Global Rice News

Food price shocks in India have led to increased protectionism in the country, resulting in bans or restrictions on overseas shipments and trade of various commodities. This shift has affected India’s position as the largest exporter of rice, as well as its status as a major seller of sugar and fresh vegetables. In March 2022, the country prohibited overseas shipments of wheat, followed by a ban on white rice in July and onions in the present month.

Despite the record-breaking export of 2.5 million tonnes of rice, with its largest buyer being Bangladesh, India has implemented a rare export floor price of $950 per tonne on premium long-grain basmati rice.

Governor Shaktikanta Das of the Reserve Bank of India has warned that India remains susceptible to food price shocks, citing the impacts of climate change and both domestic and global factors. He has emphasized the recurring and overlapping risks of food price shocks and their potential implications for inflation stretching into 2024.

Climate change has exacerbated extreme weather events in India, including intense heatwaves, erratic rains, floods, droughts, storms, and cyclones. Skewed rainfall distribution and deficiencies in some regions have impacted the growth of crops, particularly rice and pulses, leading to increased food prices.

While core inflation has been moderating, food prices have remained high. In July, consumer prices rose to a 15-month high of 7.44% compared to the previous year. Sugar prices reached a six-year high in September due to concerns over dry weather.

The effects of a patchy summer monsoon have resulted in reduced output of vegetables, pulses, and sugar. Onion production is estimated to have decreased by 3-5%, and sugar production is projected to be 32-33 million tonnes this year, down from 36 million tonnes in the previous 12 months.

Inflation continued to rise in November, with cereal prices increasing by 10.27%, vegetable prices by 17.7%, pulses by 20.23%, spices by 21.55%, and fruit prices by 10.95%.

The government has implemented various measures to control cereal inflation, including banning exports and releasing stocks from state granaries. Additionally, the import duty on refined soybean oil and refined sunflower oil was reduced in June 2023, leading to a decline in prices.

However, some economists argue that the government should lower import duties on wheat to alleviate cereal prices instead of imposing restrictions on food trade. Lowering import duties could boost domestic availability and help cool prices.

Despite the ongoing debates and measures taken to address the impact of food price shocks, India’s focus on protectionism in the agriculture sector highlights the challenges and vulnerabilities the country faces in maintaining a stable and affordable food supply.

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