The Indian government implemented a ban on its wheat exports to crush rising prices and protect food security. This move followed Indonesia’s ban on exports of palm oil to contain surging food prices. Such moves tend to upset trade partners, and India’s move has already attracted such opprobrium.
While India’s policy U-turn on wheat exports could cool domestic prices in the short run, it can hit global food prices adversely, as a 2012 WTO research paper by Paolo E. Giordani, Nadia Rocha and Michele Ruta, suggests:
“…when a shock in the international food market drives up its prices, governments respond by imposing export restrictions to mitigate the price rise in the domestic market. Their simultaneous behavior, however, has aggregate consequences, thus exacerbating the initial shock. This, in turn, feeds into even more restrictive policies and further price escalation.”
The resulting volatility in food prices make policy reforms difficult and has global welfare implications, the authors argue further.