Global Rice News

India’s Agricultural Export Performance Takes a Hit as Government Imposes Export Restrictions

India, known for producing exportable surpluses, is now facing potential supply shortages in its domestic market. This unpredictability raises concerns about food insecurity and food price inflation. To address this issue, the government has implemented export restrictions, starting with staples like wheat and rice.

In April 2023, India celebrated a record-breaking agricultural export performance, surpassing US$42 billion in the previous year. This marked a 48% increase compared to the pre-pandemic record set in 2018-2019. Rice exports saw a growth of over 15%, pulses increased by over 84%, and sugar exports were more than 25% higher than the previous year. These positive developments were seen as significant progress towards the implementation of the 2018 National Agriculture Export Policy.

However, in the first six months of the 2023-24 financial year, bullish expectations on agricultural exports have dwindled. Except for basmati rice, major agricultural commodities like non-basmati rice, pulses, and sugar have seen negative export growth. This trend had already begun before the government banned rice exports in July 2023.

To further control rice exports, the government imposed a 20% export tax on parboiled rice in August 2023. With overall supplies of major food grains tightening, as wheat production declined during the 2022-2023 crop season, the government took measures to control cereal prices. Cereal prices registered a year-on-year increase of over 8%.

The government’s decision to restrict exports was also influenced by high domestic prices of other agricultural commodities. Onion prices increased by 31% in August 2023 and by over 55% in September. In response, the government imposed a 40% export tax in August and set a minimum export price of US$800 per metric ton until the end of 2023.

Sugar exports were also restricted, allowing sugar mills to export only 6.2 million metric tons of sugar until the season ended on September 30, 2023. This quota has been extended indefinitely since then. Despite a 17% increase in pulse prices in September, the government did not impose export restrictions. Instead, it authorized the export of over 2 million tons of essential varieties like lentils and pigeon peas to stabilize the domestic market.

India’s efforts to curb the export of major agricultural commodities have resulted in sharp increases in international prices. Rice prices in global markets rose by nearly 25% between June and September 2023, while sugar prices reached their highest level ever. India’s primary export markets, especially those in its neighborhood, are concerned about the potential impact of export restrictions on prices.

Criticism from advanced countries has been directed at India’s sudden decisions to curb exports. A group of nine countries led by the United States raised concerns at a September 2023 meeting of the World Trade Organization Committee on Agriculture. They argued that India’s export ban would negatively affect countries heavily reliant on imports, putting them at risk of food shortages during economically uncertain times.

The United States specifically criticized India’s export ban on non-basmati rice as an “unnecessary trade barrier” and called for its immediate withdrawal. Their criticism was based on information from the US Department of Agriculture, which projected a record rice production of 134 million tons in India in 2023-2024. However, the department later estimated a 4 million ton decrease in India’s rice production for that period.

Export restrictions by the Indian government are clearly aimed at countering price increases for key agricultural commodities. With the next general election scheduled for May 2024 and several large states set to elect new governments, the political stakes are high. Importing to augment domestic supplies is discouraged, as it would raise questions about India’s self-sufficiency.

While the government has its reasons for imposing export restrictions, it is crucial to explore measures that can prevent global food shortages. India should consider reviving the idea of creating regional food banks that can respond to the needs of countries heavily reliant on imports during production shortages.

Source: [East Asia Forum](https://www.eastasiaforum.org)