Can Russia-Ukraine war make India a key wheat exporter?
India's export basket has added yet another item to the list of goods that are finding takers abroad. And that is wheat. With the breakdown of supply chains from the Ukraine and Russia, many countries used to importing from these countries are now hunting for new sources of this critical food grain. India, the world's second largest wheat producer, may end up filling the vacuum left by the other two countries. The latest news that Turkey has placed an order of 50,000 tonnes of wheat from India comes on the heels of contracts being concluded with Egypt. In other words, West Asia is now looking to meet its grain needs from India.
The Agricultural and Processed Food Products Export Development Authority (APEDA) sent a delegation to Turkey to finalise the deal which is being executed through a private electronic mandi. The Food Ministry says that several countries are interested in buying wheat from here including Indonesia, Israel, Oman, Nigeria and South Africa. The only downside to raising exports is that domestic prices have suddenly risen, alarming both consumers and the flour milling industry.
The surge in export interest has also taken place at a time when wheat production estimates have been revised downwards owing to the sudden rise in temperatures in mid-March. The expectation now is that output will be 105 million tonnes as against earlier projection of 115 million tonnes.
Despite this downward revision, there is still hope that India will finally emerge as a major player in the global wheat trade. Though it has always been one of the biggest food grain producers, it has not been able to carve a space as a major wheat exporter till now. The situation had already started to change in the last fiscal - 2020-21 - when wheat exports shot up from 2 million tonnes in the previous year to over 7 million tonnes. For the current fiscal, the expectation is that it will touch 11 to 12 million tonnes.
While wheat exports may be rising due to supply disruptions caused by the Ukraine conflict, there has been an overall surge in agricultural exports over the last few years. In rice, for instance, India has been the top exporter for several years now. In contrast, it is the second largest wheat producer but till recently was only the 34th largest exporter. This scenario looks set to change but much will depend on whether it is able to provide sustained supplies of wheat to world markets. With domestic prices rising, flour millers within the country have already expressed concern over enhancement of exports.
India is also the fourth largest exporter of both cotton and seafood. But it has yet to make a market in exports of other agricultural commodities though it is one of the biggest global producers. One of the problems that has faced higher exports of agricultural, horticultural and marine products is that of technical specifications which have emerged as major non-tariff barriers in several developed countries. It is here that scientific expertise needs to be provided to exporters to help them overcome these obstacles. For instance, mango exports to the US were held up for a long time in the past due to fears over pest infestations. These are all areas in which the government needs to provide support on a sustained basis so that exports can continue unhindered to major western markets.
This is imperative as technical issues are some key reasons why India is the second largest fruits producer but only 23rd in terms of exports. In vegetables, it is the third largest producer but only the 14th rank in exports.
In the case of marine exports, the situation is somewhat better. India is the fourth largest seafood exporter and is currently the biggest shrimp supplier to the US. Recently efforts have been made to promote inland fisheries development to capitalise on the success story of marine exports but there is still a huge gap to be filled in terms of value addition for fisheries and seafood. Here again stringent testing and checking requirements of developed countries have become non-tariff barriers.
As far as wheat exports are concerned, however, the geopolitical situation has enabled this country to finally make a breakthrough in a commodity that has always had huge potential. It is possible that India will now emerge as a major wheat supplier to the rest of the world. This will also provide a fresh market for farmers especially those of the northern states who have been relying for sales largely on government procurement programmes. It will also ensure the government can liquidate wheat inventories which had been piling up due to the necessity of making such large scale purchases from farmers. A big chunk of stocks have been drawn down over the past two years through the free food grain schemes that were formulated to support the deprived during the pandemic. Even so, it is clear that the country is capable of growing enough wheat both to meet domestic needs as well as for exports in the future.
The issue of rising food grain prices, however, cannot be sidestepped as these will enhance inflationary pressures on the economy. The central bank has already changed its stance and begun to focus on containing inflation by raising interest rates for the first time in several years. So wheat exports need to be approached with caution in the short run, but there is no doubt that these can be a significant foreign exchange earner in the medium and long term. If efforts in this direction succeed, one will have to concede that the difficult geopolitical environment has brought about a silver lining on one front.