Friday, 17 May, 2024
This move by India is not taken in stride both by the entire international community and also by the farmers of the country as well.
India has imposed a wheat ban recently, soon after an announcement by Prime Minister Modi regarding India aiming to increase its wheat exports. India is the second largest producer of wheat in the world but hasn’t been involved very actively in the trade of the same. As the following chart shows, the value of India’s exports rapidly shot up post 2020 and a similar trend was expected prior to the ban.
(Source: Statista)
However, in the wake of the Russia-Ukraine war which led to a global shortage of wheat followed by increased global prices, the hopes of most nations shifted to India to meet this shortage considering its claims to ramp up its wheat exports.
The reason given behind the ban was the increased domestic prices due to most of the yield being spoiled as a result of the heat wave that covered most states. Additionally, the concern expressed was the hoarding of Indian wheat by certain countries to benefit from the hiked-up world prices. Furthermore, despite India banning wheat exports, it has officially committed to help the vulnerable and “friendly” nations independently, if the need be and fulfill its obligations pertaining to outstanding contracts backed by Letters of Credit.
This move by India is not taken in stride both by the entire international community and also by the farmers of the country as well. While the former believe that India’s action will severely worsen the fast approaching food crisis and hence are of the opinion that the ban be reversed, the latter feel the chance to benefit from higher prices is being taken away from them. The urgency of wheat demand is proof by UAE’s action of banning re-export of wheat and flour from India, i.e., it will only be used domestically. In an interview, IMF chief, Kristalina Georgieva said that the country could play a key role in international food security and global stability and hence urged India to take back the ban. There are views that such actions of food protectionism only worsen a prevalent and growing crisis. Also, there are strong views that this ban will increase global prices further which is bound to affect poor countries that depend on international supplies of wheat. The following chart shows the consistent rise in the wheat prices and the steep increase in the same since the beginning of 2022 and also shows the price rise post the wheat ban. (Note: The spike marked at the beginning of 2022 is post the export ban - May 13th.)
(Source: Macrotrends)
The ban is unlikely to be reversed as there have been explanations even to the disapproval by farmers being made on the lines that the farmers had sold their wheat prior to the ban which means they weren’t actually affected by the export ban. What is also in question is will this ban even help the domestic inflation considering the already existing shortage? However, what needs to be thought about here is if this is a lost opportunity to emerge as a strong potential exporter or even make strong ties with a number of countries who depend on international supplies for such a basic product as wheat. Additionally, it is only difficult to imagine a situation wherein this move by India won’t affect its goodwill with the nations and that India will not create enemies if it fails to meet its obligations on outstanding contracts. Further, there is a strong possibility of there being a lack of a market for India’s agricultural exports in the future. Lastly, the very fact that India has been going back and forth on its statements will put into question its credibility as an emerging power.
