India’s rice export ban and its effects on global food supply
India, the world’s largest rice exporter, has banned exports of non-basmati white rice, a staple food for billions of people, in an attempt to curb rising domestic prices and inflation. The decision, announced on July 20, has sent shockwaves through the global market, leading to a scramble for supplies and heightening concerns over food security.
Why did India ban rice exports?
India is the second-largest producer of rice after China, and accounts for about 40% of the global trade in the cereal. It exports around 22 million tonnes of rice to 140 countries every year, of which six million tonnes is the relatively cheaper non-basmati white rice.
However, India has been facing a supply crunch due to a fall in area under the paddy crop in the current Kharif season, which is sown with the onset of the monsoon rains in June and harvested in September-October. The monsoon has been erratic and uneven this year, affecting the sowing and growth of the crop. Moreover, the costs of growing rice have gone up because of a rise in prices of fertilisers, diesel and labour.
At the same time, domestic demand for rice has increased due to the Covid-19 pandemic, as the government has been distributing free or subsidised rice to millions of poor people under various welfare schemes. India also has a large buffer stock of rice, estimated at around 41 million tonnes as of July 1, which is sufficient to meet both domestic public distribution and government-level trade.
The ban on non-basmati white rice exports is aimed at easing the pressure on domestic supplies and prices, as well as controlling inflation, which has been hovering above 6% for several months. The government has also imposed a 20% duty on exports of non-basmati rice except for parboiled rice, which is partially boiled before milling and has a lower demand in the international market.
How has the ban affected the global market?
The ban on non-basmati white rice exports has reduced the availability of this staple food by about a fifth on the world market, as India dominates around 70% of the global trade in this variety. This has led to a surge in global rice prices, which have increased by 14% since last June. The ban has also raised serious concerns among rice-importing countries, especially in Africa and Asia, where rice is a major source of energy and nutrition.
According to Shirley Mustafa, a rice market analyst at the United Nations’ Food and Agriculture Organisation (FAO), the ban has also affected the reliability of international trade. “Export restrictions inherently reduce trust in the dependability of international trade,” Mustafa told Reuters news agency. As a result, importing countries may resort to more government-to-government deals to ensure a steady supply of rice, he added.
Some of the major buyers of Indian non-basmati white rice are China, Nigeria, Senegal, Gambia, Mali and Ethiopia. These countries are likely to approach the Indian government for rice sales, as India has indicated its willingness to consider meeting the requirements of countries in need of rice supplies. In fact, since India banned exports of broken rice last September to cool domestic prices, it has approved sales of around one million tonnes of broken rice to countries including Indonesia, Senegal, Gambia, Mali and Ethiopia.
Other importing countries such as Indonesia and the Philippines could sign government-to-government contracts with top rice exporters like Thailand and Vietnam. Indonesia has already signed an agreement with the Indian government to potentially import one million tonnes of rice if the El Nino weather pattern disrupts its domestic supplies. Thailand and Vietnam are also expected to benefit from India’s export ban, as they can offer competitive prices and quality to fill the gap in the global market.
What are the implications for food security?
The ban on non-basmati white rice exports by India has raised global food security concerns, as it comes at a time when supplies are under strain due to inclement weather conditions in South Asia and rising costs of production. The International Monetary Fund (IMF) recently said it would “encourage” India to remove restrictions on exports, citing the profound impact it would have on global inflation.
According to FAO’s Mustafa, export restrictions can have negative consequences for both exporting and importing countries.”For exporting countries, they can lead to reduced incentives for producers and lower production levels in subsequent seasons. For importing countries, they can lead to higher prices and increased volatility” he said.
Rice is not only a staple food but also a symbol of culture and identity for many people around the world. Any disruption in its availability and affordability can have serious social and political ramifications. Therefore, it is imperative that countries work together to ensure a stable and transparent global rice market, and avoid unilateral measures that can jeopardise food security and livelihoods.