Global Rice News

India’s Rice Export Ban: Implications for the Global Food Market

Rice is a vital agricultural product that plays a crucial role in diets, cultures, and economies worldwide. It is especially important in Asia, where it serves as a staple food and a major source of livelihood for approximately 3.5 billion people. The rice value chain also contributes significantly to achieving Sustainable Development Goals (SDGs), supporting around 900 million poor individuals globally, with 400 million directly involved in rice production. It is essential for food security, poverty reduction, and economic growth, particularly in Asia.

However, recent challenges, such as the COVID-19 pandemic and rising geopolitical tensions, have led to an increase in rice prices, posing a threat to the global agricultural sector. The current ban on Indian rice exports, implemented by the second-largest rice producer and largest rice exporter since 2012, India, can potentially lead to a shortage and subsequently a food crisis.

The Indian government faces the delicate task of balancing the needs of its consumers and farmers with the responsibility of supporting food security in vulnerable nations. This situation highlights the importance of carefully analyzing India’s rice trade strategies and international commitments to understand the full impact of export regulations on both local and global participants. It is crucial to evaluate the implications of the ban on international producers and consumers.

Rice Production: India and the World

India holds a significant position in global agriculture, ranking as the third-largest cereal producer and possessing 11.2 percent of the world’s arable land. Although it has the highest area under rice cultivation, surpassing even China, it ranks as the second-largest producer due to lower yield rates, standing at 2,809 kg/hectare. The primary issue lies in low productivity, which, despite improvements over the years, remains below global standards.

Various factors contribute to this productivity gap, including regional disparities, mismatched ecosystem types, uneven fertilizer usage, stagnant technological adoption, excessive flooding, and poor management and irrigation. These obstacles not only affect the yield but also create uncertainty regarding the final rice stock, necessitating government interventions and trade measures to stabilize the market. This situation demands policymakers’ attention to address productivity issues and unlock the full potential of India’s vast agricultural resources.

India’s Dominance in Rice Trade

The global rice trade, accounting for only 10 percent of total rice production, is heavily influenced by Asian countries, which contribute over 86 percent of the production. Despite being the top producer, China has a lower export share and relies on imports to meet its domestic demand. In a post-COVID world, political tensions take a backseat as countries like China turn to India for rice imports when their usual suppliers, such as Pakistan, Thailand, and Vietnam, cannot meet the demand. Sub-Saharan Africa leads globally in rice imports, reflecting the trend of rice as a staple food primarily in developing regions, thereby emphasizing its role in food security.

India stands as the largest rice exporter, maintaining its position since 2012. It has witnessed notable growth in exports in recent years, reaching a peak of 22.1 million tonnes in 2022. To maintain favorable foreign relations and ensure domestic food security amidst a growing and increasingly affluent population, India must adopt well-balanced trade policies.

Export Prohibition on Rice

India’s rice exports mainly consist of Basmati, parboiled, non-Basmati white, and broken rice, which together constituted 98 percent of its total rice exports in the fiscal year 2022-23. Despite imposing a 20-percent export tax on non-Basmati white rice in September 2022, international demands driven by geopolitical unrest and weather changes led to an increase in its exports. However, in order to stabilize local prices, an export prohibition was enforced on July 20, 2023. Additionally, exports of broken rice were halted on September 9, 2022, as addressing a significant local deficiency was crucial for the livestock and ethanol production sectors.

These restrictions and tariffs will significantly impact major importers of Indian rice, including Nepal, Vietnam, Malaysia, and African countries. This can potentially lead to increased global prices and jeopardize food security in these areas. Moreover, these changes coincide with India’s G20 Presidency and its invitation to the African Union (AU) to join the G20, potentially straining international ties.

Implications of the Trade Ban on the World

Among the major importers of Indian non-Basmati white rice, Sub-Saharan Africa relies extensively on its lower price and economic quality. The export ban will result in a shortage in the global market, leading to rising prices. This will have a clear negative impact on international consumers’ surplus. While producers in importing countries will benefit from increased prices, African and East Asian nations, on average being net importers of rice, will experience a loss in consumers’ surplus, resulting in reduced aggregate welfare. However, the claims of India’s ban causing a global food crisis are unfounded.

Global trade accounts for only 10 percent of rice production, of which India’s exports constitute 40 percent. However, non-Basmati white rice, which is the quality most affected by the ban, constitutes only about 20 percent of India’s total exports. While global prices will undoubtedly rise, the export ban alone cannot cause a major crisis or disrupt food security.

Though cross-price elasticity between different qualities of rice is minimal, the price surge may eventually impact Basmati markets. This would enable Basmati farmers to enjoy higher profits but would deflate consumers’ surplus. Basmati rice is primarily imported by wealthier countries and consumed by high-income households, reducing its significance in terms of food security. There will be a redistribution of gains from trade, benefiting large-scale producers at the expense of rich consumers.

Conclusion

India’s rice export ban is unlikely to trigger a global food crisis, considering the extent of the reduction in global supply and the accompanying price increase. It will undoubtedly disrupt the food value chain in African and East Asian countries, the major consumers of the banned variety of rice. However, to strike a balance between domestic and international food security, the Indian government must take necessary measures, such as sending rice consignments to the affected countries, to minimize the negative effects of the ban. This situation could have been avoided if India maintained a tariff regime on Basmati exports and reinvested the revenue in increasing productivity. The adoption of efficient technologies can eliminate the uncertainty regarding food stocks in the long run. The government should prioritize increasing domestic yield, focusing on advanced irrigation techniques and the use of high-quality fertilizers.

Source: [Source](https://www.orfonline.org){:target=”_blank” rel=”nofollow”}

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