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To control inflation and maintain adequate domestic availability, the Indian government has banned onion exports until March 31, 2024. On Thursday, the Directorate General of Foreign Trade issued a report changing the export policy of onions from free to forbidden.
The decision was made in reaction to a 58% increase in onion prices in November. This rise is related to increased festive demand and lower productivity during the monsoon sowing season.
In addition, irregular rainfall and extended dry periods hampered the Kharif season, resulting in decreased onion harvests.
Onions, A Synonym to Price Rise
Onions, which are famous for their political sensitivity when prices rise, have been swiftly placed in the 'prohibited' category. According to Sanjeev Chopra, the food secretary, this step is intended to prevent stockpiling and fake scarcity.
Concurrently, the government has imposed further wheat-related restrictions, such as lower stock-holding limitations for wholesalers, merchants, and processors.
According to Barclays, retail inflation in India may have exceeded the Reserve Bank of India's tolerance level of 6% in November. Food prices, such as onions and wheat, have contributed significantly to inflation.
Shaktikanta Das, the Reserve Bank Governor, praised these efforts in lowering inflation but also said that the 4% target remains unmet.
However, these policies have been criticized for being too harsh and restrictive. Ashok Gulati, a renowned professor at the Indian Council for Research on International Economic Relations, is concerned about the potential impact on farmer income.
He pushes for a more sensible and dependable trade policy that balances producers' and consumers' interests. The market is seeing elevated pricing as a result of the supply shortage and numerous factors influencing onion output.
Onion costs in the Delhi-National Capital Region ranged from $60 to $80 per kilogram. The average retail price in India has increased by about 98% year on year.
Wheat and Rice Too!
In addition to the prohibition on onion exports, the government has severely decreased wheat stock holding limitations. Wholesalers are now limited to 1,000 tons, while retailers are limited to 5 tonnes.
Large retail chains have the flexibility to store 5 tonnes in each depot, for a total of 1,000 tonnes.
The government has introduced the Open Market Sale Scheme (OMSS) to increase domestic availability. This includes a 10.1 million-tonne allocation of wheat at a subsidized price of $2,150 per quintal.
Furthermore, an additional 2.5 million tonnes of OMSS unloading may occur between January and March 2024.
The Indian government's proactive actions, such as the ban on onion exports and changes to wheat stock restrictions, are part of a larger campaign to stabilize food prices.
As the country prepares for the Lok Sabha elections in 2024, these initiatives aim to maintain abundant domestic availability, reduce inflation, and strike a balance between producers' and consumers' interests.
The impact of these measures on farmers and the economy as a whole will be rigorously examined, highlighting the importance of a nuanced and well-thought-out approach to trade policy that shall also reflect on the elections.