India, the world’s largest rice exporter, has banned exports of broken rice and has imposed a 20% export tax on several rice varieties. This move has paralyzed trade in Asia, with the Philippines and Indonesia predicted to be the most vulnerable to the ban.
The restriction on rice exports and the imposition of the export tax was announced in early September as a bid to control domestic prices and boost supplies after the below-average monsoon rainfall curtailed planting.
India accounts for approximately 40% of global rice shipments and exports to more than 150 countries. In 2021, India’s rice exports reached 21.5 million tons, more than the total shipment from the next four biggest exporters of rice, namely Thailand, Vietnam, Pakistan, and the United States.
Sonal Varma, a chief economist at a financial services firm, stated, “For India, July and August are the “most crucial” months for rainfall, as they determine how much rice is sown. This year, uneven monsoon rain patterns during those months have reduced production.”
Rice-producing Indian states such as West Bengal, Bihar, and Uttar Pradesh are receiving 30% to 40% less rainfall, however, there was a slight increase toward the end of August. Despite that, Varma said, “The more delayed the sowing [of rice] is, the greater is the risk that yield will be lower.”
Analysts from Nomura, a Japanese bank, reported that “The impact of a rice export ban by India would be felt both directly by countries that import from India and also indirectly by all rice importers, because of its impact on global rice prices.”
The report also revealed the Philippines, which imports more than 20% of its rice consumption needs, is the country in Asia most at risk of higher prices. Inflation in the Philippines was at 6.3% in August, way above the target range of Nomura’s 2% to 4%. The export ban would be an additional blow to the Philippines.
Indonesia is likely to be the second-most affected country in Asia as it relies on imports for 2.1% of its rice consumption needs, according to the same report.
While Singapore imports all of its rice, with 28.07% coming from India, the country isn’t as vulnerable as the Philippines and Indonesia. According to Varma, this is because “The share of rice in Singapore’s CPI basket is quite small.” Additionally, consumers in Singapore tend to spend a chunk of their expenses on services.
Although India’s rice export ban will render some countries vulnerable, there are also other countries that will benefit from it. Thailand and Vietnam may profit from the rice export ban as they are the most likely alternatives for countries looking to fill their rice import gap. In 2021, Vietnam’s total rice production was approximately 44 million while Thailand produced 21.4 million tons of rice in the same year.
Since India’s announcement of the rice export ban, rice prices have jumped 5% in Asia. The prices are expected to rise further.