Government may view wheat import as a shortage, concerns of rising inflation loom



Indian Prime Minister Narendra Modi has boldly declared that his country is ready to “feed the world” after Russia invaded Ukraine. Less than four months later, the government must consider importing cereals.

Even before Modi made his promise, a record heat wave that began in March was threatening Indian wheat production. This has reduced production and driven up local prices, making daily life more expensive for hundreds of millions of Indians who use the grain to make staples like naan and chappatis.

Indications that a bumper wheat harvest was not going to happen prompted the government to restrict exports in mid-May. State reserves fell in August to the lowest level for the month in 14 years, according to Food Corp. of India, while consumer wheat inflation is nearing 12%.

The impending shortage and rising prices are now forcing authorities to prepare to buy abroad. Government officials are discussing whether to reduce or abolish a 40% import tax on wheat to help millers in some areas import grain, people familiar with the matter said, asking not to be identified because the talks are private. This was first reported by Reuters.

The finance ministry did not respond to an email seeking comment. A spokesman for the food and trade ministries declined to comment.

Indications that a bumper wheat harvest was not going to happen prompted the government to restrict exports in mid-May. State reserves fell in August to the lowest level for the month in 14 years, according to Food Corp. of India, while consumer wheat inflation is nearing 12%.

The impending shortage and rising prices are now forcing authorities to prepare to buy abroad. Government officials are discussing whether to reduce or abolish a 40% import tax on wheat to help millers in some areas import grain, people familiar with the matter said, asking not to be identified because the talks are private. This was first reported by Reuters.

The finance ministry did not respond to an email seeking comment. A spokesman for the food and trade ministries declined to comment.

Although it is the world’s second largest producer of wheat, India has never been a major exporter. It has never imported much either, with overseas purchases accounting for around 0.02% of annual production. The country was almost self-sufficient.

Authorities now expect the 2021-22 harvest to be around 107 million tonnes, down from a February estimate of 111 million. This may still be too optimistic, as traders and millers are forecasting between 98 and 102 million tonnes.

Government purchases of wheat for the country’s food aid programme, the largest in the world, are expected to be less than half of last year’s levels, according to the food ministry. This prompted authorities to distribute more rice in some states and restrict exports of wheat flour and other products.

Consumer wheat inflation has held above 9% year-on-year since April and jumped to 11.7% in July. Wholesale prices rose again, by 13.6% in July, according to official data. This creates a headache for the central bank, which is trying to bring headline inflation, currently close to 7%, below its 6% target.

Wheat is India’s largest winter crop, with planting in October and November and harvesting in March and April. There are also concerns about its rice production, which could be the next challenge to the world’s food supply.

“Grain inflation is a concern due to lower paddy plantings,” said Sameer Narang, an economist at ICICI Bank in Mumbai. Rising grain prices are expected to continue for some time, he said.

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