The ban on wheat exports is simply “marginally positive” for the home inflation outlook, a British brokerage mentioned on Tuesday.
The ongoing heatwave poses “significant risks” to the wheat output, and the federal government’s shock transfer to ban the exports will ease home worth issues solely on the margins, analysts at Barclays mentioned.
Firming costs of the grain aggravating the already uncomfortable inflation state of affairs was speculated as one of many causes for the shock transfer from the federal government to ban wheat exports.
The headline inflation accelerated to almost 8 per cent in April and is predicted to remain elevated for some extra time. Already, there have been a slew of strikes by Indian policymakers to comprise inflation like a shock hike in lending charges earlier than the export ban.
“Wheat export ban marginally positive for domestic inflation outlook,” the analysts mentioned, including {that a} 10 per cent rise in home wheat costs pushes up the headline inflation by 0.27 per cent.
The report mentioned the transfer by India – which was one of many key suppliers of wheat following the Russian invasion of Ukraine – is akin to comparable ones by Indonesia (which banned palm oil exports) and Serbia and Kazakhstan (on meals grains).
Till now, wheat costs within the home market have risen solely by 3 per cent as in opposition to a 44 per cent rise globally since February 24, when the invasion started.
The British brokerage mentioned if not for the ban, it might have been troublesome for the federal government to attain the goal of 10 million tonnes with out placing strain on home costs because it has entered the monetary yr with a buffer inventory of solely 19 million tonnes of wheat.
The potential draw back to wheat manufacturing this yr due to the warmth wave may wipe out the small surplus that the nation has loved over the previous few years, which maybe influenced the choice to ban exports, it mentioned.
It additionally famous that the federal government just lately slashed its estimate of wheat output for FY22-23 to 105 million tonnes from the prior estimate of 111.23 million tonnes.
“We think the export ban was triggered by a tightening in domestic wheat demand-supply dynamics, which could have pushed up wheat prices and aggravated food inflation,” it mentioned.
Source: www.financialexpress.com”