 Putin's war on Ukraine and Biden's sanctions on Russia are turning out to be a war on the world's poor and on food prices across the world. Why? Because of four key things. First, fuel. Second, wheat. The third, sunflower oil and finally fertilizers. Why should that happen? Let's start with fuel. Russia is the world's second largest exporter of crude oil after Saudi Arabia. Without crude oil there can be no petrol, no diesel, no LPG, none of the fuels that we use. Second, when it comes to wheat, Russia is the largest exporter of wheat in the world and along with Ukraine the two of them export 25% or one quarter of the world's wheat and they control 3 fourths or 75% of the world's sunflower seed oil. Fertilizers. Russia is the world's largest exporter of fertilizers and its neighbor and ally Belarus is one of the largest suppliers of potash in the world. Belarus was already under sanctions because of supposedly rigging elections and for human rights violations and therefore along with Russia these two giant suppliers of fertilizers of the world are under sanctions and they're unable to sell their fertilizers to other countries and that has pushed prices of fertilizers up across the world. Those affected include countries like India. We import more than half of our fertilizer requirements and most of them come from Russia and Belarus. But now we have to turn to Canada, another large supplier and Israel for our potash requirements and they don't send this stuff as cheap as Russia and Belarus which is why our fertilizer import costs are going up sharply. And by the way, even if these countries give it to us at the same rate that Russia and Belarus used to, fertilizer costs are still going to go up because fuel prices are up and shipping guzzles fuel and shipping costs are going up. So therefore imports of fertilizers are going to be more expensive. Private fertilizers sellers expect the prices to go up by anywhere between 40 to 60% this year. So farmers will pay more for inputs like fertilizers. They will also pay more for the fuel diesel which they need to power their generator sets. They need it for their pumps, they need it for their tractors, combine harvesters and finally to take their produce to the market. And that means higher MSP because farmers will demand higher prices for their crops because their input costs have gone up and it will be difficult for the government to resist it not only because of the fact that farmers hold key votes but also because India has a large subsidy scheme for the poor where free or very cheap wheat and rice is distributed. So the government needs to regularly buy and stock wheat and rice which it distributes through the ration shop system. If the government does not buy crops at higher minimum support prices rich farmers and grain traders will buy up from medium and small farmers and sell it abroad where prices have shot up. That is why to continue to hold its stock and to have enough to distribute to the poor the government will be forced to increase the minimum support price significantly and that means the food subsidy will go up. Wheat and rice will have to be bought at higher rates and then sold at cheaper rates to the poor because inflation is already going up very sharply, fuel costs are going up because of which everything will cost more so the poor need to be protected with cheap staples that they can rely on. And that is likely to push up the government's food subsidy bill for this year more than what it had budgeted. The budget has estimated that it will be about 2 lakh crore rupees including the sugar subsidy and that could go up by 10% or about 20,000 crore rupees. But farmers will demand cheaper fertilizers as well, they will bear a part of the cost but some of it will have to be borne by the government. The government has a fertilizer subsidy and that might have to be increased significantly. This year the layout is about 1 lakh crore rupees and that could go up anywhere between 30 to 40,000 crores. So between these two things food subsidy and the fertilizer subsidy the government might end up spending 50 to 60,000 crores extra. Now where will the government get its money from? Normally it would have taken curd with fuel taxes, taken a little more from you and me when we went to buy our petrol and diesel or ask government PSUs, oil PSUs like Indian oil and ONGC to give them more dividends. This time that is unlikely to happen because fuel prices are already very high. It is impossible for the government to justify that it will raise taxes for people like you and me to pay even more than we are paying. And already the chief economic advisor has indicated that if fuel prices stay above a certain level according to him 110 dollars to a barrel then the government will also have to share a part of the burden which means it will have to reduce its excise duty that it takes from you and me. That means the Modi government will have to increase its fiscal deficit to meet the higher subsidies and lower taxes from fuel and that higher fiscal deficit means that it will have to borrow more. And remember economists think that the RBI is going to increase its signal rates over the next year several times which means the government's borrowing costs will go up. But whether the government spends more in whatever way it does it, that subsidy is no good for you and me because you and I don't buy from ration shops, we will face the full brunt of food inflation that is taking place across the world. But the good news at least for India is that we are self-sufficient when it comes to producing staples like wheat and rice and we produce a large part of our pulses, we produce a significant amount of most foods that we eat. At least we are not like Egypt which imports 80% of the wheat it consumes because like India it has a big elaborate food subsidy system where bread is subsidised. Two thirds of Egypt's population are entitled to five pieces of a large Egyptian flatbread called Aish Baladi, five pieces each of which sells for the equivalent of 75 paise. Bakeries need about ten times that much to produce it and that difference, the losses are compensated by the government. The Egyptian government right now is facing a massive fiscal crisis and is looking towards the IMF for another tranche of another loan, several ones of which it has taken over the last six years. Egypt is not a loan and it's dependence on Russian wheat. There are many Middle Eastern and African countries which depend on imports from Russia and Ukraine and they're all running short of food right now, food prices are going up there and there are major protests taking place which could turn uglier by the day. If India is food secure today it is because of the much maligned so-called socialist practices of giving assured minimum prices to farmers. The guaranteed prices ensure that farmers produce enough wheat and rice in this country and a similar thing exists in milk production and sugar as well. That is why even if international food prices explode at least we won't have to import staples to feed our poor. But food prices will go up in India and we will face a significant inflationary cycle over the coming months. That's the show today, keep watching NewsClick, subscribe to us, like this video, share it as well.