India is the world’s 2ndlargest wheat producer right after China, but due to subsidized domestic prices and massive domestic requirements, it rarely tends to export much of the grain.
However, in recent years India’s wheat exports have seen a rise. This rise in wheat exports has been achieved because of the Agricultural Products Exports Development Authority (APEDA) which has taken up various initiatives such as organizing B2B exhibitions in different countries, exploring new potential markets, and initiating marketing campaigns with active involvement of Indian Embassies.
Current Global Scenario
Russia and Ukraine together accounted for one-fourth of the Global Wheat Trade. The Russian invasion of Ukraine and erratic weather patterns in different parts of the world disrupted the global supply chain of wheat. This in turn has led to a shortage of wheat to such an extent that wheat has become a scarce commodity in the international market today.
This raised the demand for Indian wheat across the globe which in turn raised the prices of the commodity in the domestic market. With a view to ensuring food security, the Government of India imposed prohibitions on exports of wheat in May ’22, while keeping the window open for overseas shipments subject to request from foreign governments. However, this caused a jump in overseas demand for wheat flour or meslin flour and wheat flour exports registered a growth of 200% during the April-July period in comparison to the corresponding period in 2021. Therefore, on 26thAugust’22, the Government of India decided to put restrictions on the export of wheat or meslin flour to curb the rising prices of the commodity and to ensure food security. Local wheat markets have started to react to the ban, with prices falling up to 2% in the past week in various spot markets.
India’s Latest Export Policy On Wheat
India has given permission to export-oriented units and firms set up in Special Economic Zones(SEZs) to export wheat flour from imported wheat (a Government order mentioned in 14thOctober’22). Wheat processors had earlier
approached the government with an aim of seeking permission for importing wheat under the Advance Authorisation Scheme so that they can export the value-added products. Due to this, India has allowed food processors to import duty-free wheat against a commitment to export flour. The concerned agencies are not allowed to sell their products in the domestic market.* The overall cereal stocks position appears to be relatively comfortable for now thanks to the rice stocks, things could change going ahead due to persistently high inflation.
Sanjeeb Mukherjee from the Business Standard mentioned that India would need to import wheat if the prices of the commodity further rose (if high inflation continues till December) and private traders stop importing the commodity thereby hinting that it is unlikely for the country to become a net Wheat Importer.
The prices of international wheat will depend on the fate of Ukrainian wheat being controlled by Russia. If this wheat comes into the market regularly, prices may soften to some extent. Although, If India does find itself in a position where it needs to go to the international market to meet its domestic needs, it will find the task all the more challenging if there is a continuation of the war or if there are any future restrictions on this supply.