As the world grapples with rising inflation, transitional trade flows, and food security issues, several developments in the agriculture sector are making headlines. Recently, the United Arab Emirates (UAE) suspended the re-export of wheat and flour from grain obtained in India, following India’s decision to ban wheat exports to cater to its domestic market demands and meet the needs of neighboring countries.
This development stems from international developments affecting trade flows, and indicative of the strong ties between the UAE and India, particularly since the signing of the Comprehensive Economic Partnership Agreement.
India’s Wheat Export Status: A Global Perspective
Even though India is the second-largest wheat producer globally, trailing behind China, it makes up less than 1% of the international wheat trade volumes. The country maintains large wheat reserves to provide subsidized food to the underprivileged, primarily exporting to Bangladesh, Nepal, Sri Lanka, and the United Arab Emirates (UAE).
Reasons Behind India’s Wheat Export Ban
On 13 May 2022, India suspended wheat exports due to soaring global wheat prices that threatened food security domestically and in neighboring nations. This ban came on the heels of a heatwave that affected wheat production and an inability of the Food Corporation of India (FCI) to gather enough stocks for buffer storage. Rising inflation, marked by a significant movement in the WholeSale Price Index (WPI) from 2.26 per cent at the start of 2022 to 14.55, and an eight-year retail inflation high also informed this decision.
The Projected Impact of India’s Wheat Export Ban
India’s wheat export ban might have a limited effect on India’s domestic food inflation, but it could prevent local wheat prices from escalating considerably. However, the recent heatwave predicted to limit domestic wheat production may keep local wheat prices from falling significantly.
On a global scale, the ban comes in the wake of a slump in wheat production following the Ukraine-Russia war, which will cause a rise in wheat prices and supply issues worldwide. This could affect economies in Asia that depend on imported wheat for domestic consumption. Indirectly, these countries might have to contend with higher global wheat prices as India’s new export restrictions could drive prices up, particularly hitting poor consumers in Africa and Asia.
The Role and Significance of Wheat Exports to India
Wheat exports can help India reduce the accumulated wheat stocks in FCI’s warehouses and capture foreign markets, potentially contributing to increased forex reserves and a lowered Current Account Deficit (CAD).
Additionally, exporting wheat to needy and vulnerable countries can bolster India’s international relations, presenting diverse trade opportunities, including the export of food grain and manufactured goods to destinations with unreliable supplies. Despite the global price surge, India’s wheat rates remain competitive, hence increasing the chances of diversifying its export basket.
Way Forward
While the export ban originates from genuine concerns about food security and domestic price stabilization, India should clarify its position to the international community. Miscommunication could potentially harm India’s reputation and strain diplomatic ties if food security in vulnerable countries is compromised.
About Wheat: Key Details
Wheat ranks second only to rice as an essential cereal crop in India, especially in the north and north-west regions. It thrives during a cool growing season and requires bright sunlight for proper ripening. The successful Green Revolution contributed significantly to the growth of this rabi crop. Government initiatives such as the Macro Management Mode of Agriculture, National Food Security Mission, and Rashtriya Krishi Vikas Yojana support wheat farming.
Land suitable for wheat cultivation includes well-drained, fertile loamy and clayey loamy soil in Ganga-Satluj plains and the black soil region of Deccan. The major wheat-producing states include Uttar Pradesh, Punjab, Haryana, Madhya Pradesh, Rajasthan,Bihar, and Gujarat.