The Global Impact of India’s Ban on Rice Exports

On July 20, India imposed a ban on the export of non-basmati white rice. The announcement came three days after Russia pulled out of the Black Sea Grain Deal. It was not the first time India banned rice exports as the country also announced a ban on the export of broken rice back in September 2022 and it is still in effect today.

The country cited domestic reasons for the ban, stating that rising food prices, high inflation, and fear of rice shortage due to El Niño are set to disrupt supply as India head into the festive season and elections. However, the impact of the prohibitions is now being felt globally, with prices shooting up.

Nitin Gupta, senior vice president of Olam Agri India Private Limited, one of India’s biggest rice exporters, stated, “Earlier rice was trading for 550 USD per metric tonne, now prices are hovering above 650 USD.”

India is the world’s biggest rice exporter, accounting for nearly 40% of global rice trade in 2022 and exporting 22 million tonnes worth 9.66 billion USD to 140 countries. That included 4.5 million tonnes of basmati rice, 8 million tonnes of parboiled rice, 6 million tonnes of non-basmati white rice, and 3.5 million tonnes of broken rice.

India continues to export parboiled and basmati rice, meeting its international commitments halfway but since the ban, global rice prices have increased by 15 to 25%. Bangladesh and Nepal are the worst-hit countries as they depend on Indian white rice. African countries such as Benin, Senegal, Togo, and Mali, which import broken rice for being the cheapest and most filling, are also hit hard.

Due to Russia’s war on Ukraine, international prices for grains have shot up. The prices have further risen since Russia left the Black Sea Grain Initiative, which would have allowed grain from Ukraine to reach world markets.

In addition to India’s rice ban, there is fear that Thailand, Vietnam, and Pakistan may do similar bans in case their crops are hurt by El Niño which has returned for the first time in seven years. The three countries together account for 30% of global rice sales.

According to traders and scientists, a shortage of rice will have a spillover impact on wheat, soya beans, corn, and maize, all of which are used as rice substitutes both for human consumption and in animal feed. This could lead to a domino effect on the demand and prices of not just rice items but fuel as well.

Rice is a staple for more than half the Indian population. India produces around 135 million tonnes of rice annually, which is more than enough to meet domestic demand of around 100 to 105 million tonnes, including the rice it distributes at subsidized rates to the country’s 800 million poor.

Samarendu Mohanty, who is the Asia regional director at the International Potato Center and who previously was the principal scientist at the International Rice Research Institute (IRRI) in the Philippines, stated, “Our buffer stock level is very, very comfortable. We have around 41 million tonnes of rice in [government] warehouses. We don’t have any shortage. But our domestic price, with all other food prices, has been rising.”

Several traders have said that rice prices are up more than 10% in India in the past year, with global rice prices rallying on the back of the Russian war in Ukraine. According to them, the latest export ban was imposed to reduce domestic prices and as a precautionary measure in case El Niño affects the rice crop.

However, with domestic prices continuing to stay high, the Indian government said that it will offload 2.5 million tonnes of rice in the open market in an attempt to rein in prices. Five state elections are scheduled ahead of national elections in May next year, and it’s politically critical for the ruling government to keep prices low. Experts say that due to that, the Indian export ban is likely to remain in place until then.

Videos of people panic buying Indian rice in crowded groceries in the United States and Canada have gone viral. There are also reports that some stores in the US are restricting sales to “one rice bag per family” to deal with the rising demand. Many of the customers are Indian expats who are used to eating Indian rice.

Experts say that the price rise and grain shortage are not likely to make a direct dent in food budgets in the developed market where 80% of the consumption is of basmati rice. However, the impact on the “MENA market,” which refers to the Middle East and North Africa, as well as certain West African and Asian countries, is worrying.

Panic is beginning to set in in Nepal, Bangladesh, and several African nations where rice makes up more than half of the food budget, as well as countries like the Philippines and Indonesia whose agriculture and fisheries are being hit by El Niño and other climate change conditions.

Raghu Murtugudde, earth system scientist and emeritus professor with the University of Maryland and Indian Institute of Technology Bombay said, “In Indonesia, fisheries are already probably hurt because the impact of El Nino is pretty strong.”

A cascade effect on prices of other items as people switch from fish to meat is inevitable. “There are ocean heatwaves that damage corals, impacting fisheries and tourism. If they are losing out on fisheries and tourism, they are going to lose out on rice purchasing power,” Murtugudde added.

The Philippines, which is the world’s second-biggest importer of rice after China, is reeling under extreme weather conditions. Rice prices in Nepal have seen a 16% surge since India announced the ban. Both Nepal and the Philippines have said they will ask the Indian government to allow rice shipments.

When India imposed the rice ban in 2022, it left a provision for government-to-government (G2G) sales. Under the scheme, it exported close to 800,000 tonnes of rice to Senegal, Indonesia, and the Gambia on humanitarian grounds. The latest ban has a provision for G2G exports to address food security concerns.

“The government of India is giving a positive signal that they might allow some export of white rice out of India on a certain quota basis,” Olam’s Gupta said. But other experts say that the amounts exported are small, the process is longer, and politics are often in play.

Paddy in Asia is especially vulnerable to El Niño, a climate pattern caused by the warming of surface waters in the eastern Pacific Ocean that leads to an increase in both heavy rainfall and droughts. “India gets affected by El Nino 60 percent of the time, but Southeast Asia, especially Indonesia, gets hammered very heavily 100 percent of the time,” said Murtugudde.

Aside from El Niño which can last from nine to 12 months, there are extreme weather conditions due to global warming. “The whole country is on a monsoon break right now. What El Nino tends to do is extend these breaks. We have to see if El Nino creates a long break this August, in which case it’ll create serious deficits in rainfall,” Murtugudde said.

India is expecting a normal crop of 135 million tonnes but August and September are critical in terms of rainfall for paddy that will be harvested between October and December. The monsoon or “kharif” crop makes up about 80% of the total rice production. In rainfall fails, then India will have a drought that can affect about 35% of its rice production.

El Niño’s peak warming, which typically happens from December to February, may affect India’s next crop for which sowing takes place between October and December. The country is beginning to create stockpiles in anticipation of a shortage.

“They may even consider temporary restrictions on rice export, which will lead to a situation like it was in 2007-2008 when rice prices tripled in a few months because of the rice ban that started with Vietnam,” Mohanty said. The incident led to a global rice crisis as India and Cambodia joined the bans during that time.