Boosting India’s presence in the global agri market

The war between Russia and Ukraine has affected the global economy in unprecedented ways, especially the increase in fuel prices and its fallout on the entire supply chain of countries such as India that depend on fuel imports.  India imports 85 per cent of its oil requirement. The war, on the heels of the pandemic, has created a sense of economic danger due to spiralling inflation and low demand. However, every adversity brings with it a slew of opportunities, and India will need to evaluate the positive prospects. 

Even as the country’s FMCG sector has taken a hit from the inflation, which eroded the profit line of corporates and burdened consumers with price increases, the war has inadvertently opened up for India the possibility of global trade in wheat. As wheat supply from warring Ukraine and Russia has been disrupted, countries such as Indonesia and Egypt, as also several African countries and West Asia are looking for alternative sources. India is a leading producer of wheat after China and has the potential to ship 12 million tonnes to the world market in the 2022-23 fiscal. In fact, Indian wheat is today priced more competitively than Australian wheat, helping it find a foothold in the international export market.

Supply chain breakdown

The strain on global food security owing to the war and the resulting supply chain breakdown cannot be overlooked by any country. Supply from India can serve as an immediate alternative, but to fill the gap sustainably there is need for long-term planning by the agriculture stakeholders in the country — from policymakers to self-help groups, farmers and exporters. This is especially needed to balance domestic food security and export requirement — otherwise, the rise in prices of wheat and wheat products will cause undue pain to domestic consumers.

The wheat shortage is pretty serious, as Indonesia reported a consequent scarcity of Indomie instant noodles. Global reports have shown that prices of farm commodities were heading north due to drought even before the war broke out. The war worsened the situation by choking shipments from the affected region, cutting off more than a quarter of the world’s wheat supply.

Benchmark wheat prices in Chicago surged to an all-time high of $13.635 a bushel last month after the Russian invasion, compared with an average of $5.50 a bushel in the preceding five years.

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Burgeoning inflation

India has a tough war on its hand against burgeoning inflation and rising oil price. The annual inflation rate in India increased to 6.95 per cent in March 2022, the highest since October 2020, and beyond market forecast of 6.35 per cent. The Economic Survey 2022 estimated India’s gross domestic product (GDP) growth at 8-8.5 per cent in 2022-23, which hinges on crude oil prices staying in the range of $70-75 a barrel. With crude oil crossing $100 per barrel, it will hit most sectors. While the government’s import bills will increase, the expected increase in wheat exports may take off some heat. 

There is also scope to increase export of other agriculture commodities such as corn, edible oil and spices. Russia and Ukraine are the two biggest producers of sunflower oil and soyabean oil, meeting nearly 80 per cent of global demand. The war has led to shooting oil prices globally, including in India. Even producers like Indonesia and Malaysia could not escape the inflationary pressure of edible oils.

As the international agriculture export market is now focused on evaluating India as a potential partner for trade, it will need long-term planning and forecasting from Indian stakeholders including the government, states, farmers, producers and traders, to cash in on the opportunity and sustainably cultivate it.

(The writer is Managing Director, CG Corp Global)