Why is agricultural trade policy so unpredictable, and what does that do to investment?

Agricultural trade policy in India is characterised by one word: unpredictability. Export bans were announced suddenly. Import duties changed overnight, and stock limits were imposed without warning. Movement restrictions appear and disappear. This system has profound consequences for investment, productivity, and ultimately farmers’ prosperity. But why is trade policy so unpredictable?

Politicians fear consumer anger over high food prices more than they fear farmer distress over low prices. When prices spike, the impulse is to act immediately. Banning exports means farmers may lose money, but consumers are placated. Unlike central banks that set interest rates through rule-based frameworks with some insulation from political pressure, agricultural trade decisions often respond to immediate political pressures.

What does unpredictability do to investment? Build a warehouse to store wheat, onions, or pulses, and your business model depends on the price spread between the harvest and lean seasons. But if export bans or stock limits can wipe out your arbitrage opportunity overnight, why invest? Importers depend on a continuous, reliable supply. Many major importers of Indian agricultural goods have shifted to other markets because they do not know whether the goods they ordered from India will arrive. Such uncertainty kills the export market and harms farmers’ ability to earn money from global buyers.