NDA or INDIA: This sector anticipates potential changes after June 4

Updated June 1, 2024, 3:37 pm EST

The nation eagerly awaits the results. The outcome of this election will have profound implications for government policy, which in turn will impact the entire business environment.

NDA or INDIA: This sector foresees potential changes after June 4 (Image source: Times Now Digital)

as Lok Sabha Elections 2024 is reaching its final stage, the nation is eagerly awaiting the results. The outcome of these elections will have profound implications for government policy, which in turn will impact the entire business environment, including the agricultural sector. Agricultural markets are closely monitoring India for potential changes in trade policy as the new government prepares to take office this month. Such changes could significantly affect global food prices.

India, the world’s fifth-largest economy, has been restricting exports of key agricultural products such as sugar and some varieties of rice for over a year. Prime Minister Narendra Modi implemented these restrictions to ensure adequate domestic supplies and control consumer costs ahead of the national elections. The move reversed India’s earlier pledge to “feed the world” following Russia’s invasion of Ukraine. Additionally, India has maintained a high tax on wheat imports to support local farmers, who constitute a significant voting bloc.

As commodity prices fall from peak levels and state agencies crack down on stockpiling, there is speculation that the new government may lift some of these restrictions after the June 4 election results are announced, according to a Bloomberg report.

Potential impacts of policy changes

Rice Market

India banned the export of broken and white rice and imposed a 20% tax on parboiled rice. These measures have tightened global supplies and pushed up prices, severely affecting countries in West Africa and the Middle East that rely heavily on Indian rice.

BV Krishna Rao, president of the Rice Exporters Association, said, “the industry will urge the new government to lift export restrictions even if the tax remains. Given ample domestic supplies and favorable forecasts for the upcoming monsoon season, which is expected to boost harvests in 2024-25, lifting the ban could help stabilize global rice prices,” Bloomberg quoted.

Wheat market

The wheat industry is lobbying for a reduction in the 40 percent import duty on wheat to make imports profitable. India has not imported wheat on a large scale since 2017-18. Local supplies have been constrained by heavy purchases by state agencies under welfare programs, which have pushed retail prices for wheat and flour about 5 percent over the past year.

Chicago wheat futures are up more than 9 percent this year. Bloomberg cited Navneet Chitlangia, senior vice-president of the Roller Flour Millers Federation of India, as stressing the need for India to import 2 to 3 million tonnes of wheat this year to ensure sufficient domestic supply and create a buffer. US Department of AgricultureThe Overseas Agriculture Service forecasts India’s wheat imports at 2 million tonnes for the current season, reflecting steady local demand. Concerns about wheat stocks will persist until the next harvest begins in March 2025.

Sugar Market

As the world’s second-largest sugar producer, India has extended its export restrictions beyond October. In 2022-23, it introduced a quota system, limiting exports to approximately 6 million tonnes compared to 11 million tonnes previously. This year’s export quota has not yet been announced.

Deepak Ballani, director general of the Indian Sugar and Bioenergy Producers Association, said the country has enough reserves to meet local demand and export 2 million tonnes this season. It expects the government to approve the requested export quota. Good pre-monsoon rainfall and an above-normal rainfall forecast will ensure adequate supplies for domestic consumption and support the ethanol blending program, Bloomberg reports.