On 13th May, the government of India took a decision to prohibit all exports of wheat citing a threat to food security. The ministry of commerce said that they have taken this decision as a result of rising wheat prices because of several factors. India’s retail inflation has reached an 8-yr high in April because of rising food and energy prices. Till March 2022, India had exported upto 7 million tonnes, up by over 200% from the last fiscal year.

Ukraine was a major supplier of wheat to Europe. Since the Russian invasion of Ukraine, wheat exports to Europe have become destabilized. India being the second-largest producer of wheat, was expected to fill in this gap. But a scorching heat wave this year has curtailed domestic output and soared the prices in local markets. India’s hottest March in over a 100 years has heavily affected the wheat grain size and crop output. Government’s MSP of wheat is 20,150 rupees per tonne which has risen to 25,000 in certain places. This decision has come two days after an announcement from India that delegations will be sent to countries like Turkey, Tunisia, Indonesia, Morocco, Philippines etc to explore the possibilities of wheat export. The department of food and consumer affairs says that the prohibition comes because of a slight dip in the produce this fiscal year (190 LMT as compared to 273 LMT) and the need to stabilize the agricultural sector by preventing the possibilities of hedging wheat(plus atta) and consequently control inflation. Prior to the prohibition, 10 MT were expected to be exported this year.

India’s neighbors are heavily dependent on its wheat exports. In 2021-22, Bangladesh imported nearly 50% of India’s wheat produce. Afghanistan recently received 2,500 tonnes of wheat from India on humanitarian grounds. This ban could drive global wheat prices sky high and affect poorer countries of Asia and Africa. According to an article by Bloomberg, In Chicago, prices have risen by about 5.9% for ½ a bushel. If we look at the prices of wheat from April 2021, it has risen by over 30% impacting the price of everything from bread to noodles. Prices of different wheat varieties have also risen. Hard red winter futures increased by 70 cents to $13.52 a bushel, highest s ince 2008, while spring wheat increased by more than 4%. Corn increased by 2.2%. India is only the 8th largest exporter of wheat and yet its decision has had ripple effects across the world.

The government has said that it would allow exports with ‘already issued letters of credit’ (a guarantee for payment issued by a bank for goods and services purchased, which cannot be canceled during a specified time period.)and to those countries that request produce ‘to meet its food security needs’. The prohibition has been criticized by the G7 nations meeting in Germany which has expressed concerns over crises worsening if countries start closing export borders.

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