This year will be a crisis year for the agricultural sector and rural demand will stay stagnant till the beginning of next year, NR Bhanumurthy, vice chancellor, Dr BR Ambedkar School of Economics University, said, speaking at a Moneycontrol panel on ‘Government’s trade policy on curbing exports and imports’ on August 7.
The economist was commenting on India’s decision to ban the export of non-basmati white rice last month and a ban export of wheat last year.
India took these steps to contain domestic inflation and make the grains easily available in the Indian market, the commerce ministry said in a statement. However, the decision is expected to have a significant impact on the global market as Indian exports meet 40 percent of the rice demand in the world.
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Last year, India exported 22 million tonnes of rice to 140 countries, while the estimated global trade in rice was 56 million tonnes.
“This macro policy intervention coming from the Centre will have huge repercussions on rural demand which will fall further,” the economist noted.
“We do not consider agriculture to be an industry and keep interfering in day-to-day activities of its markets to keep it (prices) down. Advanced countries have vibrant commodity exchanges but it’s a non-starter in India due to this reason,” he said.
The government’s decision to ban the export of some kinds of rice in the wake of an erratic monsoon, with heavy rains in some parts hitting crops. The policy on rice looks like an early warning in line with the monsoon we have had, Bhanumurthy said.
However, taking a longer time frame into account, this measure would be a trade constraint, he said. “It has been proven that such trade constraints or restrictions will not have any impact in the long run. This was an opportunity for India to take the global stage and really fight for China plus one, make its policies more consistent and predictable.”
With this move, more businesses are set to look at India unfavourably.
Recently, the Rice Exporters Association wrote to the commerce ministry, saying that any further ban can damage India's image in the global markets and it will take a long time to restore confidence in the markets where India has penetrated.
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