India could scrap a 40% duty on wheat imports and cap the amount of stocks traders can hold to try to dampen record high domestic prices in the world's second-biggest producer, government and trade officials told Reuters on Monday. India last imported wheat from Australia, Russia, and Ukraine in 2017-18.
In April 2019, India raised the import duty on wheat to 40% from 30% to support local farmers.
Meanwhile, India barred wheat exports due to a sudden rise in temperatures between April and May. Yet, international prices are still way above the domestic market, making it unviable for traders to buy from abroad.
Domestic wheat prices ended last week at a record 24,000 rupees ($301.57) per tonne, having risen 14% from lows struck after the government surprised markets on May 14 by banning exports, ending hopes that India could fill the market gap left by the missing Ukraine grain.
Domestic prices are still nearly a third lower than global prices, said a Mumbai-based trader with a global trading firm, who described Indian wheat as the cheapest in the world.
"If global prices fall by another 20% and Indian prices continue their rally, then maybe, sometime after a few months, imports might become feasible," the trader said.
If the government does remove the duty and international prices also fall, then traders say they could start importing, especially during the upcoming festival season, when higher demand typically drives domestic prices higher, the report said.
New Delhi could scrap the 40% import duty and impose stock limits on wholesalers and traders to signal to the market that the government will do everything in its power to keep prices in check, said the official, who declined to be named due to the sensitivity of the subject.
Weak monsoon weighed on rural consumption
After two consecutive seasons of surplus rainfall in June 2020 and 2021, June 22 ended with an 8% monsoon deficit, according to media reports. In some parts, the shortfall reaches 70 per cent. July saw an erratic monsoon across most of the states. While the west, central, and south of India majorly faced excess rainfall,
As a result, automobile sales fell in July. In particular, two-wheeler and tractor sales.
In July 2022, two-wheeler sales stood at 10,09,574 units. This was a 10.92% decrease from the 11,33,344 units sold in July 2021. Tractor sales fell 28% last month to 59,573 units, down from 82,419 units in July 2021, data from the Federation of Automobile Dealers Association showed.
According to data from the Centre for Monitoring the Indian Economy (CMIE), the agriculture sector in rural India added 9.4 million jobs in July after losing 8 million in June.
However, this lower-than-expected absorption of labour into agriculture in July reflects the patchy progress of the southwest monsoon and the correspondingly poor Kharif sowing this year, it said.
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