Muddled thinking on wheat exports

India’s flip-flop over wheat exports points to serious problems in decision-making, co-ordination and policy continuity. The government has come out wanting in all these respects and faces the prospect of losing its credibility with both farmers and the world community. On May 12, the Commerce Ministry announced that it was planning to export more wheat from the country. Prime Minister Narendra Modi and Commerce Minister Piyush Goyal had earlier spoken about India feeding the world in the wake of supply disruptions caused by the Ukraine war. But the very next day, the government banned wheat exports with immediate effect. After two days, it relaxed the ban by allowing consignments already with customs on or before May 13 to go through. These serial policy changes show decision-making in a poor light.

Global prices of wheat had shot up because of a shortage caused by the war. India had planned to export 10-15 million tonnes against last year’s 7 million tonnes. But the U-turn was caused by the fall in domestic production and low procurement of wheat. The resulting fall in public stocks was seen to threaten ‘’food security.’’ But the fall in production had been predicted as early as March. The government’s market intelligence either failed or its input was ignored in decision-making. The decision also showed poor co-ordination between the Commerce Ministry and the Agriculture Ministry. Export plans had pushed up prices and many farmers held on to their stocks. Minimum Support Price-based procurement suffered as a result. The ban on exports has led to a fall in domestic prices and farmers are unhappy that they have been denied an opportunity to get higher prices.

The increase in inflation was also a factor considered by the government, but it is pointed out that it could have offered a bonus above the MSP to the farmers to incentivise them to sell wheat to the government. Farmers, traders and exporters are all unhappy now for various reasons. If the farmers still decide to keep their stocks in the hope of getting better prices, it can defeat the purpose of the ban. Another consequence of the ban is the damage to the country’s international credibility. India was planning to become a major agricultural exporter. But such sudden changes signal policy unpredictability and can hurt business and the country’s reputation. Prices in the world market have spiked after India’s withdrawal, and the clarification that some exports would be allowed has not helped. It may even be seen as another flip flop.