg lettuce, red cabbage, sweetcorn or asparagus,” say the trade experts.
A progressive increase is also expected in the demand for citrus, persimmon or pears, products that similarly represent an opportunity for Spanish producers, with favourable forecasts. The margin for improvement is, therefore, very wide in the second-most populous country on the planet, with high consumption of fruit and vegetables, and a growing population of medium-high purchasing power that values the quality and consumption of products considered there to be “exotic”.
“India may be a very good market in the future for stone fruit and especially plums,” says Miguel Ángel Gómez-Cardoso, who is convinced that, once the phytosanitary protocol is modified, “it will become a reference market.” Even more optimism is shown by Afrucat. “We are undoubtedly going to grow in India and throughout the Asian market, despite the fact that there is still a lot of varietal classification work to be done to find out how it responds to the long distances,” says Manel Simón.
The Trade Bureau in New Delhi believes that the participation of India as a guest country at the 2019 Fruit Attraction fair “will lead to greater knowledge of Spanish products among Indian importers and, therefore, to an expected increase in exports”. Its experts recommend that Spanish sellers focus on products with a high differential value to capture the “niche” or segment of select customers, who value quality and are willing to pay for it.
Other opportunities that they point out, in the medium-long term, are in intermediate products or food ingredients, and machinery and production systems, in order to assist India in its goal of becoming a significant player in industrial transformation with a view to the export of manufactured products to the countries in its zone of influence. In fact, this aim has led the Indian government to allow 100% direct foreign investment in the food processing industries and in the sector's facilities and infrastructure, establishing a tax exemption during the first five years for projects focused on the development of new processing plants, in addition to other tax benefits.
It is a policy that is framed within the so-called ‘Make in India’ plan, launched in 2014 to boost the country’s agricultural and agri-food development, which, although it puts up barriers to importation, contains opportunities that the number one fruit and vegetable exporting power in Europe and third in the world, i.e. Spain, will surely know how to grasp.