Rural Economy Reaps Rich Gains from War

Subject: Economy

Section:

Context- The Russia-Ukraine war has given an opportunity for India to step up wheat exports, benefitting our farmers.

Concept-

The Russian invasion of Ukraine has presented an opportunity for the country’s rural economy.
There could be a silver lining for India with an upsurge in rural sentiments as harvesting of rabi crops is in full swing and prices are at an all-time high, higher than the Minimum Support Price( MSP) in domestic open markets as well as in global markets.
The MSP of wheat is ₹2,015 per quintal whereas the trading price in the open market is in the range of ₹2,200 to ₹2,300 per quintal.
In April, the prices of wheat in open market are up by 17 per cent, mustard by 30 per cent, barley by 67 per cent and soybean up by 36 per cent, in comparison to April 2021.
Mustard, the second most important rabi crop in India has seen a 30 per cent higher sowing in FY22 versus FY21 and will be the second-largest contributor to farm income this year.

Russia and Ukraine’s Share in Exports:

Ukraine is among the largest global exporters of wheat with a share of 12 per
- sunflower form 47 per cent
- barley 17 per cent
- rapeseed 20 per cent
- maize 14 per cent of global exports
Russia also has a strong presence with global exports of
- sunflower 25 per cent
- wheat 18 per cent and
- 14 per cent in barley
A ban on Russian flights to Europe and the US also means opportunities for Indian exporters of processed food, nuts, fruit juices, confectionery, pulse and cereal preparations, according to APEDA.
The prolonged conflict is an opportunity for India to garner a share in the global market by exporting quality wheat (like how we did with Basmati rice) so that Indian wheat remains in demand even after the crisis.

India’s Wheat Production:

After China, India is the world’s second-largest producer of wheat about 1,008 lakh tonnes in 2020-21, contributing around 15 per cent of the world’s total production.
At present, the warehouses overflowing with more than 230 lakh tonnes of wheat stocks against a buffer norm of 70 lakh tonnes and the new crop will start reaching in a week.
Despite holding 400 lakh tonnes of wheat stock in 2016, India hardly exported any of it.
In 2016, India’s global share was just 0.14 per cent and has increased to 0.54 per cent in 2020; even today, it’s less than 1 per cent, and had exported about 78.50 lakh tonnes in 2021-22.
India is drawing up a strategy to step up wheat exports to a record of 100 lakh tonnes in the fiscal year 2022-23.

Challenges in Export:

Absence of requisite transportation infrastructure,
higher cost of transport to seaports in the western region, and
higher levies on grain purchase. The taxation system of Punjab is discouraging as exporters have to pay 8.5 per cent levies, more than any other State.

The way ahead

If we go by the 2020-21 numbers, the lion’s share of Russian and Ukrainian wheat was exported to nations such as Egypt, Indonesia, Turkey, Nigeria, Italy and Bangladesh.
India must focus on these nations.
Setting up a special task force on agri-exports with representatives from the Commerce Ministry, FCI and States procurement agencies, railways, shipping, ports and exporters will boost the country’s rural economy in a big way.