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Potato J. 37 (1 - 2): 48-55, 2010

PROJECTION OF POTATO EXPORT FROM INDIA:A MARKOV CHAIN APPROACH

Mahendra Singh

ABSTRACT: The paper analyses the trends in area, production and yield of potato during 1950-51 to 2006-07 in India. The

growth in value of output from potato and its comparison with fruits and vegetables and total value of output from agriculture

was estimated during 1999-2000 to 2005-06 in major potato growing states in India. Apart from this the export of fresh or chilled

potatoes in reliable markets and structural changes in composition of various products of potato were also predicted till the

end of XIthFive Year Plan by using Markov Chain approach. The study observed that the annual compound growth in area,

production and yield was lowest in post-WTO period (1997-2006) in comparison to any sub-period or entire period of the study.

The analysis of the export composition of potato products reveals that the share of potatoes, fresh or chilled, and potatoes other

than seed potatoes, fresh/chilled, declined while share of flakes, granules and pellets of potatoes had increased substantially

during 2003-07. Nepal, Sri Lanka, Mauritius, Malaysia, Singapore and United Arab Emirates are projected as reliable markets

for potato products till the end of XIthFive Year Plan. The study suggests that to strengthen potato production ensure positive

growth in yield and to sustain in world markets in exports of potato products there is a need to focus on reliable markets and

demand driven products, bring about changes in research priorities and strengthen the linkages among researchers, extension

personnel and policy planners.

Division of Agricultural Economics, Indian Agricultural Research Institute, New Delhi-110012, India.E-mail: [email protected]

INTRODUCTION

The objective of the International Year of

the Potato is to raise awareness of the

importance of potato and that of agriculture

in general in addressing issues of global

concern, including hunger, poverty and threats

to the environment (7). Potato is grown innearly 150 countries and is the worlds single

most important tuber crop with a vital role in

the global food system and food security. It is

the fourth major food crop in the world after

rice, wheat and maize and contributes to the

energy and nutritional needs of more than a

billion people worldwide. Potato is classified

as a high value crop (HVC), a non-staple

horticultural crop, which yields higher net

returns per unit of land than staples. In

agriculture sector, HVCs are expected tocontribute more to the wellbeing of the small

holders, as they require more labour in the

production and marketing process and

generate higher returns than cereals (11).

The shares of potato in value of output

from fruits and vegetables and agriculture in

major growing states of India are presented in

Table 1. Potato contributed over 6% in value

of output from fruits and vegetables and about

2% in value of output from agriculture (all

crops) at all India level during trienniumending 2005-06. The maximum share of potato

in output from fruits and vegetables was

recorded in the state of Meghalaya, followed

by Uttar Pradesh, West Bengal, Madhya

Pradesh and Punjab where potato occupied

over 10% share. The state of Meghalaya also

ranked first in term of highest share of

potato in total output from all crops of

agriculture sector.

The states of Uttar Pradesh, West Bengal

and Bihar jointly contributed about two- thirdsof potato area and production of the country

during the triennium ending (TE) 2006-07(Table 2). However, these prominent states

were behind Gujarat in terms of yield,

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Projection of potato export from India

Table 1. Share of value (percent) of output from potato in fruits and vegetables and total value of output from agriculture inmajor potato producing states in India, 2003-04 to 2005-06.

Sl. No. State Share (%) of potato in value of output of

Fruits and vegetables Agriculture (all crops)

1. Assam 8.98 2.09

2. Bihar 3.97 1.89

3. Gujarat 7.26 1.19

4. Haryana 5.92 0.60

5. Himachal Pradesh 3.91 2.35

6. Karnataka 1.83 0.51

7. Madhya Pradesh 10.95 1.00

8. Meghalaya 29.07 13.29

9. Orissa 0.50 0.21

10. Punjab 10.11 0.71

11. Tamil Nadu 0.60 0.19

12. Tripura 5.82 2.80

13. Uttar Pradesh 28.57 4.07

14. West Bengal 11.36 4.98All India 6.41 1.52

Source: Authors calculations with data from Central Statistical Organization, Ministry of Statistics and ProgrammeImplementation, Government of India (8).

Table 2. Status of area, production and yield of potato in major potato producing states in India, 2006-07.

Sl. No. State Area TE 2006-07 % of all India Production TE 2006-07 % of all India Yield TE 2006-07000 hectare 000 tones tonne/hectare

1 Uttar Pradesh 451.5 31.1 10018.8 38.7 22.2

2 West Bengal 331.1 22.8 7215.2 27.8 21.8

3 Bihar 201.3 13.9 2678.9 10.3 11.4

4 Assam 73.5 5.1 482.5 1.9 5.1

5 Punjab 72.4 5.0 1291.5 5.0 18.06 Karnataka 61.4 4.2 393.0 1.5 5.5

7 Madhya Pradesh 45.7 3.1 654.3 2.5 14.3

8 Gujarat 44.3 3.1 1212.8 4.7 27.4

9 Haryana 19.0 1.3 346.6 1.3 12.2

10 Meghalaya 18.4 1.3 153.0 0.6 5.9

11 Himachal Pradesh 13.8 0.9 143.2 0.6 8.4

12 Orissa 9.6 0.7 113.0 0.4 8.7

13 Tripura 5.4 0.4 100.0 0.4 12.9

14 Tamil Nadu 5.1 0.4 78.1 0.3 10.6

15 Others 101.0 7.0 1029.3 4.0 12.7

All India 1453.4 100.0 25910.4 100.0 12.5

Source: Authors calculations with data from Agricultural Statistics at a Glance, National Horticulture Board, Ministry ofAgriculture, Government of India (9).

especially Bihar where yield is less than half

of the Gujarat yield and below the national

average.

Given the importance of potato in the

Indian agricultural sector, the present study

analyses (1) the trends in area, production

and yield of potato during the period 1950-

51 to 2006-07; (2) the growth in value of

output of potato relative to fruits and

vegetables and total value of output from

agriculture during the period of 1999-2000 to

2005-06 in major potato growing states in

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Mahendra Singh

India; and (3) the structural changes in exports

of potatoes and potato products to reliable

markets. The paper also attempts to predict

the exports of potatoes and potato products

to different markets by the end of XIth Five-

Year Plan.

MATERIALS AND METHODS

Growth and variability in area, production

and yield of potato at national level areanalysed for the trend 1950-51 to 2006-07. The

period of 56 years is divided into five sub-

periods as pre-green revolution period (1950-1967), green revolution period (1968-80), wider

technology dissemination period (1981-90),

early reforms period (1991-96) and post-WTO

period (1997-2006). It is assumed that theimpact of the WTO agreement (January, 1995)

on multilateral trade would be evident two

years after adoption of the provisions bymember states.

Export projections

To predict the changes in shares of

importing countries and structural changes in

exports of various products of potato, first

order finite Markov chain model was used.

This model has been used to analyse the

structural changes in land-holdings, land use,

farm and market structure, share of area under

various horticultural crops (2, 3, 6, 12, 16, 17,

18); and forecasting of milk supply,

distribution of agricultural firms and crop

production (4, 5, 14); identification of stable

markets for onion and cashew exports (1, 13,

15). The first order finite Markov chain modelis a stochastic process which has specific

features such as the finite number of possible

states, the random nature of the process, the

condition that the outcome of this period is

affected only by the previous periods outcome

and the stationarity condition. The model can

be expressed algebraically as follows:

Ei

rE P ejt jt ij jt=

=

+

1 1

where

Ejt = export of fresh or chilled potatoes (per

cent of total potato export) to the jth countryduring the year t;

Ejt-1

= export tojth country during the year

t-1,

Pij = probability that exports will shift from

the ith countryto jth country;

ejt

= Error term which is statisticallyindependent of e

jt-1;and

r = Number of importing countries.

The estimated share of importing country

during a period t was obtained by multiplyingthe value of import during the previous period

(t-1) with the estimated transitional probability

matrix. The transitional probability matrix was

estimated in the linear programmingframework by applying mean absolute

deviation method in which objective function

is to minimize the sum of absolute errors,subject to the constraints of the equation, the

row sum condition and the non-negativity

condition as follows:

Min O P* +Ie (sum of the absolute errors)

Subject to

XP* +U = Y (matrix from the equation)

G P* = 1 (row sum condition)

P* e 0 (non-negativity condition)

where

O is a null vector;

P* is the vector in which the probabilities Pij

are arranged in one column;

I is an appropriate dimensional column vector

of units;

e is the vector of absolute errors;

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X is the block diagonal matrix of lagged values

of Y;

U is the vector of errors;Y is the vector of exports of each country; and

G is a grouping matrix to add the row elements

of P as arranged in P*.

SOURCE OF DATA

The study is based on secondary data

which were compiled from published reports

of various government departments, namely,Ministry of Agriculture, Central Statistical

Organization, Ministry of Statistics and

Programme Implementation, Government ofIndia. Data were also accessed from website

of Commodity Trade Statistics Database,

United Nations Statistics Division (http://

comtrade.un.org).

RESULTS AND DISCUSSION

Dynamics of area, production and yieldof potato

The growth and variability of area,

production and yield of potato were estimatedfor various sub-periods (Table 3). It isobserved that growth in area, production and

yield had drastically declined during post-

WTO period. In case of yield, the decline wassubstantial with the growth rate becoming

negative (-0.3%) from a high rate of 4.2% in

the previous (early reforms) period. This

implies that the total growth in production

was contributed by area expansion rather thanyield increment during post-WTO period.

However, variability in area and productionshowed a continuously declining trend and

reached below 10% during post-WTO period.The variability in yield declined substantially

but a sudden spurt in variability was observed

during Green Revolution period (16%). Thisimplies that the growth in yield and its stability

was crucial factor for sustaining potato

production in the country. The deceleration invariability in area, production and yield is a

positive indicator for sustainable production

of potato in the country, because it could behelpful to producers, consumers, exporters

and policy planners in terms of area expansion

under the crop, availability of potato on

reasonable price, export contract withimporting countries and framing the suitable

policy respectively.

Value of potato

The analysis of growth in value of output

from potato, fruits and vegetables and total

value of output from agriculture in majorpotato producing states in India during 1999-

2000 to 2005-06 indicated that the maximum

growth in value of output from potato was inthe state of Gujarat, followed by Haryana,

Madhya Pradesh and Uttar Pradesh. However,

the states of Bihar and West Bengal, whichcontribute significantly in national potato

Table 3. Trends in area, production and yield of potatoes in India during 1950-51 to 2006-07.

Period Annual compound growth (%) Coefficient of variation (%)Area Production Yield Area Production Yield

Entire period(1950-07) 3.3 5.5 2.2 49.5 75.2 35.3

Pre-Green Revolution period(1950-67) 4.6 5.7 0.9 24.3 33.0 10.9

Green revolution period (1968-80) 4.0 8.0 3.8 17.4 32.3 16.0

Wider technology dissemination period (1981-90) 2.9 5.0 2.0 8.6 16.2 9.2

Early reforms period (1991-96) 3.4 7.7 4.2 7.4 17.3 9.7

Post-WTO period (1997-06) 1.5 1.2 -0.3 6.6 8.6 9.2

Source: Authors calculation with data from Agricultural Statistics at a Glance, 2008, Ministry of Agriculture, Government of India (10).

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Mahendra Singh

production, showed negative growth in value

of output. Similarly, in Himachal Pradesh,which showed highest growth in value of

fruits and vegetables, the growth in value ofoutput from potato was negative. In case of

Gujarat, the growth in value of fruits andvegetables output and total agricultural output,

though positive, was less than that of these

two sectors indicating slowdown relative toother commodities. Such a situation of a

negative or low growth in value of output of

potato is a cause of concern for researchers,extension personal and policy planners.

Relationship between production andexport of potato

It is evident that the production and exportof potatoes (fresh or chilled) was found

positively correlated. The regression result also

shows that an increase in one percent inproduction influences the 0.75% export quantity

positively (Table 5). It implies that production

of potato is a prerequisite for strengthening the

exports of potato and potato products.

Table 4. Annual compound growth (percent) in value of output

from potato, fruits and vegetables and total value of outputfrom agriculture in major potato producing states in Indiaduring 1999-2000 to 2005-06.

Sl. No. State Potato Fruits and Total valuevegetables of output

fromagriculture

1. Assam -8.29 -6.38 -2.662. Bihar -2.46 3.51 -1.503. Gujarat 9.13 14.35 11.624. Haryana 6.67 4.57 2.025. Himachal Pradesh -4.72 16.45 8.826. Karnataka -5.39 -4.75 -2.237. Madhya Pradesh 1.39 -1.40 1.50

8. Meghalaya 0.59 -0.02 0.339. Orissa -2.01 1.84 2.9110. Punjab -1.18 7.64 1.0911. Tamil Nadu -2.82 1.52 -3.20

12. Tripura -2.02 6.04 3.7713. Uttar Pradesh 1.26 0.90 -0.04

14. West Bengal -0.70 1.87 1.33All India 0.61 2.13 1.65

Source:Authors calculations with data from CentralStatistical Organization, Ministry of Statistics and ProgrammeImplementation, Government of India (8).

Table 5. Correlation and regression between production andexport quantity of potatoes (fresh or chilled SITC code 0541)during 1988-89 to 2006-07 in India.

Parameter Value

Correlation coefficient 0.59

Regression by using Power Standardized Coefficientsfunction (dependent variable: ()= 0.75quantity of exports)

Source: Authors calculation with data accessed fromAgricultural Statistics at a Glance, 2008, Ministry ofAgriculture, Government of India and Commodity TradeStatistics Database, United Nations Statistics Division (http://comtrade.un.org) on 27th September 2009 (10).

Export performance

The analysis of the composition in exportsof potato products revealed that the share ofpotatoes (fresh or chilled) and potatoes other

than seed potatoes (fresh/chilled) have

contributed over 70% in potato export in theyear 2007. However, the share of potato (fresh

or chilled) and potato other than seed potato

(fresh/chilled) declined while share of flakes,granules and pellets of potatoes had increased

substantially during 2003-07 (Table 6). The

maximum growth was recorded in flakes,

granules and pellets of potatoes followed bypotato flour, meal, pellets and potatoes

prepared, not frozen. The overall share of

export of potatoes products in world tradewas below one percent, in spite of third

producer after China and Russian Federation

in the year 2007, this is a challenge beforeresearcher and policy planner.

The predicted share of export of various

products of potato from India for 2009-12 is

presented in Table 7. The results show that the

share of raw potato will decline while share ofprocessed products of potato will increase by

the end of XIth Five-Year Plan period. Thisimplies that the scope of value addition in

potato sector will increase in future which is

beneficial for our labour abundant economy.

During 1997-2007, Nepal, Sri Lanka,Mauritius, Malaysia, Singapore and United Arab

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Emirates were major importers and accounted

for over 80% of the share of the total potato

exports during the period. Nepal and Sri Lankatogether imported for over half the potatoes

exported from India (Table 8).

The first step transitional probabilitymatrix for exports of potatoes fresh or chilledfrom India during 1997-2007 (Table 9)showed

that Nepal and Sri Lanka are the only tworeliable and stable importers of potatoes,having more than 50% of probability ofretaining import shares of potatoes fresh orchilled from India. Sri Lanka is the most stabledestination for Indias potato exports amongmajor importers as reflected by the highprobability of retention of 0.84 i.e., the

probability that Sri Lanka retains its sharefrom one period to another period is 84%. SriLanka loses 9% to UAE, 1% to Singapore and6% to other countries. However, it gains 18%share of Nepal, 78% of UAE, 45% of Malaysiaand 22% share of other countries. Sri Lanka isfollowed by Nepal as the second most stabledestination with a retention probability of 0.64.

The projected shares of importing countriesfor potatoes, fresh or chilled from India forthe period of 2009-12 (Table 10)showed that

Sri Lanka ranked first followed by Nepal as

importing markets. A relatively smaller

increase in exports is also predicted to UAEduring 2009-12. While stagnating exports are

predicted for Malaysia and Singapore markets,

Table 6. Changes in value (percent) of export of various products of potatoes from India during 2003-07.

Commodities Share in total Share in total Share in total Annual Share in worldpotatoes products potatoes products potatoes products compound export TE2007

export 2003 export 2007 export (2003-07) growth (2003-07) (2003-07)

Potatoes fresh or chilled 46.41 38.10 40.52 23 0.49

Seed potatoes fresh or chilled 4.88 1.87 2.74 -5 0.15

Potatoes other than seed potatoes 41.53 36.23 37.78 25 0.58fresh/chilled

Potatoes uncooked 3.59 5.63 5.97 55 2.12

Potatoes flour, meal, pellets 0.72 7.03 5.33 139 0.42

Potato starch 0.39 0.11 0.11 -9 0.01

Potatoes prepared/preserved 1.49 2.61 2.46 40 0.02

Potatoes prepared not frozen 0.96 4.52 2.87 133 0.06

Flakes, granules & pellets of potatoes 0.04 3.90 2.22 296 0.18

Total 100.00 100.00 100 29 0.26

Source: Authors calculation with data accessed from Commodity Trade Statistics Database, United Nations Statistics Division

(http://comtrade.un.org) on 25th March 2009.

Table 7. Predicted share of export of various products of potato from India during 2009-12.

(percent)

Year Potatoes Seed Potatoes Potatoes Potatoes, Potato Potatoes Potatoes Flakes,fresh or potatoes fresh other than uncooked flour, meal, starch prepared/ prepared granuleschilled or chilled seed potatoes pellets preserved not frozen & pellets of

fresh/chilled potatoes

2009 33.66 2.01 31.26 4.85 7.65 0.09 2.25 7.23 10.98

2010 30.93 2.25 27.60 4.28 7.40 0.08 1.97 7.00 18.48

1011 27.90 2.13 24.06 3.72 6.50 0.07 1.71 6.24 27.67

2012 24.41 1.82 20.62 3.18 5.53 0.06 1.46 5.31 37.60

Source: Authors calculation with data accessed from Commodity Trade Statistics Database, United Nations Statistics Division(http://comtrade.un.org) on 25th March 2009.

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Mahendra Singh

a declining trend is predicted for Malaysiaand Mauritius.

ACKNOWLEDGEDMENT

The author is indebted to Dr. V. C. Mathur,Head, Division of Agricultural Economics,

Indian agricultural Research Institute, New

Delhi-110012 for his insights and suggestionson earlier draft of this paper. The valuable

comments of the anonymous referee aregratefully acknowledged.

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Table 8. Destination of export of potato (fresh or chilled) from India during 1997-2007.

Year Share of importing country (percent)

Nepal UAE Singapore Malaysia Mauritius Sri Lanka Others

1997 11.7 12.8 0.7 0.1 2.2 64.9 7.6

1998 3.6 8.1 0.6 0.6 5.5 68.6 13.01999 0.6 2.2 0.5 1.9 0.1 74.4 20.4

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Table 9. Iststep transitional probability matrix of export of potatoes (fresh or chilled) from India during 1997-2007.

Nepal UAE Singapore Malaysia Mauritius Sri Lanka Others

Nepal 0.64 0.00 0.02 0.02 0.12 0.18 0.02

UAE 0.00 0.00 0.00 0.00 0.00 0.78 0.22Singapore 0.00 0.00 0.00 0.00 0.00 0.00 1.00

Malaysia 0.00 0.55 0.00 0.00 0.00 0.45 0.00Mauritius 0.00 0.00 0.00 0.06 0.20 0.00 0.74

Sri Lanka 0.00 0.09 0.01 0.00 0.00 0.84 0.06Others 0.51 0.00 0.00 0.04 0.23 0.22 0.00


Table 10. Projected shares (percent) of importing countries for exports of potatoes (fresh or chilled) from India during 2008-12.

Year Nepal UAE Singapore Malaysia Mauritius Sri Lanka Others

2009 26.2 4.5 0.8 1.7 8.6 45.6 12.7

2010 19.1 5.4 0.7 1.2 6.4 56.2 10.9

2011 15.6 5.8 0.7 1.0 5.4 61.3 10.3

2012 14.6 6.0 0.6 1.0 5.1 62.7 10.1


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