In major stock markets of the world, funds that invest in the commodity exporting economies do not particularly track India. One of the reasons for this disinterest is India?s reluctance to harness its strength in the global market as a large commodity producer. The on-off syndrome costs us in terms of lost markets abroad and in terms of wastage of foodgrains at home. Worse, when stocks rise, the price discovery for farmers suffers despite the minimum support price. So, food minister KV Thomas?s statement that his ministry is not averse to allowing exports, and that the issue will be placed before the EGoM, makes one hopeful. One expects the government will now remove the restrictions on exports, especially for rice and wheat. The EGoM?s recent decision to permit an additional half a million tonnes of sugar exports also gives hope of change in the food export policies. Rice and wheat stocks in the central government pool have gone up to almost 28 million and 37 million tonnes, respectively, putting the total food stocks at 65 million tonnes, a record high. This is more than twice the buffer stock norms of 25 million tonnes and far exceeds the 62 million storage capacity of FCI and the Centre, including the open storage of around 18 million tonnes. Recent numbers show that the increase in price of rice has come down to 2.6% in May, on a YoY basis, much below that of sugar, which is rising by 5.3%. With total food stocks steadily rising from 16.6 million tonnes in 2005-06 to around 55 million tonnes in 2010-11, the Centre?s food subsidy bill has gone up too, from R23,077 crore to R60,600 crore.
The record increase in foodgrain stocks is happening when the prospects for exports have improved significantly. Global food markets have seen a significant turnaround during 2011 as comfortable supply and a relatively stable price scenario have given way to a more worrisome outlook. Though unfavourable weather conditions were the main reason for this deterioration, food markets were also impacted by the Japanese disaster, the political unrest in north Africa, plus an uncertain global economy. Short-sighted policies on export show India?s share of global food exports has shrunk from 1.4% to 1.3% over 1990-2009, even as its share of global imports went up five-fold from 0.2% to 1%. Improving national food security, therefore, requires increasing India?s share of global food trade and removing export restrictions?important steps in this direction.
