Why did India restrict wheat exports despite big trade plans?

India is the world’s second largest producer of wheat. But most of it was being consumed by the country itself -- leaving little room for export. And whatever little we exported, it mostly went into neighbouring countries. Like 55% of our wheat went to Bangladesh.

But over the years, our wheat export has been on the rise. In FY 22, India exported a record 7.85 million tonnes of wheat. It was a 270% jump from 2.1 million tonnes the previous year. 

And this year, when Russia invaded Ukraine, India found itself in a spotlight. Scores of countries which used to purchase wheat from the two countries looked towards New Delhi to fill the void.

During the second week of April, Prime Minister Narendra Modi told US President Joe Biden that India was ready to supply its food stock to the world if the World Trade Organization (WTO) allowed it.

Orders for wheat ocks started pouring in from foreign shorests. Farmers were happy and so was the government. Egypt, which typically gets 80% of its wheat from Russia and Ukraine, approved imports from India in mid-April. 

On May 4th, Food Secretary Sudhanshu Pandey said the Centre was not moving to curb wheat exports as India had sufficient stocks. 

But the food secretary said that due to an increase in market prices and higher demand by the private players, both for domestic as well as export purposes, the Centre’s wheat procurement would be lower this year.

Also Read

TMS Ep131: Wheat export, ICICI's Sandeep Bakshi, markets, battery swapping

Four ships waiting to berth at Kandla port to load wheat for exports

Wheat markets still on the edge a fortnight after govt's export ban

TMS Ep-123: Back to office, Indian trade, markets, NSE IFSC

Wheat export: Madhya Pradesh stays one jump ahead of Punjab, Haryana

He added that a large quantity of wheat was being bought by traders at a higher rate than the Minimum Support Price, which was good for the farmers.

Around the same time, addressing the Indian diaspora in Germany, Prime Minister Modi said Indian farmers were coming forward to feed the world when big nations were worried about food security.

Just two days before announcing the ban, the government said it would send trade delegations to nine countries including Indonesia, Thailand and Turkey for exploring possibilities of boosting wheat exports from India.

But on May 13, the Indian government pulled a surprise and shocked many. It ordered a ban on export of wheat with immediate effect. Just before the ban, the government had plans to export a record 10 million tonnes of wheat this year.

According to the government, the main reason for the ban was to “manage the overall food security of the country and to support the needs of the neighbouring and other vulnerable countries”.

It comes against the backdrop of the hottest March in 122 years which stunned the grain -- leading to a considerable drop in yield. The yield, this year, may barely cross the 100 million tons mark, down from the government’s initial estimate of a record 111 million-ton harvest.

Meanwhile, the stock in the granaries of the Food Corporation of India is also low. And if the government extends its free grain programme, the FCI stocks may dwindle further. Currently it has 30 million tons in storage. And combined with this year’s purchase of about 19.5 million tons, it is just just enough to meet the government target of free grain plan.

So exporting about 10 million tons from this year’s yield would not have been a good idea given the increase in domestic market consumption. 

But critics say that the move has hit the farmers, who were about to harvest a good windfall after several years.