Invoke export bans only under exceptional circumstances, suggests Economic Survey

Chief Economic Advisor V Anantha Nageswaran.

Weighing in on the issue of how the government can strike a delicate balance between consumers and farmers even while rolling out price stabilisation measures, the Economic Survey for 2023-24 suggests invoking export bans only under exceptional circumstances.

The survey presented on July 22 says that farmers should be allowed to benefit from higher international prices and any bans on food export need to be telegraphed in advance lest hunger and famine elsewhere in the world worsen.

These comments come at a time when the government has export restrictions in place on key commodities such as non-basmati rice and sugar.

According to the survey, infrequent bans or restrictions on food exports may also allow domestic consumers to substitute, especially if the agricultural commodities in question are not essential consumption items such as food grains.

And even in the cases of staples, the government can allow substitution effects to play out before responding to domestic supply concerns, the survey said.

"For example, if sugar prices rise, consumers can consume less of it or switch to jaggery. It may even be a good thing for their health. In general, it is far easier for consumers to substitute or pare back consumption than for farmers to endure big losses because of ad hoc export bans or huge imports," according to the survey.

The survey does acknowledge that price stabilisation measures aimed at consumers often conflict with income support policies for the farmers.

"Governments have no option but to do a delicate balancing act. Here, the combination of policies becomes important. It is about a basket of policies that serve the interests of both farmers and consumers. There is a strong case here that both with farmers and consumers, income top-ups, i.e., direct cash transfers, are more effective. Direct transfers allow the markets to function," it noted.

The suggestion to rely less on export bans is a part of a string of recommendations to protect farmers' income, which also included avoiding banning futures or options markets at the first sign of price spikes, and making farming consistent with climate considerations.