Will India restrict rice exports?

International Business News  –  When India restricted wheat exports a few months ago after a heat wave, world grain markets were shaken. While India is a huge wheat consumer, it is not a wheat exporter that has reached the same volume. The real concern is that New Delhi may also cut off rice exports: India is by far the world’s largest exporter of rice.

Fortunately, inhibited by ample global supply and a weak rupee, Indian rice prices touched a five-year low when the country restricted wheat exports. But the situation has changed today.

First, Indian rice by a virus caused by a mysterious “dwarf” disease attack. To add insult to injury, the three major rice-producing states in northern and eastern India have seen little or erratic rainfall.

There are rumors that Indian officials, worried about shrinking supplies and domestic inflation, are now considering imposing restrictions on rice exports as well.

India last banned grain exports in 2007 and 2008, when the decision triggered a years-long food security crisis.

Repeating such a ban would cause market volatility, as higher global rice prices would hit developing countries, which are now in a period of economic vulnerability. These countries are struggling as the Russia-Ukraine conflict pushes up the prices of food, fuel and fertilizer.

The rice export ban will not reduce domestic inflation in India. 28 million tons of rice were stored in Indian government warehouses in August (well above the mandatory 11 million ton buffer stock), so India will not run out of rice any time soon.

Meanwhile, agricultural economists Ashok Gulati and Ritika Junayja point out that inflation in India is mainly driven by fuel and vegetable prices.

In addition, the export ban will hit not only other poor countries, but also India’s own farmers, who will miss out on the high prices overseas. The authorities may be more concerned about urban food prices than agricultural profits. Indian farmers are used to a norm: when global prices dip, they are adversely affected; when global prices rise, they do not benefit.

India has sparked ongoing controversy following the implementation of a wheat export ban, and these controversies may already be having some impact.

If India stops exporting rice, then Vietnam and Thailand, the second and third largest exporters of rice, are likely to do the same.

The authorities are also keeping a close eye on what this rice crisis means for the country’s agricultural sector. Simply put, while India may be the world’s breadbasket, its productivity is extremely low.

India’s rice dependence on the rainy season remains too great. West Bengal, Bihar and Uttar Pradesh are areas where rainfall and rice production have been lower than expected, and where India has failed to establish proper irrigation systems.

As a result, farmers in these states struggle to produce crops on a continuous basis.

The lack of irrigation, coupled with poor agricultural practices, has led to extremely low agricultural yields in India. According to the Food and Agriculture Organization of the United Nations, India’s rice yield in 2020 is less than 4 tons per hectare. Vietnam, on the other hand, has a rice yield close to 6 tons per hectare. Even Bangladesh can reach 4.8 tons per hectare, which is about the Asian average.

The biggest step India can take for the world and its own food security is to increase the efficiency of rice cultivation. India’s efforts should be focused on this.