Discover the ripple effects of India’s rice ban. Unveil how this decision might reshape the rice market and impact prices worldwide.
India plays a crucial role in the global rice market, serving as a major rice exporter. In fact, it supplies 40% of the world’s rice demand, with 140 countries relying on India for their rice imports. In 2022 alone, India exported an impressive 22 million tonnes of rice, surpassing the combined exports of the next four leading exporters (Thailand, the US, Pakistan, and Vietnam), as reported by the Economic Times.
With this data, you can imagine how important India’s rice is to the world. And the same rice is causing problems in Western countries. If you see, citizens in Western countries are standing for hours in line just to get their hands on some bags of Indian rice. But the question is why?
Let’s find out.
What’s Happening?
On 20th July 2023, the Food and Consumer Affairs Ministry took a significant step by implementing an immediate ban on the export of non-basmati white rice. This decision was prompted by the delay of seasonal monsoon rains, which adversely affected the rice crop and raised concerns about potential production shortages.
Although certain varieties of rice can still be exported, such as basmati rice and parboiled rice, the ban specifically targets two major export categories – non-basmati rice and broken rice.
Basmati rice exports reached 4.4 million tons in 2022, while parboiled rice exports amounted to 7.4 million tons during the same period, as reported by Economic Times.
This is not the first incident of a rice export ban, as similar actions were taken in September 2022 when India also prohibited the export of broken rice and imposed a 20% duty on exports of various rice grades.
Why is the Ban Imposed?
Several factors prompted the ban on rice exports. Firstly, the suspension of the grain deal between Russia and Ukraine (known as the Black Sea Initiative) disrupted Ukraine’s ability to ship food grains to the world, leading to global price inflation and exacerbating the food crisis.
Now, nobody knows how long the supply chain will be disrupted. So, India had to plan for the days ahead. As we know, India is now the most populated country in the world. So, it has its own demand to meet. Additionally, there are shortages as heavy rains have hit supplies.
Rice prices in the retail market have surged by 15% in the last year, contributing to food inflation in India, as per Moneycontrol. The government had to implement measures to balance export orders with domestic demand to tackle rising inflation and ensure sufficient supplies for its citizens. With the upcoming wedding and festival season starting in August, the demand for rice is expected to increase further.
Global Impact of the Rice Ban
The export ban on Indian rice has resulted in a substantial surge in international rice prices, with reports citing prices now reaching as high as $50 or more, compared to the previous range of $15-$20, as reported by CNBC TV18. Moreover, there are growing concerns about the potential impact of El Nino on rice production in India, which could have significant repercussions on rice supplies for various countries.
What’s Next?
In India, the retail inflation rate saw a notable increase, rising to 4.81% in June after reaching a 25-month low of 4.25% in May on an annual basis. This surge indicates that the cost of retail goods is on the rise. In response to this situation, India is taking proactive measures to control the escalating prices within the country.
According to Moneycontrol, the industry believes worldwide rice scarcity will ease by 2024.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The article is for information purposes only. This is not an investment advice.
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