June 27, 2022

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Why India stopped exporting wheat


En The Government of India intends to ensure the “food security” of a population of 1.4 billion, while restricting wheat exports and controlling consumer price inflation in the face of declining production due to exceptional heat. CSC Sehgar, an expert in agro-economics and a professor at the Institute of Economic Development, University of Delhi, understood this controversial conclusion.

Point: At a time when India has promised to support world markets in the face of the grain crisis caused by the war in Ukraine, why such a decision?

CSC Shaker: The first reason is related to the decline in wheat production in India. Temperatures rose unusually in March And the formation of grains ready for harvest was disrupted. The country had never experienced such heat during this time and production was affected. Instead of the expected 110 million tonnes, a reduction of 5 to 6 million tonnes should be considered, and some estimates may be even higher. As production was low, the government had immediate difficulty in building up wheat stocks.

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Where exactly is this process?

The Food Procurement Corporation of India (FCI) government procurement process has now reached only 17.9 million tonnes of wheat, up from 35.4 million in the same period last year (May 13), more than double. Shopping did not go as planned. The main reason is that many private companies buy wheat in the market and offer it to farmers at a more attractive price than the fixed price (minimum support price, MSP) of public companies.

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What is India looking for by banning exports?

In a bid to curb speculation from private buyers, India’s immediate priority is to accelerate wheat purchases this year to boost stocks and curb food price inflation.

This decision provoked strong criticism abroad. Especially from the G7, And prices rose in the European market. But India is not a major wheat exporter.

India is a marginal player and its decision should not cause such panic. However, India has recently increased its exports significantly. As on March 31, India exported 7.2 million tonnes of wheat a year, followed by 1.1 million tonnes in April, an increase of 250% over a year. This growth gave rise to the hope that India would make up for the shortfall caused by the war in Ukraine and the overall shortage of 5 to 6 million tonnes of wheat in world production.

In 2020, during epidemics, when the country interfered in the delivery of vaccines abroad, India faced a similar situation.

The display is identical. India exported its vaccines, which suddenly faced a domestic crisis, which restricted its exports.

As for wheat, do you think a strict ban is right?

For example, India may have had a more gradual response with an export tax on wheat to encourage private exports. The announcement of the Fixed Price Bonus (MSP) may have encouraged farmers to sell their crops to the government so that India can generate its own shares.

Will small farmers be affected by this decision?

It should not be. Harvests began in April, and most of them had already sold their crops because they needed immediate cash. Big buyers are the ones most affected, but contracts signed before the May 14 announcement will be respected.

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What is the impact on consumer prices?

In the immediate future, the price of wheat foods will fall by 3 to 8% depending on the market. As long as there is a ban, this price should be low.

Should we worry about India’s wheat stock and its food security?

India’s stocks are not at risk. India needs 31 million tonnes of wheat for its public food distribution system and additional allocations related to the Govt-19 epidemic. We are approaching 19 million, of which 1 to 18 million have been securedThere is April. The account should be good.

If the situation is still under control, why come to this?

India can expect wheat prices to rise in world markets due to the turmoil associated with the Ukraine crisis. If the government wants to intervene to control domestic prices, it will need strong stocks. But I think India should lift the ban in the next few months as long as its shares are safe. The big Indian traders who are currently under control, can then resell the wheat, perhaps at a price IInteresting. An evil hides the good.

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