In an order from the Ministry of Commerce, Indian officials said they made the decision after considering India’s own needs and those of neighboring countries. India’s food security is “at risk” due to rising international prices, the ministry said.
The announcement marked an abrupt reversal weeks after Indian officials and international analysts talked about the possibility that India could significantly increase exports to fill the gap created in part by the war in Ukraine. International food prices have risen to record levels in recent months, putting pressure on billions of people, mainly the world’s poorest, UN officials have warned.
India tries to adapt to extreme heat, but it’s paying a heavy price
But a record heat wave this spring – March was India’s hottest month on record – hurt Indian crops and cut wheat production by as much as a quarter in some cases. As traders rush to buy food to sell on the international market, the Indian government has struggled to make purchases for its own domestic food bank and rationing program, according to Indian agricultural researchers and government statistics.
Like many countries, India is also struggling with rising inflation that is taking a toll on household budgets and even diets. Food inflation rose 8.3 percent in April, the government said.
Egypt, the world’s largest importer of Russian and Ukrainian wheat, recently negotiated with India to import 1 million tonnes. Turkey and several countries in Africa, which are also dependent on wheat imports from the Black Sea region, have also queued up in recent weeks to buy from India. India recently sent trade delegations to nine countries, including Tunisia, Morocco and Indonesia, to discuss increased exports.
“At a time when the world is facing wheat shortages, India’s farmers have taken a step forward to feed the world,” Prime Minister Narendra Modi said earlier this month during his visit to Germany. “Whenever humanity faces a crisis, India presents a solution.”
To help boost wheat exports, the Indian government rushed to set up 200 laboratories for export quality checks, added more rail cars for transport and prioritized exports from ports.
Egypt has approved India as a wheat supplier in April, Commerce Minister Piyush Goyal said in a tweet, adding that the country was “ready to serve the world”.
Now, it’s not immediately clear which deals will be approved. The Ministry of Commerce, which oversees trade, said in its Friday order that shipments with irrevocable letters of credit were allowed to proceed. The Indian government could also give special permission for exports to countries “to meet their food security needs”. Otherwise, all exports are frozen.
Tunisia among the countries with the greatest economic consequences of the war in Ukraine
Analysts said the decision to pause exports was the right one at a time of global uncertainty.
“We must maintain a surplus, given climate aberrations and food security concerns,” said Devinder Sharma, an agricultural policy expert. “We have such a large population to take care of. Who knows [whether] the pandemic may not come back?”
During the pandemic, the federal government provided 5 kg of wheat or rice and just over 1 kg of pulses – about 11 pounds and just over two pounds, respectively – per person every month, in addition to existing food subsidies. Earlier this year, the program was extended until September.
But the stress on the system became clear when the government last week announced it would provide more rice instead of wheat under the program.
Government wheat purchases have fallen to a 15-year low this year, to less than 20 million tonnes, after a record 43 million tonnes in 2021. Exports were a key factor.
The surge in global wheat prices meant a bonanza for traders. The World Bank predicted in April that wheat prices are likely to hit an all-time high this year, rising more than 40%. India’s wheat exports more than tripled in size.
Falling production, rising exports and high fuel prices have led to a sharp rise in domestic wheat prices in recent weeks. Wheat is one of the country’s most popular staples, and rising prices are squeezing consumers across the board.
Experts said the last wheat crisis in India in 2005 served as a wake-up call. India’s high exports depleted its reserves, forcing it to import wheat in subsequent years.
“India shouldn’t make the same mistake,” Sharma said. Next year, if the need arises, “stock may not be available and prices will be unaffordable.”