A ban on wheat exports was the country’s least damaging option

Context: The Indian export ban on wheat in mid-May drew much negative attention. The ban was on private sector wheat exports, leaving open government-to-government contracts.

The widespread criticism of the ban was misplaced.

Details about the wheat export ban and related issues

The issue has been covered in detail in the following articles,

• Boon to ban: How the wheat export story changed in two months
• Why GoI can resume wheat exports
• What explains India’s U-turn on wheat exports?
• India can’t feed the world with a major chapati crisis at home
• Frequent policy flip-flops are bad for farmers as well as consumers

Why the criticism of the wheat export ban is unwarranted?

Economists routinely condemn sudden policy reversals because these erode trust in government. However, in this case, it was the least damaging of options before the government.

Reducing the free food grain would have been an even more disastrous betrayal of public trust.

To have provided farmers a bonus above the MSP of ₹250 per quintal, so as to outcompete export demand, would have been a fiscally disastrous additionality to the food subsidy.

In the midst of a fiscal watch on public debt levels, and inflation concerns, all avenues were blocked other than a ban on free-flowing wheat exports.

The wheat export ban signalled cognizance by the government of the need for multiple actions to stem inflation

How have other countries responded to India’s wheat export ban?

International calls to reverse the ban continue.

At a high-level ministerial meeting in New York on ‘Global Food Security: Call to Action’, India was reminded of its global responsibilities, especially in the context of its upcoming role as chair of the G-20.

The issue figured prominently in a meeting of the UN Security Council. And of course, it will come up at the G-7 meeting later this month in Germany.

The immediate reason for the ban was the drop in the production of wheat due to extreme heatwave conditions caused by global warming and climate change.

Global leaders reminding India of its responsibilities have themselves not come through with their climate finance commitments.

Way forward

The principle is clear.

The setting of global targets and monitoring of individual country contributions cannot be selectively done by a powerful subset of countries. Countries outside that exclusive subset have to be allowed to retreat from commitments to the free flow of exports if their domestic imperatives compel them to do so.

Source: This post is based on the article “A ban on wheat exports was the country’s least damaging option” published in Livemint on 3rd June 22.