India’s move to ban the export of non-basmati white rice, intended to stabilize domestic prices and ensure the availability of rice within the country, could trigger a global food crisis as dozens of countries, especially in Asia and sub-Saharan Africa, rely heavily on Indian rice.
India, the world’s largest rice exporter, imposed a ban on rice export in July. With over three billion people worldwide relying on rice as a staple food, India’s contribution of around 40% to global rice exports is substantial.
Economists point out that this ban is another disruption to global food supplies, coming amidst challenges like Russia’s actions in Ukraine and weather-related events such as El Niño.
Why India banned rice export?
India’s sudden decision to halt non-basmati rice exports on July 20 sparked questions about the motives behind the move. “High international prices due to geo-political scenario[s], El Nino sentiments and extreme climatic conditions in other rice producing countries” lead to this decision, as per the officials.
The Directorate General of Foreign Trade justified the decision by stating that it aims to ensure “adequate domestic availability at reasonable prices”.
Additionally, the Ministry of Commerce and Industry introduced new measures to curtail the international trade of Indian-grown rice. One such measure is the prohibition of fragrant basmati rice exports priced below $1,200 per metric ton. “The Government has received credible field reports regarding misclassification and illegal export of non-basmati white rice, export of which has been prohibited with effect from 20th July 2023,” the ministry said in a statement.
The ministry also highlighted cases where non-basmati white rice was exported under the HS codes meant for parboiled and Basmati rice. In addition to the export ban, India also took further steps to control rice trade.
Recently, a 20% export tax was imposed on parboiled rice, and since September of the prior year, the sale of broken rice had already been prohibited.
Which countries will be the worst hit?
The global repercussions of India’s rice export ban are poised to impact numerous countries, primarily affecting Asian and African nations.
Among those nations, Malaysia stands out as particularly vulnerable, given its significant reliance on Indian rice for its rice supply, according to the analysis report of Barclays. “[Malaysia] imports a substantial portion of its rice supply, and India accounts for a relatively large share of its rice imports,” the analysts wrote.
Singapore, another country in the region, is also expected to feel the effects, as India constitutes about 30% of its rice imports. However, the impact might be somewhat mitigated by Singapore’s broader reliance on imported food, rather than just rice. Efforts are underway by the country to secure exemptions from India’s export ban.
The rise in global rice prices, exacerbated by factors like El Nino, is adding pressure to major Asian rice producers like Thailand, Pakistan, and Vietnam. The Philippines is particularly sensitive to these price fluctuations due to the significant weighting of rice in its consumer price index (CPI) basket, but a substantial portion of its rice imports originates from Vietnam.
Beyond Asia, African and Middle Eastern nations are also set to experience the repercussions of India’s rice export ban. Markets highly dependent on Indian rice exports are concentrated in Sub-Saharan Africa and the Middle East and North Africa (MENA) region.
BMI, a research unit of Fitch Solutions, highlights Djibouti, Liberia, Qatar, the Gambia, and Kuwait as the most exposed nations to India’s export restrictions. This underscores the wide-reaching impact of India’s decision across diverse regions.
Global Rice Prices surge to 12-year high
The United Nations’ food agency reported a notable surge in global rice prices, reaching their highest point in the past 12 years. The rice price index registered a 2.8% increase in July, marking a substantial rise of approximately 20% in comparison to the previous year. This surge placed rice prices at their most elevated levels since September 2011.