It is a classic example of government policy-making. Most of the time, it happens behind closed doors. In this case, we see glimpses of it in the public domain. Let me dilate on this a bit.
Government policy is dictated by national interest. Every asset that a nation has is used to further its national interest. Recently, India has used two of its assets, Covid 19 vaccines and wheat, to promote its national interest. We will focus on grain here.
Ukraine- Russia conflict has led to supply disruption of wheat and oil. Prices of both these commodities have dramatically risen. Oil importers like India are getting impacted by high oil prices. One policy response from India was to buy discounted oil from Russia.
The Middle East countries are food-deficit countries and major importers of wheat. They are big oil exporters. The tradeoff is quite simple, India will sell the region grain provided it gets something in return. It may be discounted oil.
If India continues to permit the sale of wheat n the open market, the benefits will go to traders. India has turned the available export tap off but kept the country to country export on. Now wheat is an asset available for bargaining. How is this playing out?
Traders who had bought wheat from farmers will now have stock on their hands which they will now be forced to offload onto the open domestic market. Market supply will rise, cooling food prices.
Farmers selling directly to traders will come to the government and sell wheat at Minimum Support Prices. Wheat stocks will again build. The stock is now used on government contracts on terms in the national interest. The country can decide not to sell wheat to Turkey, which has a negative policy view of India.
Public policy has to be nimble. The wheat import ban in India is an example of public policy. You will see more of this in play as the country acquires capabilities and builds a wider asset base.
Everyone does it. India is just a new entrant into the global club.
Smart policy moves. Requires nimble management by govt. Bureaucrats Known to be plodders.