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The New Delhi government is trying to curb the domestic price race: throughout the past year, India’s rice prices have risen 11 percent. According to the UN, rice is the most consumed food raw material in the world. In 2022, India sold 22.2 million tons of rice abroad.
You don’t live on Ukrainian wheat alone. World markets were in turmoil after the government of India, the world’s largest rice exporter, announced last Thursday its abrupt decision to ban the sale of Indian rice abroad. The only exception was made for the “elite” variety basmati.
According to a spokesman for the Indian Ministry of Consumer Affairs, “the decision is designed to reduce the price and ensure the availability of the product in the domestic market.” According to the ministry, rice prices in India rose 11.5% last year and 3% last month, reflecting a 35% year-on-year increase in export volumes between April and June.
Many international analysts say that India’s ban, triggered by falling production, will inevitably lead to higher prices worldwide. It will be a chain reaction. “Rice supplies to world markets will drop significantly, followed by a series of price increases,” said in an interview with CNBC Eva Barre, an economist at Coface, who is in charge of the Association of Southeast Asian Nations (ASEAN). According to Barre, the shortage will primarily affect Bangladesh and Nepal, the two main importers of Indian rice. In addition, blocking exports can also become a problem for some African countries. Russia has pledged to supply the neediest African countries with grain for free and intends to implement the aid plan at the Russia-Africa summit scheduled for next week in St. Petersburg.
India is the world’s second largest rice producer after China, but New Delhi still maintains its lead as an exporter, with about 40% of internationally traded rice coming from Indian rice fields. In 2022, India sold 22.2 million tons of rice abroad. According to the UN, rice is the most consumed food raw material in the world. At present, India supplies rice to 150 countries of the world. The number one importer is China. “Recently, many importers such as China have decided to increase rice imports and reduce corn imports instead, due to rising cereal prices,” said Sudhanshu Pandey of the Ministry of Consumption, Food, and Government Distribution.
In 2023, the rainy season in India came earlier than usual, and heavy rains in the north of the country damaged many crops. While many rice fields in northern Indian states such as Punjab have been flooded for over a week, other Indian states have not had enough rain to even grow rice. According to The Times Of India newspaper, “the government fears that due to severe rain shortages in states such as Jharkhand, Madhya Pradesh, and West Bengal, the total harvest of the agricultural season among the main rice producers between June 2022 and July 2023 risks falling by 6% to 104.9 million tons.”
In recent weeks, Indian housewives have already been perplexed by the price of tomatoes, which skyrocketed in late June and early July, rising 4.5 times on average to 120 rupees ($1.45) per kilogram in just a few days.
The fight against poverty in India is the main battle point of Prime Minister Narendra Modi and his Indian People’s Party, as they prepare for the May 2024 general election. According to a recent analysis by the United Nations, while 55% of India’s population in 2005 lived below the minimum poverty line, in 2021 this alarming figure has dropped to 16.4%. At present time, according to the United Nations Development Program (UNDP), only 10% of India’s population has to make ends meet on $2.15 per day (176.51 rupees – ed.). In other words, even with regard to rice, the Modi government decided to follow the “political” path already adopted for wheat and sugar, when protectionism prevailed in order to ensure that the Indian population had enough.
The first wake-up call came from the Chicago Stock Exchange, where the price of wheat rose for the third week in a row. World rice prices have been rising for eleven years now, and a halt in exports from India threatens to exacerbate many problems caused by the decline in grain exports from Ukraine. Following the New Delhi government’s decision, countries such as Vietnam and Thailand, the world’s second and third largest rice exporters respectively, are also expected to decide to increase prices.
This is not the first “Made in India” blow that has made international markets flutter: On September 11, 2022, the New Delhi government has already banned the export of crushed rice, one of the by-products of rice processing, and has imposed a 20 percent tax on the export of numerous varieties of rice. The blocking of exports at that time was motivated by the necessity to ensure sufficient national stocks precisely “in view of the possible decline in the 2023 harvest.”
