India’s export shock is exacerbated by the global food crisis

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Well, it was a sharp and unwanted reversal. A month ago it was India to brag it will tackle the growing international food crisis by releasing some of its generous wheat stocks on world markets. Last Saturday, Narendra Modi’s government lowered its ambitions from feeding the world to simply feeding India by announcing export ban on wheat after the sudden heat pushed the forecast of domestic production and raised prices. From Ukrainian wheat production is expected fall by a third this year and Russia seized Ukrainian grain and destroying their farmsthe risk of the food crisis getting out of control has only increased one step further.

It’s pretty clear there in parallel between India’s performance on wheat and Covid’s vaccine shortage last year. Its super-competitive pharmaceutical industry boasted of inculcating the world, and the government initially enjoyed the reflected glory of soft power, but New Delhi reduce exports when the needs of one’s own country sound louder.

You see a dangerous gap here when a global governance system should exist but does not exist. When there is an international crisis with food or vaccines, the beginning claims of rich supplies and international solidarity quickly shrink in the heat of domestic expediency. There is a lot of talk among governments about global food security, which includes the G7 group of rich countries rhetorical action criticize India’s export ban this week – but nothing like enough coordination to make it happen.

Although India’s export restrictions are likely to be used as calibrated control instrument than a direct ban, commodity markets were not satisfied, global wheat futures shooting higher on Monday. The situation is particularly worrying for importing countries in the Middle East and north africawho consume wheat in large quantities and usually do not replace it with other grains. Egypt, the world’s largest importer of wheat, approved India as a supplier in April: it had to look for assurances that its recent order for half a million tons of grain will be executed.

The current issue here is sales inventories. According to the US, overall world grain production in the last few years has been satisfactory Data from the Department of Agriculture. If the trade was instantaneous and gratuitous, and all the food was substitutable and marketable, there would be no such great problem. But strong demand, and more recently some poor harvests, including in the southern U.S. states, mean that wheat stocks held by the world’s largest exporters are the lowest in a decade.

In the case of India it was not just a failure with the harvest. The problem arose because of the complicated and inefficient way of distributing wheat, which is bought by a government agency, the Food Corporation of India, and sold at subsidized rates or added to government stocks. In fact the country had a lot of wheat, however mismanagement procurement forced the FCI to suddenly meet its needs.

As always, global problems stem from domestic, and often from, political choices rather than economic inevitability. Food crises are not usually related to general food shortages. It is about the inability of the authorities to bring it where it is needed, usually through some combination of lack of data, poor policies and neglect.

Some time ago I wrote about Modi said India was not allowed to export wheat to resolve the crisis because the World Trade Organization told it not to do so. For his part, this was a slight exaggeration, but it is true that there are WTO rules against countries that inefficiently subsidize farmers with high fixed prices and cheaply throw away food abroad. The rules that stop cheap food from entering world markets may look strange, but news this weekend from India shows their long-term benefits. It is unwise to allow food-importing countries to become dependent on subsidized and dumped exports, which may suddenly be cut off at source.

The world needs more efficient, large food producers who systematically and reliably prioritize exports, and that is not enough. There is still very little sense of a well-planned response to the food crisis, both internationally and through the actions of individual countries. There is a lot of talk about coordinated action, but India’s sudden change of course shows how difficult it is to implement plans.

alan.beattie@ft.com

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