India feeling financial impact from export curbs

India’s attempts to slow food inflation by curbing exports of wheat, rice and sugar has caused a shortfall of $4 billion to $5 billion, Reuters reported on Dec. 21, citing an anonymous source.

However, a government official said growth in exports of other farm commodities, such as meat, fruits and vegetables, are expected to offset the export deficit, the report said.

“If we remove agricultural commodities whose exports are controlled, like wheat and rice, exports are growing by over 4%,” said Rajesh Agarwal, a secretary in the trade ministry, during a recent press conference.

India, the world’s second largest wheat producer, halted wheat exports in May 2022 and the ban has remained in place the past 19 months. While India has never been a significant player in global wheat trade, it has been historically at or near the top in rice exports due to a significant surplus of the food grain. In fact, India typically accounts for around 40% of world rice trade. But the recent spike in food prices led the Indian government to ban exports of non-basmati rice and include a 20% duty on parboiled rice exports.

Having recently surpassed China as the most populated country in the world at 1.4 billion people, accounting for nearly 18% of the global population, keeping its citizens fed at an affordable price is a growing challenge for India.

Oscar Tjakra, senior research analyst, RaboResearch Food and Agribusiness, Asia, told World Grain in November that the grain export restrictions have had limited success in bringing down prices.

“Despite banning wheat exports, Indian domestic wheat prices still increased in 2023,” Tjakra said. “Domestic wheat prices in India reached their highest point in nearly eight months in September 2023.”

Tjakra said the decision to restrict exports isn’t only tied to supply and demand fundamentals. There’s a political element as well.

“It doesn’t seem the Indian government will lift the rice and wheat export bans anytime soon,” Tjakra said. “The government will most probably only lift these bans after the election next year.”

Tags: export, rice, sugar, wheat, India, restrictions