IN APRIL, Prime Minister Narendra Modi told US President Joe Biden that if World Trade Organization permits, India can supply foodgrain to the world, which is facing serious shortages due to war between leading wheat producers — Russia and Ukraine. Days later, commerce minister Piyush Goyal tweeted: "Egypt approves India as supplier. Modi government steps in as the world looks for reliable alternative sources for steady food supply. Our farmers have ensured our granaries overflow and we are ready to serve the world." Soon, his ministry announced plans to send trade delegations to Morocco, Tunisia, Indonesia, the Philippines, Thailand, Vietnam, Turkey, Algeria and Lebanon to explore possibilities of exporting wheat amid rising global demand.
However, on May 13, in an apparent reversal of stand, India announced restrictions on wheat exports. Goyal had an explanation for that too. "PM Narendra Modi's pro-people decision on wheat export ban is well-timed to control prices and avert hoarding," he tweeted, ruling out any crisis as "India has sufficient stock to feed its people and also assist its neighbours and vulnerable nations." The apparent volte-face raises several questions. Why did India offer to open its granaries for the world if it was unsure about having sufficient domestic supplies? Why did government announce restrictions just when the exports were in a take-off phase? Will this impact the image India desires to build — that of a reliable source of food to the world?
The answer is unambiguous. India's huge 1.4 billion population means its domestic food security concerns will over-ride any ambition to become an agri export powerhouse despite the country being the leading producer of several food items. It is, after all, the largest producer of milk and pulses, and second-largest producer of rice, wheat, sugarcane, groundnut, vegetables and fruits, according to United Nations Food and Agriculture Organization (FAO). It is one of the leading producers of spices, fish, poultry, livestock and plantation crops. It is first or second in several non-food crops such as jute and cotton. In essence, India is no rookie when it comes to food production. However, as it has the world's second-largest population, its own consumption is much more than the surplus available for exports. Hence, its share in global food and agriculture trade is just 2.2% (in value terms) as compared to European Union's 50% and US' 10%. Sustained exports are possible only if India can make its agriculture sector far more productive and Indian produce remains price-competitive not only during global supply crises but also normal times. For that, it will have to make huge investments in agri inputs/infrastructure, technology adoption and give farmers freedom to sell in most profitable markets —domestic and foreign — without abrupt restrictions. India's transformation into a global food bowl will not happen on its own.
India's Credentials "Why do you doubt your politicians?" asks Ashok Gulati, Infosys chair professor for agriculture, Indian Council for Research on International Economic Relations (ICRIER) and former chairman of Commission for Agricultural Costs and Prices (CACP). "Global rice market is 51 million tonnes. How much has India exported? 21 million tonnes! Are we not feeding the rice eaters of the world? We are already doing it in rice and have a capacity to do it in wheat provided we get a better price for our wheat," he says. India is one of the few countries where area under agriculture is almost half the geographical area, he says. "In other countries, it ranges from 10% to 25%. China is about 11% or so.
The Gangetic plains are the most fertile regions in the world," he adds. OECD-FAO Agricultural Outlook 2021-2030 considers India among the handful of nations that will drive foodgrain production this decade. "The growth in global rice trade will be supported by production surplus in India as output is expected to grow at a higher rate than domestic demand. India's rice surplus will be mainly directed to sub-Saharan Africa, where rice imports are projected to increase by 90% over the next 10 years," says the OECD-FAO report. It estimates that global wheat output will rise 87 million tonnes to 840 million tonnes by 2030, where "India, the world's third-largest wheat producer, is expected to provide the largest share of the additional wheat supply, increasing its wheat production by 18 million tonnes by 2030, driven by yield improvements and area expansion in response to national policies to improve self-sufficiency in wheat."
US Department of Agriculture, which values global agricultural trade at $1.4 trillion (in 2018), says in its latest report that global trade patterns are already shifting in favour of emerging economies. "Although the United States and the European Union remain among the largest exporters and importers of agricultural products, five countries — Brazil, China, India, Indonesia and Russia — have emerged as important traders in the global agricultural market and, in some cases, as key trading partners to the US," says its agri outlook report.
Will kneejerk reactions, like the recent restrictions, spoil India's plans to feed the world?
Trade Restriction
Commerce minister might have tweeted restrictions on wheat exports as a 'ban', but his ministry says it is not. "It may look like a ban but you have to see the fine print. Firstly, primacy is being given to ensure adequate food in the country. There has been a sudden spike in prices of wheat and atta across the country. Secondly, our government is committed to ensuring food security of its neighbours and vulnerable countries. When we exported seven million tonnes last year, almost half went to one country, Bangladesh. Nepal does not produce much wheat and we are shipping rice to Sri Lanka on credit. So, we have kept the window open for our neighbours and large number of vulnerable countries," says commerce secretary B.V.R. Subrahmanyam. He says government order directs wheat trade in a certain direction. "We do not want our wheat to go in an unregulated manner to places where it might get either hoarded or not used for requirements of vulnerable countries. That is why government to government window has been kept open. The trade could still be private but entity making the request should be a government," he adds.
To be fair, the directive to restrict wheat exports allowed orders that had been placed to be fulfilled. "India's credibility as a trading nation is important. We could have imposed them (restrictions) overnight. But export orders to the tune of 4.2 million tonnes wheat had been contracted of which 1.2 million tonnes had gone in April and another 1.1 million tonnes in May. The order honours existing contracts," says Subrahmanyam.
Incidentally, government has also imposed a volume ceiling on sugar exports from June 1 till October 31. Exports during the period will require government permission on a case by case basis. Sudhanshu Pandey, secretary, Department of Food and Public Distribution, says it's a technical issue as there is no change in export target for the current sugar season (October 2021-September 2022). "Sugar exports will be highest ever. However, since there is a global shortage and Brazil's production is not adequate, our domestic (sugar) availability also has to be ensured," he says. As per the government order, up to 10 million tonnes sugar will be allowed to be exported during the season. Considering that in sugar seasons 2017-18, 2018-19, 2019-20 and 2020-21, India had exported 0.62 million tonnes, 3.8 million tonnes, 5.96 million tonnes and seven million tonnes, respectively, government feels that 10 million tonnes is a reasonable target for sugar season 2021-22. Further, so far, contracts for export of only nine million tonnes have been signed; about 8.2 million tonnes have been dispatched from mills, of which around 7.8 million tonnes have been exported.
However, the issue is swiftness and unpredictability of such restrictions, which will prevent India from building long-term trade relations. Farmers also get miffed if they can't be sure about getting best prices when demand is high. Take wheat. One of the reasons for restricting exports was second round of production estimates that said wheat output during the season may not be as high as predicted in the first round. "Last year's final production figure for wheat was 109 million tonnes. This year, our estimate was 111 million tonnes. But because of heat wave, yield has been affected to some extent, and our (current) estimates are 105-106 million tonnes," says agriculture secretary Manoj Ahuja.
Read More at https://www.fortuneindia.com/amp/story/long-reads%2Fcan-india-be-a-global-food-bowl%2F109640