Daily Answer Writing
09 May 2022

Q) The global inflation in the food commodities has made everyday items unaffordable for Indian poor. Discuss the merits and demerits of export ban as a means to control food inflation in the domestic market, in this regard. (150 words)


Introduction: Food inflation in recent times has increased due to the breakdown of supply chains due to the Pandemic and the Russian invasion of Ukraine. This has led to severe inflation in commodities such as wheat and food oil particularly, which has led the FAO's food price index to an all-time high.

In the past years, the government has found it easier to control inflation by putting an export ban or raising export duties to effectively stop export of agricultural commodities to control inflation. This has various merits as well as demerits.

 

Merits of export ban on agricultural commodities:

    • Immediate effect on inflation: for example the current inflation is due to the international factors, a higher export duty would definitely have an immediate effect.
    • Tax collection: It would also open an avenue help the government collect tax.
    • Prevents poverty: High inflation leads to deprivation and poverty. An export ban can prevent many from being pushed back to poverty.

 

Demerits of export ban on agricultural commodities:

    • Not fair for the farmers: The farmers seldom get enough price for their toil. Period of high inflation can help farming grow in high inflation years. Putting an export ban would deprive them of the opportunity.
    • Market distortion: Ban on export goes against the free market principle under the international agreements.
    • Independence from Government support: farm revenues declining for a number of crops despite increasing production and market prices falling below the Minimum Support Price (MSP). A high inflation year can make farmers independent from the government.
    • Encourage private investment: Into businesses which agricultural output as raw material.

 

Other solutions that can help in controlling inflation:

    • Releasing buffer stock: India is currently carrying 3.5 times the buffer stock according to the 2015 norms currently. India can release the excess stocks in the market to drop the inflation.
    • Infusing excess rise in the PDS system instead of Wheat: The FCI can allow more supply of rice by supplying it to the Fair price shops(FPS).
    • Increasing MSP on Oil seeds: this would promote the adoption of oilseeds crop which can help in controlling the inflation in oil seeds in the future.
    • Increasing fertilizer subsidies: to improve yield and cope with the inflation.
    • Reducing fuel costs:  Which can again reduce the cost of raw material and help in controlling inflation.

 

Conclusion: The High inflation year is a rare occurrence for the agricultural products where the prices of the crops have remained stagnant for a long time. This gives an opportunity for the Indian farmers to grow and accomplish the vision of doubling farmers income by the end of 2022. Thus, putting export on agricultural exports must be done only in extreme situations.

 

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