India's Rice Export Ban Sparks Panic Buying and Price Surge, Know Reason Here

Rice Export Ban: India banned the export of non-basmati white rice on July 20 in an effort to control rapidly increasing domestic prices. Reports and videos of panic buying and empty rice shelves at Indian grocery stores in the US and Canada then appeared, which led to an increase in price. Although there are countless varieties of rice farmed and eaten, only four major categories are traded internationally. The majority of the world's rice commerce is made up of the long, thin Indica variety; the remainder is made up of fragrant or aromatic rices like basmati; short-grained Japonica, which is used for risottos and sushi; and glutinous or sticky rice, which is used for desserts.

Impact of Export Ban on Global Rice Markets

With around 40% of the world's total trade in the grain, India is the biggest exporter of rice. (The other top exporters are the US, Pakistan, Vietnam, Thailand, ). China, the Philippines, and Nigeria are three of the biggest consumers of rice. When their domestic supply is insufficient, "swing buyers" like Indonesia and Bangladesh increase their imports. In Africa, rice consumption is both high and increasing. It serves as the primary energy source in nations like Cuba and Panama. India exported 22 million tonnes of rice to 140 nations last year. Six million tonnes of this were the much less expensive Indica white rice. (It was expected that 56 million tonnes of rice were traded globally.) Around 70% of the world's white rice trade is dominated by indica rice, which India no longer exports. This is in addition to the nation's ban on broken rice exports last year and a 20% duty on shipments of non-basmati rice. Unsurprisingly, the export prohibition in July has led to concerns about skyrocketing rice prices worldwide. According to IMF Chief Economist Pierre-Olivier Gourinchas, the prohibition would increase costs and potentially result in a 15% increase in world grain prices this year. Additionally, Shirley Mustafa, a rice market analyst at the UN's Food and Agriculture Organisation (FAO), told that the timing of India's export ban was not particularly favourable.

Rising Prices and Supply Shortages Compound Challenges

One is that since early 2022, the price of rice has been continuously rising over the world, gaining 14% since last June. Second, there is a shortage of supplies because it will still be around three months before the new harvest is available in the marketplaces. Supplies have been impacted by South Asia's unfavourable weather, including Pakistan's floods and India's uneven monsoon rains. Due to an increase in fertiliser prices, rice farming has become more expensive. For many nations, currency devaluations have increased import costs, while high inflation has increased the cost of borrowing in the trade. "We have a situation where importers are constrained. It remains to be seen whether these buyers will be in a position to cope with further price increases," says Mustafa. More than three times the buffer required, India has a staggering 41 million tonnes of rice stored in public granaries for its strategic reserve and the Public Distribution System (PDS), which provides more than 700 million underprivileged people with access to affordable food. Indian rice prices have grown by more than 30% since last October as a result of India's ongoing food inflation, which has raised political pressure on the government ahead of general elections next year. The government faces difficulties due to the rising cost of living and the numerous state elections that will take place in the upcoming months.

Experts Warn Against India's Rice Export Ban for World Food Security

According to Devinder Sharma, an authority on agricultural policy in India, the government is attempting to prevent a production shortfall while simultaneously protecting rice-growing districts in the south from the dangers of dry rain as the El Nino weather pattern moves through later this year. Bans on rice exports, in the opinion of many, should be avoided since they threaten world food security. Ifpri estimates that 42 countries import more than half of their rice from India, and that India holds a market share of more than 80% in numerous African countries. The percentage of daily calories from rice consumption in the top Asian consumers, such as Bangladesh, Bhutan, Cambodia, Indonesia, Thailand, and Sri Lanka, ranges from 40% to 67%. Bans on food exports are not new. According to Ifpri, the number of nations implementing export restrictions on food has increased from three to sixteen since Russia invaded Ukraine last year. Exports of beef, palm oil, and a variety of grain goods were all outlawed in Indonesia, Argentina, Turkey, and Kyrgyzstan. The Covid pandemic's first four weeks saw the implementation of export restrictions on a variety of goods by about 21 countries. However, analysts claim that the risks from India's export prohibition are worse. Ashok Gulati and Raya Das of the Indian Council for Research on International Economic Relations (Icrier), a Delhi-based think tank, warn that it will "certainly cause a spike in global prices of white rice" and "adversely affect food security of many African nations."

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