New Delhi: In an upside amid rising risks to India’s economy from the Ukraine war, many countries are likely to turn to India’s massive wheat reserves, the second highest globally, to make good a fall in Russian and Ukrainian shipments.
The central government is asking its diplomatic missions abroad to facilitate export some of India’s record stockpile of wheat as international prices soar, an official aware of the development said, requesting anonymity.
Western Europe, Turkey and the Philippines are some large importers of Russian and Ukraine wheat and corn. Russia and Ukraine make up nearly a quarter of global wheat shipments.
On the flip side, the war between Russia and Ukraine has begun biting other Indian exports to Russia as the West’s economic sanctions have cut off money flow from the former Soviet nation to rest of the world.
With most Russian banks severed from the SWIFT international payments system, payments to Indian exports have been stranded, with the government looking for alternative avenues.
Global wheat prices have touched record highs since Russia invaded Ukraine. The war has cut global wheat exports by 30%, according to a note by Commerzbank, a German lender. The international Chicago benchmark price for wheat rose 50% since Russian actions in Ukraine began, with global prices touching nearly $14 a bushel, which is approximately 30kg.
“Exporters of agricultural goods will also gain because of a stronger dollar vis-à-vis the rupee,” said Ashok Agrawal, an analyst with Comtrade, a tracker. A stronger rupee makes imports cheaper. Conversely, a weaker rupee makes exports more profitable.
Exporters of non-farm items to Russia risk getting stranded for payments and receivables. The Export Credit Guarantee Corporation of India (ECGCI) has decided to provide export credit guarantees to Russia only on a case-by-case basis in view of the sanctions against Russia. The ECGCI provides insurance cover to Indian exporters against foreign payments.
India’s share of exports to Russia as a share of its total exports is 0.9%, while India’s imports from Russia make up 1.5% of its total imports, according commerce ministry data.
Wheat exports to the European Union will raise India’s export earnings and farm incomes. India has more than 100 million tonnes of foodgrains in state granaries. The country had projected farm output to touch a record 316 million tonne in 2021-22.