Editorial: An instinctive reaction
Posted: Posted Date – 11:59 PM, Sun – 15 May 22
The Centre’s sudden decision to ban the export of wheat reflects a knee-jerk reaction and may not be helpful in controlling runaway inflation. Just last month, Prime Minister Narendra Modi told US President Joe Biden in his inaugural address at the 2+2 ministerial meeting that if the World Trade Organization (WTO) allowed India to export grain, it would start export to feed the world. The ban came a day after the government announced trade delegations were being sent to nine countries to explore opportunities to boost wheat exports. The unexpected move comes even as government data shows annual consumer price inflation hit a nearly eight-year high of 7.79% in April and retail food inflation soared to 8.38%. Although the Center has asserted that there are sufficient food stocks and there is no threat to food security, the 2022-23 rabi marketing season is seeing a sharp decline in wheat purchases. Revised wheat production estimates are well below the estimated 111 million tonnes (mt), and wheat purchases are forecast at around 20 mt by the end of June, down from over 43 mt last year . April 2022 wheat inflation is 9.59% against an overall cereal inflation of 5.96%. The unexpected export ban damages India’s credibility as a reliable supplier in global markets. Falling crop yields, triggered by climate change, may not be alarming at the moment, but it is a warning that things may get worse if farmers and policymakers don’t correct their course. .
If the government considers the situation on the wheat front to be so serious, it could have calibrated exports by setting a minimum export price (MEP). Instead, the government has chosen the worst policy option, which is an outright ban on exports. This undermines the avowed policy of doubling agricultural exports. With wheat supplies from Ukraine and Russia – together accounting for around 29% of global exports – being hit hard by the ongoing war, India had previously expected to fill the void. However, the decline in agricultural production due to the early onset of summer is estimated at 5.7%; increased demand from private actors for domestic and export purposes; and the tendency of some farmers to withhold part of their production in the hope of obtaining better prices. The unfortunate consumer has already started to feel the effects, with the average price of wheat flour in retail markets reaching around Rs 33 per kg, an increase of almost 13% from last year. Despite government claims of sufficient stocks for the whole year to cover all beneficiaries under the National Food Security Act and the Pradhan Mantri Gareeb Kalyan Ann Yojana, this does not help alleviate the inflationary pressure on the food front, thus indicating failures in storage. and distribution of available stocks.
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