India considers banning most rice exports on inflation fears
3 Min Read
Following the outbreak of the Ukraine war, India prohibited broken rice exports and put a 20% levy on shipments of white and brown rice last year.
-
Indian village women harvest rice in a field on the outskirts of Bhubaneswar, India, Tuesday, Dec. 10, 2013. (AP)
India, the world's largest rice exporter, is mulling a ban on most types, which may push up already-high worldwide prices when the disruptive El Nio weather pattern returns.
Sources familiar with the situation say the government is considering a ban on all non-Basmati rice exports. This is due to growing domestic costs, and officials want to avoid more inflation. A prohibition, if enacted, would affect almost 80% of India's rice exports.
While such a move may cut domestic pricing, it also increases worldwide expenses. Rice is essential for almost half the worldwide population, with Asia using around 90% of the global supply. Based on expectations that the return of El Nino may harm crops, prices have drastically increased in the last two years.
Following the outbreak of the Ukraine war, India prohibited broken rice exports and slammed a 20% levy on shipments of white and brown rice last year. The nation has limited wheat and sugar exports. Representatives from the food, trade, and finance ministries did not reply to emails or text messages requesting comment.
Read more: India Central Bank maintains interest rates amid easing inflation
India exports rice to about 100 nations, the most important of which are Benin, China, Senegal, Cote d'Ivoire, and Togo.
Regarding the prospective ban, shares of Indian rice millers plummeted. KRBL Ltd., the country's largest rice business, fell 3.7% before cutting losses. Chaman Lal Setia Exports Ltd. fell as much as 1.4%, Kohinoor Foods Ltd. was down 2.9%, and LT Foods Ltd. fell 4.4%.
Importers like Indonesia, China, and the Philippines have been aggressively storing rice. According to the World Meteorological Organisation, El Nino conditions have arisen in the tropical Pacific for the first time in seven years, threatening to cause drought in several rice-growing countries. A prospective embargo by India will exacerbate supply concerns.
India's proposal comes as consumer price inflation accelerated in June, owing primarily to rising food costs.
Bloomberg Economics predicts that inflation could further rise following the recent hike in tomato prices, a vital ingredient in Indian cuisine, and an increase in the government's support price for monsoon-sown crops. Inflation estimates have been boosted by Barclays Bank Plc and Yes Bank.
The food ministry revealed that retail rice prices in Delhi have risen roughly 15% this year, while the national average has risen 8%. Persistently high food prices may sour public opinion ahead of multiple state elections later this year and a national election in 2024.
