India: Front-Runner in Grain Trade

In September 2011, India lifted a four-year ban that was responsible for limiting the exportation of wheat and rice.  Because of this ruling, India exported over 10 million tons of grain and soymeal in the first half of 2012, a figure that is nearly double what it was in the first half of 2011. The current drought in Russia, Ukraine, and Kazakhstan has significantly limited wheat production in these countries, yet world wheat prices have remained relatively stable due to India’s timely increase in the exportation of this commodity.

In the past, countries in the Middle East and North Africa have primarily imported grain from the Black Sea region, but because of the drought, these countries are looking elsewhere for grain.  India actually has the ability to transport grains to these regions more cheaply than the countries in the Black Sea region, but has not done so in the past due to limited production and concerns about the quality of the product.  Now, grain production is rapidly increasing in India and additional countries are looking to import Indian grain, hoping that the quality is up to par.

India is also using increased production of grains to help its own population.  The government is supporting India’s poor by buying wheat from rural farmers at above-market prices and then selling it to undernourished Indians at a highly subsidized price.  Unfortunately, corruption has so far limited the success of this government operation

For India to remain a front-runner in exporting grains, infrastructure must improve.  There are currently not enough warehouses to store all of the grain being produced, and so large quantities are being stored outdoors.  This often damages the grain, making it less appealing to countries looking to import Indian grain.  Also, export facilities are not yet equipped to quickly or efficiently transport the rising quantities of grain.  These issues must be addressed if India is to continue to expand its grain exports and remain atop the list of major grain exporters.