The age of instant price discovery and availability of data from different markets across the world has made little difference to India’s policy on farm exports. Decisions continue to be made at a snail’s pace. The latest example—no surprises here—is cotton.
The government banned exports of cotton under pressure from domestic lobby groups in March. At the time, demand for the fibre was strong in global markets. These prospects have dwindled considerably now. As a result, the government has been forced to raise the minimum support price of the crop from Rs.600 to Rs.900 (depending on the varieties) to prevent distress sales by farmers. A significant portion of output is free for export, but has few takers now.
A decline in global demand is only one factor at work. India’s fluctuating export policy makes the country an unreliable supplier in global markets. This only hurts our farmers.