Exports of a country are one of the primary growth indicators. They define how the economy is performing and the future prospects for multiple industries. Unfortunately, the future outlook for Indian exports is not looking good. With multiple international factors and internal matters at hand to be taken care of, exports are going to take a big hit. When the news broke out about capping the wheat exports last month, the world was taken aback as the wheat exports were already in a soup because of the Ukraine – Russia conflict.
On June 22, India’s neighbour Bangladesh brought out an order to allow the import of the non-basmati variety of rice till October 31 fearing a cap on rice exports by New Delhi. Bangladesh’s domestic production has taken a hit this year because of floods and eventually, their domestic stock has taken a hit. Earlier Bangladesh used to impose an import duty and tariffs up to 62.5 percent. But to encourage the import of non-basmati rice, they’ve slashed it to 25 percent.
The sudden cut in the import duty and tariffs have led to a price surge of 10% in India. According to Mr. BV Krishna Rao, president of Rice Exporters Association, the new price of rice is $360 per tonne against the old rate of $350 per tonne. The biggest exporters of rice in India are West Bengal, Bihar, and Uttar Pradesh. These 3 states account for the maximum export to Bangladesh. The negative impact of the lowered tariffs can be easily seen in these states where the prices have shot up by almost 20 percent.
Soon the taste of Sugar can go sour too for the countries who look up to India to fulfill their maximum needs. According to reliable sources, the Government is planning to put a ceiling on sugar exports for the second consecutive year. New Delhi aims at keeping the prices of sugar under check in the domestic market. There’s a need to regulate exports to avoid any kind of panic in the market beforehand.
Sources tell that the GoI can put a ceiling on export anywhere between 6 million tonnes to 7 million tonnes. This will be the second time when the government will be putting a cap on exports. Earlier also, they capped off the sugar exports to 10 million tonnes on May 24. The stringent restraints on sugar exports have also come in the backdrop of the burning crude oil prices. A huge portion of total sugarcane production is diverted for ethanol production also, which is later blended with the regular fuel.
The final call on the latest strains will be taken only after the Monsoon season and we have the complete figures of the production from Maharashtra. Brazil, the largest producer of sugar, has also faced the heat of the ongoing conflicts and the crude oil prices. Thus, the load of sugar exports across the world has come on the shoulders of India.
One of the biggest roadblocks for exports has been the Ukraine-Russia war. The war led to multiple hurdles across the world. From shortages of basic staple food and resources to the drastic increase in the crude oil prices. Every other factor has affected world trade in one or other way. The after-effects and tremors of the war can be felt on the Indian economy too. The inflation figures have reached a record high of 6.95 percent. RBI Governor Shaktikanta Das has said that the figure of inflation will remain above 6 percent until December 2022.
When compared with the figure of the developed economies our inflation figures might look better but maintaining it is a tedious task. Thus, the Government is taking multiple steps to keep it in control, and capping the exports is one such step which is necessary looking at the present scenario.
If we consider the situation of wheat, the recent steps are a necessity. Russia is the world’s third-largest producer and also one of the biggest exporters of wheat but its production took a hit during the ongoing conflict. Also, the sanctions placed over it by the European Union, US & UK made the conditions worse for the wheat trade across the world. As a result, the primary customers of Russian wheat looked toward India to meet their demand.
But India had to also take care of the food security, inflation rate and other related factors and eventually put a ceiling on the wheat production in the previous month. Though the decision took the global markets by storm and everyone including the IMF requested India to review its decision. As of now, New Delhi stands firm with their decision but on the other hand, has completed all its commitments related to the distribution of wheat.
US President Joe Biden has also provided a different dimension to the rising inflation and dipping exports. POTUS pointed out at the sheer profit-minded shipping companies and how they have raised their prices relentlessly during the backdrop of pandemics. These shipping companies increased the shipping charges by a whopping 1000 percent. As a result, the unjustified cost is rolled over to the citizens, and also the exporters have to rethink their budget. And now, the ongoing conflict between Russia and Ukraine has given them enough room to keep their prices higher than the normal rates.
The global supply chain and the market are going through one of their toughest phases. The export has slowed down and countries are suffering a shortage of basic staples and food items. India is facing a huge problem not only with exports but also with imports of rice bran.
Rice bran’s consumption has been growing rapidly ever since the pandemic. Being a healthier option in comparison with Sunflower Oil,its consumption level has increased. Also, the imports of Sunflower Oil plunged because it is primarily imported from Ukraine and now the supply lines have been disrupted. Ultimately, the demand for rice bran oil has reached an all-time high. Some domestic players like Ricela have increased domestic production and are trying to match the demand.
The slump in exports is worrisome & countermeasures should be deployed in time, otherwise, a situation that seems to be in control as of now can slip from our hands. The Sri Lankan civil war also has a fair share in the recent slump we are experiencing. The Automobile Industry suffered huge losses when it had to shut its plants in Sri Lanka because of the conflict. Their assembly lines are clogged and not a single vehicle can be manufactured out of it.
The pulse exporters have requested the Government to give relaxation in cash subsidy of 10 percent. The 10 percent cash subsidy can boost exports according to the exporters. The Government of India had taken back the cash subsidy of 7 percent two years back which was provided on the pulse exports. Also, they have mentioned that the selling price of the pulse at the farmgate level has slipped way below than the MSP.
At present Chana is being sold at the price of Rs. 43 per kg at the farmgate level against the MSP of Rs. 52.30 per kg. Chana is grown in huge quantities and has the maximum share in total amount of pulses produced in the country. According to the exporters a huge amount of Chana is lying unsold in the country. Government has already completed the procurement for the current fiscal year after it procured 26 lakh tonnes of it.
Kharif season is going on and the sowing of the pulses is going on. It is predicted that the season will receive a healthy amount of rainfall which is suitable for the pulses. If everything goes as predicted, then the country will see a good amount of production of pulses. An extra amount of pulse production will again lead to a problem.
Surplus production will also affect the MSP. MSPs for the pulses might seriously come down which will lead to a widespread dissatisfaction amongst the farmers. Till now, no response has been given by the Government to the request or application of the exporters. But still exporters are hopeful of receiving and as well as a solution to the problem.
One of the core and basic problems because of which the downward trend in exports is being observed is a spike in demand but dip in production. After the start of the Ukraine-Russia conflict, the supply chain has faced certain disruptions. Ukraine & Russia are clearly not able to produce and export as they used to do before the conflict. Thus, the whole onus of maintaining the demand and supply balance is on India.
Countries from all over the world are looking toward India to meet their requirements. Though, India has always been on the forefront to help the world in moments of crisis and has very well proved it during the pandemic. But, it has to first take care of the domestic demand first and then regulate the exports to the other countries.
