Rural economy reaps rich gains from war

The Russian invasion of Ukraine presented an opportunity for the country’s rural economy. There could be a silver lining for India with an upsurge in rural sentiments as the harvest of rabi crops is in full swing and prices are at an all-time high above the minimum support price (MSP) in the markets. open domestic as well as in global markets.

The MSP of wheat is ₹2,015 per quintal while the open market selling price is between ₹2,200 and ₹2,300 per quintal.

In April, the prices of wheat on the open market increased by 17%, mustard by 30%, barley by 67% and soybeans by 36%, compared to April 2021. Mustard, the second crop India’s largest rabi saw a 30% increase in plantings in FY22 compared to FY21 and will be the second largest contributor to farm income this year. It is widely estimated by brokerage firms that due to the Ukraine-Russia conflict, high commodity prices in domestic and global markets could inject an additional ₹31,000 crore revenue into the economy rural thanks to rabi crops.

Ukraine is one of the world’s largest wheat exporters with a 12% share. Ukrainian sunflower exports represent 47%, barley 17%, rapeseed 20% and corn 14% of world exports. Russia is also very present with world exports of sunflower at 25%, wheat at 18% and barley at 14%.

In the case of maize, Ukraine accounts for 13% of world trade, with half of its exports going to the lucrative European Union market. “A ban on Russian flights to Europe and the United States also means opportunities for Indian exporters of processed foods, nuts, fruit juices, confectionery, pulses and cereal preparations,” according to a analysis by the Agricultural and Processed Food Export Development Authority (APEDA). ), an agency under the Union Department of Trade and Industry.

There is huge scope for increased wheat exports in the current scenario. Export orders of 35 lakh tons have been received for the months of April to July. The protracted conflict is an opportunity for India to gain global market share by exporting quality wheat (as we have done with Basmati rice) so that Indian wheat will remain in demand even after the crisis.

We must not explore a new market for temporary gains from the Russian-Ukrainian crisis. Instead, we must forge a long-term relationship with each of the key markets.

After China, India is the world’s second largest producer of wheat with around 1,008 lakh tonnes in 2020-2021, contributing about 15% of the total world production, while a large part of it is devoted to sustaining food stocks for strategic domestic consumption. Currently, warehouses are overflowing with over 230 lakh tonnes of wheat stocks against a buffer norm of 70 lakh tonnes and the new crop will start arriving within a week.

Despite holding 400 lakh tons of wheat stock in 2016, India exported hardly any. In 2016, India’s global share was only 0.14% and increased to 0.54% in 2020; even today it is less than 1% and had exported about 78.50 lakh tons in 2021-22, 21.55 lakh tons in 2020-21 and only two lakh tons in 2019-20.

The share of Russia and Ukraine in the wheat export basket was 30%, or 420 lakh tons and 240 lakh tons, respectively, for 2021-22. To fill this void in the global market, India is formulating a strategy to boost wheat exports to a record 100 lakh tonnes in the financial year 2022-23.

Challenges for Punjab and Haryana

Gujarat and Madhya Pradesh have been exporting wheat since last year to neighboring South Asian countries, but exporting from other wheat-producing states, especially Punjab and Haryana, will be difficult due to lack of required transport infrastructure, higher cost of transport to seaports in the western region, and higher levies on the purchase of grain.

While the Madhya Pradesh government has waived mandi fees and other levies totaling 3.5% on grain purchases, in a bid to boost wheat exports, Punjab has made no announcements to boost exports. The high tax rate here is another disincentive. Punjab’s tax system is daunting as exporters have to pay levies of 8.5%, more than any other state.

With soaring wheat prices in the world market, the world is counting on India to supply wheat. This will help exporters, as well as farmers, to earn money quickly.

By July, no fresh wheat arrivals are expected from anywhere in the world except India. Although Ukraine and Russia’s wheat crops will ripen in August and September, no one knows the extent of the damage to wheat fields, godowns and ports in war-ravaged Ukraine. Australian wheat, which competes with Indian wheat, will not arrive until November. Wheat-producing states in India must therefore be export-ready.

The path to follow

India is unlikely to bid to capture all the markets vacated by Russia and Ukraine this year. Earlier in March, Ukraine had banned the export of wheat, oats, millet, sugar, cattle and cattle by-products, mainly to ensure that the nation, destroyed by Russian missiles , has enough stocks to feed its people as the country’s supply chains are disrupted. .

If we go by the 2020-21 figures, the lion’s share of Russian and Ukrainian wheat was exported to countries like Egypt, Indonesia, Turkey, Nigeria, Italy and Bangladesh. India must focus on these nations. The creation of a special task force on agricultural exports with representatives from the Department of Commerce, CFI and state supply agencies, railroads, shipping, ports and exporters will significantly boost the country’s rural economy.

The author is the vice-president of the Sonalika group; Deputy Chairman of the Punjab State Planning Council; President Development Council of the northern region of Assocham

Published on

April 12, 2022

About Keneth T. Graves

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