Trade issues in pulses continue to be on the minds of many Western Canadian farmers, especially as India recently hiked their chickpeas import tariff again (albeit it doesn’t affect the kabuli type that is predominantly grown in Canada).
We know that Canadian government is doing what it can to promote trade relations. Prime Minister Trudeau’s recent trip to India is evidence of that, although some consider the trip a bust and worsened the situation.
However, while Trudeau primarily focused on the fumigation issue, the tariff was raised for domestic reasons.
The fact remains what no one in the pulses industry of Canada – including farmers – is talking about: this is a domestic political issue in India.
Government elections are happening in India in the next year. And the opinion polls for the current majority party, the National Democratic Alliance led by Prime Minister Narendra Modi, aren’t looking great.
In the past year, approval ratings for Modi and Co. have dropped by about 17%. As they look to maintain support, one of the largest voting populations is found in the rural areas, specifically those who work in agriculture. It’s estimated that about 50% of India’s 1.2 billion people work in agricultural production, be it the actual growing of pulses, or those working in an agricultural-related field (i.e. a packing factory).
As we saw the prices of all pulses, including peas, lentils, and chickpeas, start to fall from the heights of 2016, from an Indian government standpoint, those farmers affected by global trade would be negatively impacted the most. Simply put, the incumbent Indian government does not want to appear that they turning their backs on this portion of the population.
Thus, the natural public message (and political play) becomes, “we care about our farmers”, hoping that they in turn care for the current government and will re-vote them into leadership next year. Ultimately, as much as it hurts the balance sheets of the Canadian farmer, these tariffs have more to do with the balance sheet of the Indian voting population.
There are two ways that I see these tariffs going away in the next two years.
First, Canada and Australia are the two largest exporters of pulses to India, and thus the most affected by these import taxes (Canada with peas and lentils and Australia with chickpeas). The trade ministers of the two countries could band together and make a powerhouse of superstar diplomacy to try and make something change.
The second scenario is if India doesn’t get 2018 summer monsoon rains, as was the case just a few years ago. If you can recall, the drought conditions, lowered domestic production of pulses significantly, and prices went on a tear that we’ve never seen. If this were to happen, India would likely need to import more pulses again, while being mindful of domestic Indian prices maintaining strength.
Ultimately, without one of these scenarios playing out, it’s more than likely that these import tariffs could remain in play until after India’s elections next year at this time. This means it’s possible that import taxes on pulses by India could be in place for another 1-2 years.
Only the politicians or Mother Nature can decide now.