India’s ban on rice exports adds on to food inflation woes

Adding on to the global frenzy around food inflation, which was triggered initially when the Russia-Ukraine war started, India announced an immediate ban on exports of non-basmati and broken white rice, last week. This is India’s largest rice export category and the ban will reduce the shipments from the world’s largest exporter of the grain by roughly 50%. This is after the government had already applied a 20% surge in export tax back in September 2022. Currently, approximately 42% of rice exports are banned with basmati and parboiled rice still unscathed.

The export policy relating to non-basmati white rice (Semi-milled or wholly milled rice, whether or not polished or glazed: Other) has been revised from “free” to “prohibited” and it has come into force immediately, a Directorate General of Foreign Trade (DGFT) notification said. The decision comes as a way to avert the impact of the damage caused to the crops due to the heavy rain, which in turn increased the domestic prices of the grain by 3%.

The category impacted i.e. non-basmati white and broken rice, accounted for around 10 million tons of a total of 22 million tons of Indian rice exports last year.

West African country Benin is one of the major importers of non-basmati rice from India. Other destination countries are Nepal, Bangladesh, China, Cote D’ Ivoire, Togo, Senegal, Guinea, Vietnam, Djibouti, Madagascar, Cameroon Somalia, Malaysia, Liberia, and UAE. People in the importing countries, especially the West, have been thronging the stores to stock up the grain in anticipation of both stocks running out as well as a surge in prices.

Disruptions to the modern-day food supply chain started with the pandemic in 2020, then the Russo-Ukrainian war in 2022, and have worsened with India – one of the world’s largest exporters of wheat and rice – placing export bans on its grains. According to B.V. Krishna Rao, President of the Rice Exporters Association, “India would disrupt the global rice market with far greater velocity than Ukraine did in the wheat market with Russia’s invasion.”

Also, countries in India’s immediate vicinity, such as Bangladesh and Nepal, are major buyers of non-basmati white rice from India. The ban could significantly impact their food supply chains, leading to potential disruptions and price fluctuations in these countries.

On the other hand, with India exporting 22 million tonnes of rice in 2022 (which was greater than the combined numbers of the next 4 exporting countries), rice exporters in India could face revenue losses due to reduced overseas sales, which might impact the livelihoods of farmers and other stakeholders involved in the rice export business.

Domestically as well, due to heavy rains, the prices of vegetables, fruits, grains, and pulses have also seen a steep rise, and experts are expecting more. A source said that viruses and wilt will rot the crop due to waterlogging, which will result in prices moving substantially upwards. The spike in vegetable prices is set to push the CPI inflation to an uncomfortable 5.3-5.5% in July 2023.

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