India has extended its free food grains program for another five years to shield consumers from surging cereal prices, with the upcoming general election early next year in mind, as Prime Minister Narendra Modi announced on Saturday.
This extension aims to provide relief to consumers, but it will also lead to increased government spending and the need for New Delhi to procure larger quantities of wheat and rice from farmers to sustain the welfare program, which currently offers free grains to over 800 million people.
Modi confirmed this decision during an election rally in Durg, a city located in the central state of Chhattisgarh, where state elections are scheduled for this month. The grains program, estimated to cost the government approximately 2 trillion rupees ($24.06 billion) this year, was initially set to expire at the end of the year.
As the world’s second-largest producer of wheat and rice, India has taken steps to restrict the exports of these cereals to curb rising prices domestically. This move has been necessitated by the government’s need to purchase from farmers to ensure the smooth operation of the welfare program.
A dealer in Mumbai, affiliated with a global trade house, noted the implications of these export restrictions, stating that without them, local prices would surpass the government-set floor prices, hindering the government’s ability to procure an adequate quantity of grains.
This year, India is expecting a drop in its rice output for the first time in eight years, which has raised concerns that New Delhi may extend restrictions on rice exports to maintain control over food prices in the lead-up to the elections.
Global rice prices surged to a 15-year high following India’s decision to limit exports of non-basmati rice varieties in July. India, as the world’s largest rice exporter, is responsible for over 40 percent of global rice exports.
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