Why Is India Banning Wheat Exports?

Zinger Key Points
  • India is stopping exports of wheat with immediate effect
  • The heat wave that stunted crop growth in major wheat growing belts of India has tempered expectations for a surplus
  • India's decision could impact global wheat supply and prices

India has banned exports of wheat, with immediate effect, casting a cloud on the outlook for global food supply.

What Happened: Exports of all varieties of wheat, which were previously freely allowed, has been prohibited under a revised policy, India's Directorate General of Foreign Trader working under the Ministry of Commerce & Industry said in a notification dated May 13.

The government attributed the decision to the sudden spike in the global prices of wheat due to several factors. This has rendered the food security of India, neighboring and other vulnerable countries at risk. The country, however, hasn't been able to access adequate wheat supplies, the ministry said.

India, however, made an exception for shipments if an irrevocable letter of credit has been issued before the date of notification.

"Exports will also be allowed on the basis of permission granted by the Government of India to other countries to meet their food security needs and based on the request of their governments," the notification said.

Related Link: India's PM Modi Hints He Is Likely To Seek A Third Term In Office

Why It's Important: Wheat prices have spiraled upward after the outbreak of the Ukraine-Russia war, given these two countries account for nearly one-third of the global wheat and barley exports. Following the war that broke in Eastern Europe, supplies from these countries have faced disruptions.

Meanwhile, domestic production of wheat has suffered due to a heat wave that has been prevailing in a majority of wheat growing belts in northern India since mid-March. India is the second-largest wheat producer in the world, and it had set an export target of 10 to 15 metric tons of fiscal-year 2021-22 wheat crop meant for marketing in 2022-23.

To capitalize on the opportunity presented by the global wheat supply crunch following the Ukraine war, India began exploring the possibilities of exporting to other countries, including Tunisia, Indonesia, Thailand, Philippines, Vietnam, Turkey, Algeria and Lebanon. The heat wave, which the Indian government hadn't factored in, has poured cold water on its ambitious export plans.

India's decision to freeze exports could be negative for the world, which was counting on supplies from the country to alleviate shortages. This is seen by many as driving global wheat prices higher and leading to scarcity in developing and under-developed countries.

Data released Thursday showed that annual consumer price inflation in India spiked to 7.79% in April, marking the highest rate in eight years.

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