India’s rice exports ban to upset global food security

Ban on rice exports from India
India's ban on rice exports has set off a wave of uncertainty, with potential repercussions for food security and supply chains.

Impact of ban on non-basmati white rice exports: India, the world’s largest rice exporter, shocked the global foodgrain market on July 30 by imposing a ban on the exports of non-basmati white rice. This decision, a direct response to the surging domestic rice prices that had ballooned by over 30% since October 2022, sought to restore equilibrium and tranquillity to the local market, ensuring an ample supply of the staple within our national borders. However, this action triggering apprehensions across the world about its potential repercussions on food security and its implications for the well-being of Indian farmers, exporters, and traders.

India, renowned for its substantial contributions to the global rice output, has historically stood as a significant exporter of both basmati and non-basmati rice varieties. The crop year 2021-22 saw India fortify its second position in rice production, trailing only behind China, with a formidable yield surpassing 129 million tonnes of milled rice. Recent years have seen India solidifying its position as a pivotal player in the global rice trade, particularly through provisioning crucial markets in the developing spheres of Asia and Sub-Saharan Africa.

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India disrupts market with rice exports ban

Continuing its reign as the top rice exporter on the world stage, India dispatched a staggering 21.5 million tonnes of rice during the 2022-23 period, meeting a staggering 40% of the global demand. Notably, India exercises a commanding hold over the African rice market, accounting for approximately 50% of the 15 million tonne rice that find its way to this region every year. The non-basmati white rice, a staple in various countries and a linchpin of affordable sustenance, constitutes a substantial chunk of India’s overall rice exports. Countless impoverished African nations depend heavily on Indian rice for their dietary needs.

The role of Indian rice extends far beyond sustenance -— it stands as a bulwark ensuring that vulnerable populations across these nations have consistent access to a stable and budget-friendly source of nutrition. Lending context to this, the Global Food Security Index (GFSI) of 2022 underscores that six of the 10 lowest-scoring nations hail from the Sub-Saharan African belt. The present embargo on Indian rice exports could potentially amplify their existing food security challenges.

Tremors in the global marketplace

The abrupt suspension of the exports of non-basmati white rice from India has ignited a maelstrom of uncertainty across the global rice market. Nations that have traditionally relied on Indian rice imports now scramble to secure alternative sources to meet their domestic demand. This precipitous drop in supply has triggered an immediate surge in international rice prices, exacerbating the ongoing food crises ravaging various regions.

The repercussions of this embargo are particularly pronounced in rice-importing nations spanning Africa, Asia, and West Asia. Escalating prices coupled with dwindling rice availability have exerted severe strain on their food security, rendering millions susceptible to potential hunger and malnutrition. India’s 5% broken parboiled rice variety has ascended to nearly a five-year high, fluctuating between $421 and $428 per tonne. This surge further compounds the food security conundrum faced by African and West Asian nations.

Implications for Indian farmers, exporters

While the export embargo was instituted to safeguard a steady rice supply within India and to stabilise domestic prices, it has elicited concerns for Indian farmers and exporters who heavily relied on non-basmati white rice exports as a revenue source. A substantial number of farmers, particularly in states such as Punjab, Haryana, Telangana, West Bengal, and Uttar Pradesh, dedicated substantial tracts of land to cultivate non-basmati rice due to its robust demand in global markets.

With the ban on exports, these farmers now confront the prospect of glut-induced supply gluts and plummeting prices within the country, imperilling their livelihoods and economic stability. Furthermore, should this embargo endure, farmers might consider transitioning to other crops that present more promising prospects within the domestic market, thereby potentially prompting shifts in agricultural paradigms. Exporters and traders specialising in non-basmati white rice find themselves grappling with unsold inventories and disrupted long-term contracts, resulting in financial setbacks and uncertainties regarding the trajectory of their enterprises.

Fractured trade relationships

The unexpected ban on non-basmati white rice exports has taken many importing countries by surprise. Governments and traders in these nations may now harbour reservations about India’s reliability as a trading ally. The bedrock of enduring trade relationships rests upon predictability, stability, and mutual benefit—sudden policy shifts can corrode confidence in future transactions.

Certain importing countries may now shy away from reliance on Indian rice supplies in the future, instead opting to diversify their sources of rice imports to mitigate the risk of sudden supply chain disruptions. This paradigm shift could potentially realign market share distribution among rice-exporting competitors, casting Vietnam, Thailand, and China in new roles.

Opening vistas for competitors

Vietnam, a formidable force in the global rice market, stands poised to reap benefits from India’s ban on non-basmati white rice exports. With India’s sudden exit from the marketplace, Vietnam can seize the opportunity to expand its market presence and capture a larger share. Other major rice-exporting nations like Thailand, Pakistan, and Cambodia are also primed for potential expansion of their exports. Competitors such as Vietnam might exploit this scenario by offering more competitive pricing to attract importers in search of cost-effective rice options.

Economically priced Vietnamese rice could emerge as an enticing alternative for countries previously reliant on Indian rice, particularly in Africa and West Asia. As importing countries strive for stability and secure sources of rice, exporters will chart fresh trajectories to carve out larger market slices. Consequently, the balance of influence in the rice trade landscape could undergo a transformation, with nations like Vietnam amplifying their roles.

Exploring future prospects

The long-term impact of this embargo on trade relationships and competitive dynamics hinges on India’s future course of action. If the embargo proves temporary and the Indian government succeeds in reassuring its trade partners about future stability and predictability, trust could potentially be restored over time.

Furthermore, opportunities for negotiation between India and importing nations may provide avenues to address concerns and engineer viable solutions. These deliberations could encompass measures such as quota agreements, pricing frameworks, or tailored trade arrangements.

The suspension of non-basmati white rice exports has set off a chain reaction that extends beyond immediate disruptions in the global rice market. It has instigated inquiries into the durability of trade relationships and unlocked avenues for rivals like Vietnam to bolster their market influence. As the situation evolves, the Indian government’s adept navigation of these challenges and its effective communication with trading partners will be pivotal in shaping the future dynamics of the global rice trade.

As stakeholders grapple with unfolding events and explore potential remedies, international cooperation and support will be the linchpin in securing the stability of the global rice trade and upholding the interests of all parties involved.

(Pravin Jadhav is Assistant Professor, Economics at IITRAM, Ahmedabad. Chakradhar Jadhav is Assistant Professor, Centre for Economic and Social Studies, Hyderabad.)