India, the world’s biggest rice exporter, banned the exports of non-basmati white rice on July 20, 2023.
The Government of India is doing its best to tame flooding homegrown food prices and “ensure adequate domestic availability at reasonable prices.”
Other than Asia, numerous African and Center East countries will obviously be affected by the ban.
India’s rice trade ban could swell across global rice markets — and millions are supposed to be affected, with Asian and African purchasers set to bear the greatest consequences.
The country represents over 40% of the global rice trade. With this ban, several countries will feel the ‘heat’, especially Malaysia which has all the earmarks of being the most helpless as indicated by an investigation, featuring the country’s sizable dependence on Indian rice.
Singapore is probably going to be impacted too, with the report showing that India makes up around 30% of the city state’s rice imports.
However, Singapore is to a great extent, subject to imports of food by and large, not only rice. The country is trying to get around India’s ban at the moment.
El Nino is putting additional risks on global production in other major Asian rice producers, including Thailand, Pakistan, and Vietnam. Rice prices are currently hovering around their highest levels in a decade.
Due to the fact that rice has the highest weighting in the Philippines’ CPI basket, the country would be most affected by an increase in global rice prices. However, Vietnam accounts for the majority of the country’s rice imports from Southeast Asia.
According to BMI, a research unit of Fitch Solutions, the markets that are most vulnerable to India’s export restrictions are Sub-Saharan Africa and the Middle East and North Africa (MENA) region. The firm refered to Djibouti, Liberia, Qatar, the Gambia, and Kuwait similar to the “most uncovered.”
India’s withdrawal of non-basmati white rice, comes closely following last September’s ban on shipments of broken rice. That implies up to 40% of India’s rice sends out are currently disconnected, as per BMI conjectures.
This is not India’s first time imposing an export ban on non-basmati rice, but the impact this time could be more far-reaching than before.
In October 2007, India imposed a ban on non-basmati exports, only to temporarily lift the ban and impose it again in April 2008, sending prices almost 30% higher to stand at the record high of $22.43 per hundredweight (cwt).
Prices tripled in the span of six months, according to an agricultural research company, the International Potato Center (CIP).
Costs significantly increased in the range of a half year, as per a rural think-tank, the International Potato Centre (CIP).
Samarendu Mohanty, Asian regional director at CIP, noted that India was not a major player in global exports of non-basmati rice back then, and the current ban has “a more far-reaching impact” than 16 years ago.
He added that the magnitude of the ban would depend on how other rice importers and exporters react.
If major rice exporters like Vietnam and Cambodia impose their own form of export restrictions, and significant importers like Indonesia and Malaysia scramble to stockpile, the world will be looking at “possible mayhem in the rice market,” Mohanty said.
He cautioned that it could even be worse than the aftermath in 2007.
“The scale of people impacted by Indian rice ban will be in millions,” said Mohanty, adding that poorer consumers in India’s neighbors, particularly Bangladesh and Nepal will be the hardest hit.
“There is very low probability of this export ban being lifted,” Mohanty said, adding that the ban is here to stay at least until India’s general elections in April next year.
The South Asian nation is currently wrestling with high vegetable, fruit and grain prices, a sticking issue which could hurt the election prospects of Prime Minister Narendra Modi.
India’s inflation rose to 4.8% in June on the back of soaring food prices — still within the central bank’s inflation target of between 2% and 6%.
However, inflation “threatens to come in at 6.5% in July,” HSBC estimated in a report dated July 24.
HSBC economists cautioned that extreme weather events could further put a strain on crop output.
“If shipments fall, there could be global price implications, spilling over into wheat, which is a part-substitute,” the bank noted.
The economists said cereal prices are already rising both domestically and globally, with the latter also affected by the Black Sea grain deal.
After Russia pulled out of the grain deal in the Black Sea, wheat prices went up.
Under the contract, Moscow agreed to permit Ukraine to keep on exporting grain in a bid to forestall a global food emergency following the conflict on Ukraine.
However, the Kremlin withdrew from the agreement in July, claiming that the promises made to Russia in the agreement were not kept.