India is negotiating with Russia to import wheat at a discount compared to rising global prices to boost supplies and cut food inflation ahead of state and national elections next year, according to a report published by Reuters.
According to the report, the imports would give New Delhi greater leverage to intervene in the market and lower escalating wheat prices.
India Plans to Negotiate with Russia
In recent years, India has not imported wheat through diplomatic means. The last major shipment of wheat imported into India was in 2017, when private traders supplied 5.3 million metric tonnes.
In the Reuters report, sources revealed that “the government is exploring the possibility of imports through private trade and government-to-government deals. The decision will be made cautiously.”
According to two sources with knowledge of the matter, the government’s plan to import Russian wheat is one of the supply-side measures under consideration to bring down prices of essential commodities, such as fuel, cereals, and pulses, as well as an extension of rural schemes to alleviate the impact of inflation on the poor.
India requires 3 to 4 million metric tonnes of wheat to compensate for the shortage. However, according to reports, India may think that buying 8 to 9 million tonnes of wheat from Russia will significantly impact prices.
“Russia has indicated its willingness to offer a discount on prevailing market prices. There are no restrictions on the export of food commodities from Russia,” Reuters quoted officials as saying.
Another source stated, “India is also importing sunflower oil from Russia and settling payments in US dollars and is planning to use the same approach.”
In India, wholesale wheat prices increased 10% in two months to a seven-month high in August due to restricted supply. Last year, India restricted wheat exports owing to insufficient yield, and this year’s harvest is projected to be at least 10% lower than the government’s prediction, the report concluded.
#India is in talks with #Russia to #import #wheat at a discount to surging global prices in a rare move to boost supplies and curb #foodinflation ahead of state and national elections next yearhttps://t.co/2imy3Q0jCp
— Economic Times (@EconomicTimes) August 17, 2023
Why is India Trying to Control Soaring Wheat Prices?
According to another Reuters report, Indian officials are contemplating a wide range of steps to increase domestic wheat supplies and lower domestic prices, which reached a six-month high last week.
Indian PM Narendra Modi’s ruling Bharatiya Janata Party (BJP) will face a general election early next year. Before the 2024 parliamentary election, many crucial state assembly elections are scheduled. The report explained that the BJP seeks to retain control in some state legislatures.
Inflation in India, Asia’s third-largest economy, has increased after showing signs of moderation earlier this year. Food prices surged 7.75% year-on-year in July after falling 1.24% in June. According to the report, even a slight increase in food inflation, which accounts for about half of the overall consumer price basket, irks voters and provides easy stimulus for opposition parties to criticise the government.