Home / Opinion / Columns /  Frequent policy flip-flops are bad for farmers as well as consumers

In a sudden move, India’s government banned the export of wheat on 13 May, a day after retail inflation numbers for April were released. Consumer price inflation overall was at 7.8%, with food inflation at 8.4%. But it was wheat inflation at 9.6% that triggered this panic reaction. None of it was unexpected, given the trend so far. The Food and Agriculture Organisation food index has been at its highest since the series began, driven by inflation in edible oil and cereals. Wheat prices have been rising since November and gained pace after the Russia-Ukraine war.

The panic reaction has to be seen in the context of the hype created by the government of a bumper crop of wheat followed by imaginary surpluses that would see India become the granary of the world. So much so that a narrative was created that the only reason India was unable to feed the world was the World Trade Organization’s adverse rules. Prime Minister Narendra Modi mentioned this in his discussion with US President Joe Biden on 11 April. Thereafter, the claim was made by several ministers, including finance minister Nirmala Sitharaman, who even raised it at the spring meeting of the International Monetary Fund and World Bank. Just a day before the export ban, India announced sending trade delegations to nine countries, including Morocco, Tunisia, Indonesia and Thailand, to explore opportunities for exporting wheat.

But how did we go from making claims of ensuring food security for the world to worrying about our own food security in just a month? Since much of what has unfolded was already public knowledge, the reason appears to be a lack of understanding of the agrarian economy or its food security impact. Neither was the hype based on facts, nor is this panic reaction desirable.

It was known that wheat production would suffer due to extreme heat waves, which damaged standing crops. While the government revised its production estimate down by only 5.7% to 105 million tonnes, actual output may be even lower. That wheat prices were rising internationally was also known months in advance. With the Russia-Ukraine war, there was a clear indication that global markets would witness a 25-30% fall in supply, given the dominant share of these two countries in the global wheat trade. This information was available and used by traders to pay higher prices to farmers for grains. It was obvious even to the government, given the low arrival of grains at public procurement centres. As against our target of 44 million tonnes, actual procurement has been less than 20 million tonnes. Relaxing the quality of wheat procurement is too little, too late.

A simpler solution would have been a bonus over the minimum support price. This would not only have allowed the government to meet its procurement target on time, but also provided better prices to farmers. Instead, the government allowed private traders and speculators to take advantage of the situation and mop up supplies from the market. These were mostly bought for exports, but are now trapped by the ban. While the ban is unlikely to pull down wheat prices, the sudden decision raises uncertainty over government policies.

Unfortunately, it also won’t help domestic food security. This became clear as soon as realization dawned that public stocks are unlikely to provide for the regular requirements of the National Food Security Act (NFSA) along with additional allocations under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). The panic reaction has resulted in a cut-back in the NFSA allocation of wheat in several states, many of them mainly wheat-consuming states. The entire allocation under the PMGKAY for major wheat-consuming states Bihar and Uttar Pradesh has been withdrawn. The offer to replace these with rice shows a muddled bureaucratic approach that assumes people can change their dietary preferences and tastes according to government fiat.

This flip-flop on agricultural policy is not an isolated case. Vacillation has become part of policymaking, more so in the case of agricultural commodities. Apart from sending mixed signals to farmers and traders, it also reflects a lack of understanding of the domestic food and agricultural economy. At a time when inflation is likely to erode real purchasing power, especially in rural areas and of the poor, the withdrawal of NFSA and PMGKAY wheat allocations will worsen lives. But a far worse outcome would be a loss of faith in public policy. Farmer trust in government has been at a nadir. Policy flip-flops only reinforce some of their fears.

Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi

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