By exporting part of surplus wheat and rice, India could augment global food availability, relieving price pressures around the world.
Indian policymakers need to heed the warning from the UN Food and Agriculture Organisation (FAO) that price volatility is a threat to food security. Although global cereal demand and supply appear balanced and there is no indication of a food crisis, market prices have spurted in recent weeks for a variety of reasons, including an unexpected crop failure in some important exporting countries (because of wet weather in Canada and drought in Russia), and the consequent embargo on export (in Russia). Speculative markets have accentuated the price movement. Since July, international wheat prices have soared by 60-80 per cent and corn (maize) by about 40 per cent, putting food importing poor countries to tremendous hardship. Experts have called for new measures to check food price volatility and manage associated risks.
Despite its growing integration with the global market, the Indian domestic market has not been really affected by global cereal price spikes. A rebound in domestic cereal output, the large stocks with the government and a continued embargo on exports (mainly wheat and non-basmati rice) have ensured that global price cues are not transmitted to the domestic market. But there is little justification for the Government holding cereal stocks far in excess of the country's genuine needs. Instead of allowing them to rot, such excess stocks should be liquidated, preferably in the domestic market, at prices affordable for the poor. Some quantities may be exported too, to take advantage of the high international prices. Importantly, if India decides to export wheat and rice (say 2-3 million tonnes each) it would go some way in augmenting global export availability and relieve the upward price pressures around the world. India cannot be sitting on unconscionable levels of inventory that benefit neither domestic nor overseas consumers. If anything, we owe it to the world, especially to food importing poor countries.
New Delhi must consider with due seriousness the FAO warning about speculative capital driving food prices higher. India is a regular importer of edible oils and pulses, and occasionally an importer of sugar and wheat; the agricultural policies and implementation of farm programs in recent years have not delivered the desired results. Even now, despite large public stocks and the expected rebound in production, food inflation is still at elevated levels. Farm policies and programmes must result in production of genuine surpluses. In a shortage economy, infusion of speculative capital exerts a disproportionately large impact on market prices, with no guarantee of primary producers reaping any benefit from the price behaviour.
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