multilateral solutions needed for India’s rice export restrictions
Published on: October 18, 2023.
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India’s Rice Export Ban May Impede Global Food Security Efforts
Author: Jose Ma Luis Montesclaros, NTU
India’s decision to ban non-basmati rice exports in July 2023 has received significant criticism. Previously, non-basmati rice made up a third of India’s milled rice exports, and this move by the world’s largest rice exporter raises concerns about its commitment to addressing global food challenges as the G20 president for 2023.
Political Factors and Rising Food Prices
Many argue that India’s export ban on rice is driven more by political motives than domestic food security concerns. With the upcoming March 2024 elections, the Indian government aims to appease the urban middle class by reducing the mounting food prices. As a result, India has not yet normalized its rice trade, and the rice prices have soared to levels comparable to the global food price crisis in 2007-08. Additionally, Myanmar has also banned rice exports since August 2023, potentially encouraging more countries to follow suit.
Partial Concessions and Complex Balancing Act
In late August 2023, the Indian government announced a small concession, allowing exports to countries facing significant food security challenges, such as Bhutan, Mauritius, and Singapore. However, this has done little to ease the concerns of international markets. It is important to recognize the complex balancing act that food exporting states like India face. They must serve as reliable suppliers in the international food market while also meeting the food security needs of their own population.
The Dual Mandate and Impact on Wheat Exports
India’s dual mandate becomes evident when examining its response to Russia’s invasion of Ukraine. Following the conflict, India increased wheat exports to fill the gap in international wheat supply. However, this led to domestic shortages and a surge in wheat prices, resulting in India imposing a wheat export ban in May 2022. Moreover, India reduced its COVID-19 food distribution program in January 2023 to reallocate grains to domestic markets and address inflation concerns.
Understanding Rice Export Restrictions
The recent rice export bans in India can be seen as an extension of the problems faced by the wheat sector. Wheat and rice are substitutes in India’s grain stockpiles, so wheat shortages contribute to the rice shortage. This cycle has driven up domestic food prices and led to a minimum rice export price restriction in September 2022. In July 2023, India’s food price inflation increased by 11.5%, prompting the government to impose further rice export restrictions.
A Multilateral Solution to Mitigate Crises
Pressuring India to normalize its rice trade may not be the most effective approach. Instead, a multilateral approach could help address the double burden faced by India and other food exporting states. This approach would involve providing international capital assistance to bridge India’s financing gaps in domestic subsidization, ensuring affordable prices for both the population’s poorer and middle-class segments. By implementing subsidies, India’s need to ban grain exports could be eliminated while keeping food prices lower. Furthermore, a multilateral approach would recognize India’s role as a net food exporter and compensate it accordingly. The Global Food Import Financing Facility proposed by the UN Food and Agriculture Organization to the International Monetary Fund could serve as a foundation for this multilateral solution.
Mitigating a Potential Price Crisis
If the Indian rice ban persists, countries dependent on rice trade for revenue, imports, and consumption may anticipate price speculation to maximize profits and minimize costs. This scenario could potentially trigger a situation similar to the global food price crisis of 2008. While a multilateral solution would still result in increased global grain prices, it could help mitigate the prospects of a worse crisis.
With Russia’s war in Ukraine and projected reductions in crop harvests during the El Nino season, exploring multilateral solutions becomes critical for an already challenged global food supply chain.
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