India has leapt into the lead as Canada’s largest wheat buyer this year by taking about a million tonnes, adding to its normal role as Canada’s biggest pulse customer.
Hot dry weather in February last year cut the yield of India’s fall seeded crops, necessitating a major increase in food imports.
But even with increased imports, the south Asian giant, home to more than one billion people, faces rising inflation.
Food costs have risen and in a country where hundreds of millions survive on a subsistence basis, that leads to political tension.
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Some politicians are blaming the introduction of futures trading in several farm commodities. The markets were introduced to provide a mechanism for price discovery and insurance for farmers through hedging. But some now criticize the markets, alleging they have become dominated by speculators who have driven prices far beyond what the forces of supply and demand would warrant.
Last month, the government closed the tur and urad futures markets. Both are pulse crops. Urad is also known as black matpe and tur is pigeon pea.
Some state politicians have called for the closure of the wheat futures market.
But others say the futures market debate misses the point, which is that India has neglected its agricultural sector for too long. Their arguments are more persuasive.
A World Bank report notes that India’s average agricultural growth has fallen from an average of 3.2 percent annually during 1980-92, to only 1.3 percent from 2003 to 2006.
Pulse production has been static for years. Wheat production has jumped around in recent years but generally has fallen short of consumption and stocks have been drawn down to a critical level.
While other parts of the economy boom, raising incomes and lifting millions into the middle class, India’s farmers have struggled with debt, irrigation resources are endangered and extension and research programs are failing.
India’s success in the green revolution, with the introduction of high yield varieties, irrigation and increased input application, solved its food needs for several decades. But domestic production now appears headed to inadequacy where modest weather problems can force huge imports and rising food prices.
The prospects become a greater challenge if assessments of global climate change impact on India are correct. Environmentalists warn that Himalayan glaciers, which act like vast reservoirs, are receding and eventually could cause disruptions in the flow of major rivers like the Indus and Ganges.
The inflation and food supply stresses, coupled with indications that the current crop might again be inadequate, may bring the matter to a head and force change in policies and subsidies to respark crop production and rural economic growth.
