Rajendra Jadhav [email protected]
Although the ban on wheat and sugar exports was hailed as a sign of ‘rising inflation’, the ban only offset the potential pressure on the rupee and prevented a sharp rise in inflation.
With India imposing sanctions on wheat and sugar exports, some have suddenly started blaming India for global food inflation. However, he declined to comment on how India has helped keep inflation in check and prevent a global drought. This is due to India’s policy of setting a minimum base price for major crops and procuring large quantities of wheat and rice at that rate. Many countries have also complained to the World Trade Organization (WTO) about the subsidy policy. Until last year, the Indian government also had a hard time buying food grains at basic prices. With the onset of monsoons for the third year in a row, domestic foodgrain production exceeded demand. The government had to buy twice as much wheat and rice as it needed for the ration. Huge sums of money had to be allocated for the purchase. In addition, losses are increasing due to the inefficiency of the Food Procurement Corporation. The government has enacted three new agricultural laws to eliminate this. With that, the government wanted to change the existing system. However, not many people know that this system has saved India from a major crisis this year.
Russia’s invasion of Ukraine, famine in North America, heat waves in India and Europe led to the collapse of world food production. Global wheat prices rose 54 percent in just four months, while corn prices rose 30 percent. Wheat production in India has fallen by 10 per cent this year but prices have risen by only 10 to 15 per cent. The government procured a record 433 lakh tonnes of wheat last year. Therefore, despite exporting a record 72 lakh tonnes of wheat in the last financial year, there is no shortage in the country.
The central government plans to export 120 lakh tonnes of wheat earlier this year. The Ministry of Commerce has reduced the target to 100 lakh tonnes. But after 36 hours the government banned the export of wheat. A cap of 100 lakh tonnes has been imposed on sugar exports. Earlier this month, Prime Minister Narendra Modi said that Indian farmers in Germany have the potential to meet global wheat needs. India, which speaks a language that feeds the world, has been criticized for taking a u-turn all at once. The time would not have come for the government to face if the Ministry of Agriculture had made an accurate estimate on wheat production. But it is wrong to hold India responsible for global food inflation. In fact, it should be understood that India’s sustainable food storage policy has supported not only India but all the poorest countries in the world.
The purpose of stocks
It should be understood that despite India imposing restrictions on wheat and sugar exports, 140 crore countries are not importing these commodities. Earlier, after the drought, when India started importing wheat in 2006-07, the price of wheat tripled in two years to Rs 1313 per bushel. After that Ukraine reached this level again this year with the war. Wheat production in India has dropped by nearly 100 lakh tonnes this year. If India wanted to import 100 lakh tonnes of wheat, the world market price would have risen to 25 25 per bushel. In lieu of imports, India exported 2.6 million tonnes of wheat in two months.
Despite the limit on sugar exports, this year the limit is 100 lakh tonnes. World sugar prices rose sharply last year as production declined in Brazil and Thailand. At present the price of crude sugar in the world market is 20 cents per pound. Earlier, in 2009-10, when India imported 4.1 million tonnes of sugar, prices rose by 36 cents. This year, India will export 100 lakh tonnes rather than imports. If it does not, the world price will rise by 40 cents. Sugar hits Rs 70 against Indian rupee
Wheat is just as important as rice. Rice satisfies the hunger of nearly 300 million people worldwide. However, instead of rising rice prices, Indian exports declined. Two years ago, India’s rice exports were only 9.5 million tonnes. 212 lakh tonnes. This has reduced the price of rice in the world market. It provided cheap food to the poor in Asia and Africa. Earlier in 2008, due to the drought, rice exports to India and other countries were banned and the price rose to Rs 1,000 per tonne. Currently, prices are 3 360 per tonne.The world has not seen a shortage of rice as India has increased exports.
India is dependent on imports for edible oil. Prices in India have doubled due to declining supply of sunflower oil from Ukraine and Russia and restrictions on Indonesian palm oil exports. Retail inflation hit an eight-year high in April. Petrol and diesel prices have risen on the back of rising crude oil prices. The government budget collapsed with a tax cut. We can only imagine how much the price would have gone up if only mineral oil and edible oil had made our situation worse.
Food grains make up almost half of the retail inflation index. As a result, the inflation index doubled or tripled. Financial markets were collapsing. The rupee was under pressure as it had to spend foreign exchange on food imports. The RBI had to raise interest rates sharply to curb inflation. A two-course meal was expensive for the common man. But the country survived because of the efforts of Indian farmers. If the house in the distance was on fire only smoke could be seen and its burning could not be understood. We are seeing the collapse of the Sri Lankan economy. But what most Indians do not know is that we too have narrowly escaped the onslaught of inflation.
A new strategy is needed
With the rapid pace of climate change, every country must have reserves. India has been doing this for many years. Several countries, including the United States, have complained to the WTO. However, in 2022, due to this policy of India, the world will experience lower food inflation. Cereals are not an industrial product. It is unknown at this time what he will do after leaving the post. If the rains are good this year, the paddy crop in the country will be good. Wheat production will decline next year if the heatwave touches again. But no one can say for sure what will happen today. A poor horse is better than a horse. However, a large amount of money has to be spent every year for storage. The world will benefit if other countries like India adopt the hoarding approach.
Indonesia alone accounts for 60% of the world’s total palm oil production. However, with domestic prices soaring, Indonesia abruptly imposed a ban on exports this year and began stockpiling. This has led to an increase in the price of edible oil worldwide. Indonesia, which produces 510 million tonnes of palm oil a year, managed to control the situation despite stockpiling only 6 million tonnes.
Earlier, food shortages led to riots in African countries. Any producing country will try to cater to your need first. By doing so, it does not add value to WTO regulations. The United States, Europe, and the United Nations need to follow India’s approach in the face of climate change. There is no reason for developing countries to make all the mistakes and for developed countries to be all right. The nations of the world need to work together to implement the new policy in the face of future climate change.
The author is an economist