India is the world’s second-largest producer of rice, and the largest exporter of rice in the world. According to preliminary estimates, India’s rice export during FY23 summed up to $11.14 billion, encompassing both basmati rice export ($5 billion) and non-basmati rice export ($6.14 billion).
India’s recent ban on non-basmati rice export has sent waves worldwide, particularly affecting Asia and Africa. In a recent announcement from the commerce ministry, India has additionally placed restrictions on exporting basmati rice contracts valued below $1200 per tonne.
What happened?
India, the largest exporter of rice in the world, recently stopped exporting non-basmati rice on July 20. The decision was made to control rising food prices within the country and make sure there’s enough rice available at reasonable costs for its own citizens. India contributes more than 40 to the global rice trade.
Why non-basmati rice export ban matters
This export ban on non-basmati rice is expected to affect millions of people, with the most significant impact felt by consumers in Asia and Africa. Countries like Malaysia and Singapore heavily rely on Indian rice imports. The ban is a response to the high demand for rice within India itself.
Who’s affected with rice export ban
Countries like Malaysia and Singapore are particularly vulnerable due to their substantial reliance on Indian rice imports. The rice export ban could also lead to higher global rice prices, affecting places like the Philippines where rice is a major part of the cost of living calculation. However, much of Southeast Asia’s rice imports come from Vietnam, helping to buffer the impact.
Potential consequences of ban on rice export
Rice prices are already at their highest in a decade, with factors like El Nino affecting production in other major rice-producing countries like Thailand, Pakistan, and Vietnam. If other significant rice-exporting countries impose their own export restrictions, and major rice-importing nations start stockpiling, it could create chaos in the rice market, potentially even worse than a similar situation in 2007.
India’s stance on non-basmati rice export ban
The ban on non-basmati rice exports isn’t new for India. However, this time, it’s expected to have a wider-reaching impact. It’s unlikely the ban will be lifted soon, possibly staying in place until India’s general elections in April of the following year. This decision is a response to India’s own internal inflation and political considerations.
Potential future impact of rice export ban
Inflation is rising in India due to increased food prices. If rice shipments decrease, it could have a global effect on prices, even affecting commodities like wheat, which can be a substitute for rice. Unpredictable weather events could further strain crop production, adding to potential price increases.
Current rules in Basmati rice exports
The Indian govt. imposes restrictions on basmati rice export below $1200/tonne in order to prevent potential “unauthorized” shipments of non-basmati rice disguised as basmati rice.
“It has been noticed that despite restrictions on certain varieties, rice exports have been high during the current year. Upto 17th August 2023, total exports of rice (other than broken rice, export of which is prohibited) were 7.33 MMT compared to 6.37 MMT during the corresponding period of previous year, registering an increase of 15.06 per cent,” the commerce ministry said.
Conclusion
India’s rice export ban is causing a disruption in global rice markets, impacting not only rice prices but also the economies of various nations, particularly those heavily reliant on Indian rice imports. The situation could continue to develop, leading to potential consequences for global food prices and trade.
