India's Wheat Sector: An IndiaOneStop Analysis

An insight into India's wheat sector

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India is the world's second biggest wheat producer (73.2 million tonnes in 1998-99) after China.

India's wheat production in 1998-99 was 73.2 million tonnes, an 18 per cent increase from 55 million tonnes in 1993-94. The 1998-99 output made India the world's second biggest wheat producer after China. But India has not yet established itself as a regular wheat exporting nation. However, the bumper output in 1998-99 – together with other factors mentioned below – positions India to increase its wheat exports, notwithstanding the fact that production in 1999-2000 is expected to have declined by 2.9 per cent.
Demand exists in the international markets for both durum and aestivum varieties of wheat. The durum variety accounts for only 4 per cent of the total world wheat production. Nearly 10-12 million tonnes of durum wheat (valued US$2,600 million) is traded annually worldwide. India is a major durum wheat producer, but almost all the 2.5 million tonnes produced by it is consumed within the domestic market itself).

World wheat output in 1998-99 is estimated at 591 million tonnes, i.e., 20 million tonnes less than in 1997-98. In contrast, India produced 8 million tonnes more in 1998-99 compared to 1997-98. This makes international wheat production scenario favourable to India.

Another factor favourable to India's wheat export prospects is a drastic decline in the area under wheat cultivation in the United States. Reports indicate that the area under wheat cultivation in the US is at its lowest in 26 years. A dry winter in the region between Morocco and Pakistan has also reduced prospects of a good wheat harvest in that region. This improves India's wheat export prospects.

It is not that India has never exported wheat. From 1985-86 to 1988-89, India exported a total of 1.278 million tonnes. But then, exports declined to 11,000 tonnes in 1989-90 and 13,000 tonnes in 1990-91. In 1993-94, the government permitted only 300,000 tonnes of wheat to be exported. This was increased to 1 million tonnes in 1997-98 (it should be noted that the volume of foodgrains allowed to be exported depends on the domestic demand-supply situation. In the environment of trade liberalisation, however, no such control can be expected to be exercised if production is plentiful as in 1998-99).

There are several constraints on India's wheat exports. The first is price. The domestic price of Indian durum wheat is around US$160 per tonne (as in early 2000) while the international price varies between US$140-150. In the case of aestivum wheat, the Indian market price is around US$150 per tonne whereas the international price is between US$120-130. Improved agricultural technology is the answer.

The second constraint on India's wheat exports is a lack of advanced facilities for procurement, processing, storage and transport of the grain. This provides an opportunity to relevant companies in other countries to export the necessary technology to India.

The third constraint relates to a lack of a long term policy on wheat exports. This shortcoming has led to a less-than-ideal quality control over procurement.

With the thrust on exports increasing by the day, the shortcomings are bound to be redressed.