Will India’s rice export ban cause surge in prices globally?

India has banned the export of non-basmati white rice in a bid to control domestic prices. However, the move has raised further inflation fears in global food markets. “Export policy of non-basmati white rice (semi-milled or wholly milled rice, whether or not polished or glazed)…is amended from free to prohibited,” the directorate general of foreign trade (DGFT) said in a notification on Thursday (20 July). While the ban was effective from 20 July, DGFT said that the vessels under loading will be allowed to export. Moreover, shipments to other countries will be allowed if the Centre grants permission in order to meet their food security needs, depending on the request from those governments. Why has India halted the export of this rice category? What will its effects be? Let’s understand better. Reasons behind the move The Central government’s move comes amid concerns that there could be a supply shortage in the country due to heavy rains damaging paddy crops in Punjab and Haryana, noted BusinessLine. With incessant downpours inundating rice paddy fields in several northern states, many farmers have been forced to replant. Moreover, a paucity of rainfall in major rice-growing states such as Karnataka, West Bengal, Andhra Pradesh, Chhattisgarh and Tamil Nadu has affected paddy sowing. “In order to ensure adequate availability of non-basmati white rice in the Indian market and to allay the rise in prices in the domestic market, the government of India has amended the export policy”, the food ministry said in a statement, as per Reuters. Economic Times (ET) estimates rice prices have climbed by up to 20 per cent in the last 10 days owing to uneven rainfall in the key rice-growing states.

It must be noted that parboiled rice and basmati rice are not included in the export ban.

India is already reeling from high vegetable, fruit and grain prices. According to Reuters, prices of food items, especially kitchen staples, nearly tripled in June, affecting low-income households the most. [caption id=“attachment_12896902” align=“alignnone” width=“640”] There are concerns about a shortage in rice supply in India due to uneven rainfall this year. Reuters (Representational Image)[/caption] Tomatoes, a major staple in the kitchen, are being sold for over Rs 100 per kg across many parts of the country. However, after the Centre’s intervention, the prices are expected to decline and settle around Rs 30 per kg by mid-August, BusinessLine reported citing experts. The government’s latest step has come at a time when retail rice prices jumped 3 per cent in a month as heavy rains damaged crops, according to Reuters. Trade analyst S Chandrasekaran said this was necessary to rein inflation and protect food security, reported BusinessLine. Last September, India stopped the shipments of broken rice, along with imposing a 20 per cent duty on exports of various grades of the grain. The recent ban may control rice prices in India, which is slated to go to polls next year. Biggest rice exporter India, the world’s biggest rice exporter, accounts for more than 40 per cent of the global rice trade. It is also the second-largest rice producer after China. According to Reuters, rice is a staple food item for more than three billion people. Around 90 per cent of the crop is produced in Asia, with Thailand being the world’s second-biggest exporter of the grain. India is crucial to the global rice trade. As per the Mint report, New Delhi’s rice export last year was more than the combined shipments of Thailand, Vietnam, Pakistan and the United States. In 2022, India exported 17.86 million tonnes of non-basmati rice. ALSO READ: World facing largest rice shortage in 20 years: What's causing it, how badly will India be affected? Effects of India’s ban on global rice trade Experts worry about a hike in rice prices globally after India’s ban. El Nino weather pattern is also expected to curb rice supplies. “Rice prices are going to go up further in the export market. We expect a minimum gain of around $50 a metric tonne and it could be $100 or even more,” a Singapore-based trader at an international trading company told Reuters. “Right now, everybody - sellers as well as buyers - are waiting to see how much the market goes up,” the trader added. Reuters says India’s ban could nearly halve the global shipments of non-basmati white rice, which makes up for about 25 per cent of the country’s rice exports. [caption id=“attachment_12896962” align=“alignnone” width=“640”] Rice is a staple for more than three billion people. Reuters File Photo[/caption] “Global rice [supplies] would drastically tighten … since the country is the world’s second top producer of the food staple,” Eve Barre, ASEAN economist at trade credit insurer Coface, was quoted as saying by CNBC. “In addition to a reduction in global rice supply, panic reactions and speculation on global rice markets would exacerbate the increase in prices,” Barre said. The ban on non-basmati rice is likely to affect Benin, Nepal, Bangladesh, Angola, Cameroon, Djibouti, Guinea, Ivory Coast and Kenya – the key buyers of this grain category. A report published by agriculture analytics firm Gro Intelligence recently, ahead of the Thursday announcement, predicted a ban could increase food insecurity in nations heavily dependent on rice. “Top destinations for Indian rice include Bangladesh, China, Benin, and Nepal. Other African countries also import a large amount of Indian rice,” CNBC cited the report as saying. DBS Bank senior economist Radhika Rao told CNBC that affected importers are likely to turn to alternative suppliers in Asia like Thailand and Vietnam. Rice prices in major exporting countries had been on the rise in anticipation of India’s move. Meanwhile, the rice ban coincides with global wheat prices climbing more than 10 per cent after Russia withdrew from the Black Sea grain deal this week. “India would disrupt the global rice market with far greater velocity than Ukraine did in the wheat market with Russia’s invasion,” BV Krishna Rao, president of the Rice Exporters Association, told Reuters. “The sudden ban on exports would be very painful for the buyers, who can’t replace the shipments from any other country,” Rao said. He also predicted that many affected countries are likely to urge India to resume rice exports. With inputs from agencies