Editorial: A knee-jerk reaction

The Centre’s sudden decision to ban export of wheat reflects a knee-jerk reaction and may not be helpful in taming the soaring inflation. Only last month, Prime Minister Narendra Modi had told United States President Joe Biden in his inaugural address at the 2+2 ministerial meeting that if the World Trade Organization (WTO) allows India […]

The Centre’s sudden decision to ban export of wheat reflects a knee-jerk reaction and may not be helpful in taming the soaring inflation. Only last month, Prime Minister Narendra Modi had told United States President Joe Biden in his inaugural address at the 2+2 ministerial meeting that if the World Trade Organization (WTO) allows India to export grains it will start exporting to feed the world. The ban came a day after the government announced that trade delegations were being sent to nine countries for exploring possibilities of boosting wheat exports. The unexpected move comes even as government data showed annual consumer price inflation hitting a near eight-year high of 7.79% in April and retail food inflation surging higher to 8.38%. Though the Centre has claimed that there were enough food stocks and no threat to food security, the 2022-23 rabi marketing season is witnessing a sharp drop in wheat procurement. The revised estimates of wheat production are much lower than the estimated 111 million tonnes (mt), and that wheat procurement is likely to end up at around 20 mt by June end against more than 43 mt last year. The April 2022 wheat inflation is at 9.59% against the overall cereal inflation of 5.96%. The unexpected export ban adversely hits the credibility of India as a reliable supplier in global markets. The decline in crop yield, triggered by climate change, may not be alarming as of now, but it’s a warning that things can worsen if farmers and policy-makers don’t do course correction.

If the government feels that the situation on the wheat front is so dire, it could have calibrated exports by putting some minimum export price (MEP). Instead, the government chose the worst policy option, which is outright ban on exports. It hurts the avowed policy of doubling agri-exports. With wheat supplies from Ukraine and Russia — together accounting for about 29% of the global exports — hit hard by the ongoing war, India was earlier expecting to fill the void. However, there is an estimated fall of 5.7% in crop production due to the early onset of summer; higher demand among private players for domestic and export purposes; and the inclination of some farmers to hold back a part of their produce in the hope of getting better prices. The hapless consumer has already started feeling the pinch, with the average price of wheat flour in retail markets reaching around Rs 33 per kg, an increase of nearly 13% compared with last year. Despite the government’s claims of ample stocks for the whole year to cover all beneficiaries under the National Food Security Act and the Pradhan Mantri Gareeb Kalyan Ann Yojana, it is not helping to ease inflationary pressure on the food front, thereby pointing to lapses in the storage and distribution of the available stocks.

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