India Export Ban: As India announced a ban on wheat exports, the global wheat prices hit a record high- by almost 6 per cent a bushel. The ban placed by the world's second-largest wheat producer exacerbated a global food crisis.
Previously, India agreed to fill some of the supply shortages caused by the Russian invasion of Ukraine - accounting for 12% of global exports. The country even planned to increase the exports this fiscal to 10 million tonnes from earlier seven million tonnes.
Last week, India stated that it would send delegations to Egypt and Turkey, among others, to boost wheat exports. After May 13 circular, it is unclear whether these visits are still on.
Why did India place a ban on wheat exports?
India reasoned runaway inflation and food security of 1.4 billion people while placing a ban on wheat exports. However, it kept a window open for overseas shipments on the specific request of a foreign government to meet their food security needs.
In many parts of the country, wheat and flour prices soared 20-40 per cent in recent weeks. Due to this sharp rise, many farmers sold the produce to traders, not the government.
Thus, the government became worried about its buffer stock of almost 20 million tonnes, needed to avert any possible famine, which was depleted by the pandemic.
"We don't want the wheat to go in an unregulated manner where (wheat) may either get hoarded and is not used for the purpose which we are hoping it will be used for -- which is serving the food requirements of vulnerable nations," Subrahmanyam said.
Moreover, the heatwave in the country hit the wheat-producing farmers in northern India, prompting the government to predict at least a five per cent fall this year in the output from 109 million tonnes in 2021.
The G7 countries criticised India's decision and expressed concerns that such measures would worsen the crisis of rising commodity prices. “If everyone starts to impose export restrictions or close markets, that will worsen the crisis,” Ozdemir said at a press conference in Stuttgart on Saturday.
India defended the decision stating that the ban was due to the price rise. Retail inflation has been over 6 per cent for four straight months in 2022, with the prices for April soaring to 7.79 per cent, much higher than the upper band of RBI inflation target of 6 per cent. In the Consumer Price Index, wheat/ atta from PDS weights 0.17, and wheat/ atta from other sources weighs 2.56.
Experts say this pre-emptive step may prevent local wheat prices from rising substantially. However, with domestic wheat production likely limited by the heatwave, local wheat prices may not moderate materially. If India’s wheat ban leads to higher prices of substitutes like rice, then there could be upward pressure on other food prices.
Commerce Secretary BVR Subrahmanyam said the ban serves three purposes: i) maintaining the country’s food security, ii) helping those in distress; if countries make a specific request, the Indian government will take a call, and iii) India’s reliability as a supplier is being maintained by not reneging on any existing contract.
Comments
All Comments (0)
Join the conversation