India, the world’s leading rice exporter, implemented a ban on rice exports last month. The decision set off a chain reaction with unforeseen consequences. Reports and videos emerged showing panic buying and empty rice shelves in Indian grocery stores in the United States and Canada. Rice prices surged in these regions.
Rice, a staple crop consumed and cherished worldwide, has four primary global trade groups: slender long-grain Indica rice, fragrant basmati, short-grained Japonica rice used for sushi and risottos, and glutinous or sticky rice frequently used in desserts and sweets. India’s ban specifically targeted non-basmati white rice, which is an essential part of the global rice trade.
India accounts for approximately 40% of global rice exports. Last year, the country exported 22 million tonnes of rice to 140 countries.
With the ban, other major rice exporters such as Thailand, Vietnam, Pakistan, and the US are expected to witness increased demand for their products.
China, the Philippines, and Nigeria are key players in sustaining the global rice trade. Countries like Indonesia and Bangladesh often increase rice imports during domestic supply shortages to bridge the gap and stabilise their own markets.
Rice consumption is high and growing in Africa. For countries such as Cuba and Panama, rice is the main staple source.
Prior to this complete export ban, India had already taken measures to limit its rice exports. It banned exports of broken rice and imposed a 20% duty on non-basmati rice exports.
The aim was to secure domestic supplies amid rising food inflation concerns. Inclement weather in South Asia has impacted rice supplies. Uneven monsoon rains in India and devastating floods in Pakistan have led to reduced yields and production setbacks, adding strain to an already delicate situation.
Increased prices of fertilisers and other agricultural inputs have pushed up production costs, leading to higher consumer prices and adding pressure to the overall rice market. The devaluation of currencies in various countries has also exacerbated the situation, resulting in higher import costs for those heavily reliant on rice imports.
IMF chief economist Pierre-Olivier Gourinchas predicts that this move could drive up global grain prices by up to 15% this year.
The estimated global rice trade stands at around 56 million tonnes. The ban on six million tonnes of white rice from India disrupts the balance between supply and demand.
India currently has 41 million tonnes of rice in public granaries. This is more than three times the required buffer for its strategic reserves and the Public Distribution System (PDS). The PDS ensures access to affordable food for over 700 million impoverished individuals in the country.
However, persistent food inflation over the past year, with domestic rice prices increasing by more than 30% since October, has pressurised the government to impose the export ban, especially with general elections approaching next year and multiple state-level elections in the coming months.
