Why is India going against the grain?

The decision to ban the private export of wheat could have been triggered by the consumer price index (CPI) for April, which showed that inflation in the price of wheat at 9.59% is running far ahead of the rate for cereals overall at 5.96%. Cereals have a weight of 9.67% in the CPI, and the restriction – government-to-government exports are still kosher – could be an attempt to dampen food inflation, which has accelerated to 8.38% in April from 7.68% in March. The other two food groups that saw runaway inflation are vegetables at 15.41% and edible oils at 17.28%. These three groups have a combined weight of almost 20% in the CPI and the Union government was seeking policy levers to tame prices. Vegetable price surges are transient, given the duration of the harvest. Edible oils are heavily dependent on imports, and raising acreage for local substitutes can only deliver results with a lag.

Wheat became the object of the government’s food price intervention as production and procurement this year are both expected to suffer on account of a severe heatwave across the country. Crop estimates for this season are below earlier projections. And procurement is likely to halve from a year ago. This follows an extended period of drawdown in the country’s grain stockpile to subsidise food to over half of the population over the course of the pandemic. The special subsidies on rice and wheat will run till September. The subsidies could have been optimised by switching one for the other. Higher procurement prices would also have helped bring in wheat stocks that farmers and traders are sitting on as international prices rise.

The move by India, the world’s second-largest producer of wheat, has had an effect on international prices, which reached a fresh record high immediately after the decision was announced. Exporting food inflation during a global crisis does not add to the country’s reputation as a reliable trading partner. It also does not go down well with farmers whose livelihood is being squeezed at a time of rising prices.


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