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India’s U-turn on Wheat Exports

Context

The Union commerce ministry was preparing to send delegations abroad to boost the country’s wheat exports, when the government abruptly banned its exports on 14 May.

Relevance

GS-III: Public Distribution System – Objectives, Functioning, Limitations, Revamping; Issues of Buffer Stocks and Food Security

Dimensions of the Article

  • Why did India ban the export of wheat?
  • Is India staring at a food shortage?
  • What has been the global reaction to the ban?
  • Will the ban affect India’s neighbors?
  • What is the impact on farmers and traders?
  • Issues with the ban
  • Way Forward

Why did India ban the export of wheat?

  • Record retail inflation has punctured India’s export hopes.
  • While wheat prices are up nearly 20%, prices of essential food items such as flour have risen nearly 15% last year.
  • Prices of other food items that use wheat, like bread and biscuits, have surged, too.
  • Heatwaves in the latter part of March, especially in northwest India, impacted the production of foodgrains.

Is India staring at a food shortage?

  • India’s grain stocks are well above the buffer levels and the decision to regulate wheat exports was taken largely to check prices and curb hoarding.
  • The public distribution system in the country would be run smoothly.
  • However, the government has replaced wheat with rice in the Pradhan Mantri Garib Kalyan Yojana scheme for 2022-23.
  • The effort clearly is a response to the reduced availability of wheat.

What has been the global reaction to the ban?

  • Agriculture ministers from G7 condemned India’s decision to withhold wheat exports amid a global grain shortage.
  • India is the world’s second-largest wheat producer and was expected to fill the gap created because of the Ukraine war.
  • However, wheat exports will be allowed in cases where an irrevocable letter of credit has already been issued.

How will the ban affect India’s neighbors?

  • The export control will help India guide wheat trade in a certain direction.
  • Even with the ban, there is a window open for neighbouring countries.
  • The export will be allowed to other countries “based on the request of their governments”.
  • This window is crucial for Sri Lanka because the country is facing an economic crisis.
  • Also, Bangladesh and Nepal have traditionally relied on Indian wheat.

What is the impact on farmers and traders?

  • The ban has deprived Indian wheat traders the opportunity to gain from the global grain shortage.
  • It may have an unfavorable impact on wheat farmers too.
  • Market prices of wheat had soared past the minimum support price (MSP) in recent months.

Issues with the ban

  • This ban has impacted the credibility of India as a reliable supplier of anything in global markets.
  • It conveys that we don’t have any credible export policy as it can turn its back at the drop of a hat.
  • More interestingly, it also reflects a deep-rooted consumer bias in India’s trade policies.
  • It is this consumer bias that indirectly becomes anti-farmer. This ban deprives farmers from profit-making.
  • It only shows the hollowness of agri-trade policies and dreams of doubling agri-exports.
  • The export ban also reflects poorly on India’s image in playing its shared global responsibility amid the Russia-Ukraine war.

Way Forward

It may be recognized that inflation is a global phenomenon today caused by excessive liquidity injected by central banks and loose fiscal policies around the world. India’s wheat export ban will not help tame inflation at home. The Government could have announced a bonus of Rs 200-250/quintal on top of MSP to augment its wheat procurement. The government could have calibrated exports by putting some minimum export price (MEP).

Source – Live Mint

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