THE DOUBLE-WHAMMY FROM INDIA’S FALLING FARM EXPORTS

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THE CONTEXT:   The effects of bans/restrictions on rice, wheat and sugar shipments are showing in declining Agri exports from India, even as imports are continuing unhindered and hurting farmers.

MORE ON THE NEWS:

• India’s agricultural exports have fallen 11.6% year-on-year in April-September.
• According to Department of Commerce data:
  • Exports of farm commodities, at $ 23.6 billion in April-September 2023, were below the $26.7 billion for April-September 2022.
  • There has been a drop in imports as well, from $19.3 billion to $16.2 billion, resulting in a marginal dip in the agricultural trade surplus (exports minus imports) from $7.4 billion in April-September 2022 to $7.2 billion in April-September 2023.

THE IMPACT OF GLOBAL PRICES:

• India’s farm trade, especially farm prices is strongly correlated with world prices.
• With world prices since coming down, the value of both exports and imports of farm commodities from and into India are set to decline in 2023-24. This comes even as supply disruptions from the Russia-Ukraine war have eased.
• In the current fiscal (from April till October 2023), the Food price Index has averaged 123.2 points.
• The FAO’s (UN Food and Agriculture Organization’s) vegetable oils price index, at 120 points for October 2023, is also down from a year-ago level of 151.3 points and the 251.8 points peak of March 2022.

TIMELINE OF EXPORT CURBS:

• In May 2022, Government banned exports of wheat from the country.
• In September 2022, exports of broken rice were prohibited and a 20% duty levied on all white (non-parboiled) non-basmati grain shipments.
• In July 2023, exports of white non-basmati rice were banned.
• In August 2023, a 20% duty was clamped on exports of parboiled non-basmati rice, while basmati shipments were subjected to minimum export price (MEP) curbs.
• In May 2022, Government moved sugar exports from the “free” to “restricted” category and capped the total quantity of the sweetener that could go out during any year.
• Since May 2023, exports have stopped completely, with no fresh quotas for shipments being issued.

WHY HAS INDIA BANNED RICE AND WHEAT EXPORTS?

• Rice: It was imposed to cool down the domestic prices and as a precautionary measure in case El Nino affects the rice crop.
• Wheat: The sudden spike in global wheat prices and the resulting food security risks to India.

ISSUES:

• Declining international prices: It not only lowers the cost competitiveness of the country’s agricultural exports, but also make its farmers more vulnerable to imports. This is being witnessed in cotton and edible oils.
• Shortage to the global food: India is the world’s largest wheat producer The poor countries like Bangladesh and Nepal, who depend on Indian white rice, and those in African countries like Benin and Senegal Togo, and Mali, which import broken rice, are the ones who are suffering the most.

THE WAY FORWARD:

• A multilateral approach could be a potential ‘middle way’ to curb the escalation of an international food price crisis.
  • This approach would involve providing international capital assistance to bridge India’s financing gaps in domestic subsidisation, ensuring affordable prices for both its poorer and middle-class populations.
  • It would also allow India to continue exporting rice internationally, premised on the support it expects to receive in exchange.
  • This facility aims to support poorer food importing countries facing balance of payments constraints or budget shortages and can potentially be extended to include India, as well as other lower-income food exporting countries.
• Rather than pressuring India into normalising its rice trade, a more effective approach would be to address the ‘double burden’ that lies at the core of its export restrictions.

THE CONCLUSION:

If an international price crisis were to occur as a result of an extended Indian export ban, this would no doubt lead to further price instability. Exploring multilateral solutions is therefore critical for an already embattled global food supply chain, amid Russia’s war in Ukraine and projected reductions in crop harvests during the El Nino season.

PREVIOUS YEAR QUESTION :

Q) What are the present challenges before crop diversification? How do emerging technologies provide an opportunity for crop diversification? (2021)

MAINS PRACTICE QUESTION:

Q) Do you think that the recent steps taken by the Government of India in the context of export of agriculture commodities to curb inflation will lead to potential threats to global supply, prices, and food security?

SOURCE: The double-whammy from India’s falling farm exports (indianexpress.com)