MUMBAI: The world’s biggest rice exporter India has banned some overseas sales of the grain “with immediate effect”, the government said, in a move that could drive international prices even higher.
Rice is a major world food staple and prices on international markets have soared to decade highs as the world grappled with the COVID-19 pandemic, the war in Ukraine and the impact of the El Nino weather phenomenon on production levels.
India would ban exports of non-basmati white rice – which accounts for around a quarter of its total – the consumer affairs and food ministry said.
The move would “ensure adequate availability” and “allay the rise in prices in the domestic market”, it said in a statement on Thursday (Jul 20).
India accounts for more than 40 per cent of all global rice shipments, so the decision could “risk exacerbating food insecurity in countries highly dependent on rice imports”, data analytics firm Gro Intelligence said in a note.
Countries expected to be hit by the ban include African nations, Turkey, Syria, and Pakistan – all of them already struggling with high food-price inflation, the firm added.
Global demand saw Indian exports of non-basmati white rice jump 35 per cent year-on-year in the second quarter, the ministry said.
The increase came even after the government banned broken rice shipments and imposed a 20 per cent export tax on white rice in September.
India exported 10.3 million tonnes of non-basmati white rice last year and Rabobank senior analyst Oscar Tjakra said alternative suppliers did not have spare capacity to fill the gap.
“Typically the major exporters are Thailand, Vietnam, and to some extent Pakistan and the US,” he told AFP. “They won’t have enough supply of rice to replace these.”
Moscow’s cancellation of the Black Sea grain deal that protected Ukrainian exports has already led to wheat prices creeping up, he pointed out.
“Obviously this will add into inflation around the world because rice can be used as a substitute for wheat.”
Rice prices in India rose 14 to 15 per cent in the year to March and the government “clearly viewed these as red lines from a domestic food security and inflation point of view”, ratings agency Crisil’s research director Pushan Sharma said in a note.
India had already curbed exports of wheat and sugar last year to rein in prices.
Dr David Ubilava, Associate Professor of Economics at the University of Sydney told CNA’s Asia First on Friday (Jul 21), that India’s ban will drive up global prices, even if other countries such as Thailand and Vietnam step in.
As rice is a major staple, countries that are relatively low and middle-income will also be hit badly.
“When the price of a key staple goes up, that just makes people’s lives worse because we are already seeing worldwide inflationary pressures. In fact, it’s one of the reasons why India has imposed this ban,” said Dr Ubilava.
“For people within India, that’s good news. But for people outside of India, that’s bad news because the main staple will become more expensive and therefore that will impact people at the verge of poverty a lot more.”
He noted that India’s rice export ban is coinciding with “another political issue in the Black Sea region that mostly affects wheat, which is another major staple”.
The developing El Nino phenomenon, which tends to impact India and other Southeast Asian rice-producing countries, has added to this brewing “perfect storm”, said Dr Ubilava.
“It’s still too early to tell whether El Nino will develop and whether it will result in yield reduction at the levels that we’ve observed during previous El Nino episodes. But if that were to happen, there will be both rice availability issues as well as rice affordability issues,” he said, adding that the last dramatic price increase of rice was in 2008.
At that time, there was a price increase of between 200 and 300 per cent, said Dr Ubilava.
While he does not expect the prices to hit similar levels, he anticipated that the increase will be larger than the 5 or 10 per cent rise last year.