India’s rice export ban is unlikely to lead to a global food crisis, given the extent of the reduction in supply to global markets and the concomitant increase in prices
Rice is a principal agricultural product that impacts diets, cultures, and economies across the world. It is crucial for nearly 3.5 billion people, especially in Asia, where it is a staple food and a major source of livelihood. The rice value chain plays a central role in achieving Sustainable Development Goals (SDGs) as it supports around 900 million poor individuals globally, with 400 million actively involved in its production. It is pivotal for food security, poverty reduction, and economic growth, particularly in Asia. Amid global challenges like the COVID-19 pandemic and rising geopolitical tensions, rice prices have increased, threatening the global agricultural sector. At this time, any trade interventions by the major exporters will have deleterious effects on global prices and food security. The recent ban on Indian rice exports—India is the second-largest producer of rice and has been the largest exporter of rice since 2012—will thus affect global prices and the resultant shortage can lead to a food crisis.
The Indian government is balancing the protection of its consumers and farmers with the need to support food security in vulnerable nations. These developments highlight the delicate balance between national policy and global food security, underscoring the need for a careful analysis of India’s rice trade strategies and international commitments to understand the full impact of its export regulations on both local and global participants. The paper highlights the role of India’s low productivity as a driving factor of domestic uncertainty and later discusses the implications of the export ban for international producers and consumers.
The Indian government is balancing the protection of its consumers and farmers with the need to support food security in vulnerable nations.
Rice production—India and the world
India holds a significant position in global agriculture, being the third-largest cereal producer with 11.2 percent of the world’s arable land. Despite having the highest area under rice cultivation, significantly more than China, it is the second-largest producer due to its lower yield rates, standing at 2,809 kg/hectare. The core issue lies in the low productivity, which, despite improvements since independence, remains below global standards.
India holds a significant position in global agriculture, being the third-largest cereal producer with 11.2 percent of the world’s arable land.
Figure 1: Rice Yield in India and the World
Various factors contribute to this productivity gap—regional disparity, mismatch of ecosystem types, uneven fertiliser usage, stagnant technological adoption, excessive flooding, and poor management and irrigation. These hurdles not only affect the yield but also create uncertainty over the final rice stock, prompting government interventions and trade measures to stabilise the market. The situation calls for policymakers’ attention to address the productivity issues and realise the full potential of India’s vast agricultural resources.
India stands as the largest rice exporter, maintaining this position since 2012 with a notable growth in exports over recent years, peaking at 22.1 million tonnes in 2022. To maintain cordial foreign relations and ensure domestic food security amidst a growing, increasingly affluent population, India needs to undertake well-balanced trade policies.
Export prohibition on rice
India’s rice exports which are mainly composed of Basmati, parboiled, non-Basmati white, and broken rice, together formed 98 percent of its total rice exports in the fiscal year 2022-23. Despite imposing a 20-percent export tax on non-Basmati white rice in September 2022, international demands driven by geopolitical unrest and weather changes led to an increase in its exports. However, to stabilise local prices, an export prohibition was enacted on 20 July 2023. Additionally, exports of broken rice were halted on 9 September 2022, as it was required to address a significant local deficiency that was impacting the livestock and ethanol production sectors.
These restrictions and tariffs are set to significantly affect the major importers of Indian rice, such as Nepal, Vietnam, Malaysia and especially the African countries, potentially leading to increased global prices and jeopardising food security in these areas. This could also strain international ties, especially as these changes coincided with India’s G20 Presidency and its invitation to the African Union (AU) to join the G20.
Implications of the trade ban on the world
Sub-Saharan Africa is one of the largest importers of Indian non-Basmati white rice, given its lower price and economic quality. As a result of the export ban, the global market will face a shortage, leading to rising prices. This will have an unambiguous shrinking effect on the international consumers’ surplus. As prices increase, producers in the importing countries will enjoy greater surplus. For African and East Asian nations, which are on average net importers of rice, this gain from trade is unlikely to compensate for the loss in consumers’ surplus, and, in most cases, will reduce aggregate welfare. While this was anticipated, the claims of India’s ban causing a global food crisis are outlandish.
Global trade comprises only 10 percent of rice production, of which India exports 40 percent. However, of this 40-percent trade, the largest share is reserved by Basmati rice, with non-Basmati white rice comprising only about 20 percent of exports. While this will inevitably cause the global prices to shoot up, the export ban alone, cannot cause a major crisis, or even a disruption in food security.
Although cross-price elasticity between the different qualities of rice is very low, the price surge might seep into the Basmati markets. This would allow Basmati farmers to enjoy higher profits, but will deflate the consumers’ surplus. Mostly imported by richer countries and consumed by high-income households, the premium quality of Basmati reduces its significance in terms of food security. There will be a redistribution of gains from trade, but from rich consumers to large-scale producers.
India’s rice export ban is unlikely to lead to a global food crisis, given the extent of the reduction in supply to global markets and the concomitant increase in prices. It will cause disruptions to the food value chain in African and East-Asian countries, the major consumers of the banned quality of rice. However, to balance between domestic and international food security, the government to take necessary measures such as sending rice consignments to the affected countries, ensuring that the negative effects of the prohibition are minimised. This situation could have been circumvented if India maintained a tariff regime on Basmati exports, and reinvested the revenue in increasing productivity. While this would raise questions about India’s commitment to food security, adaptation of efficient technologies can eliminate the uncertainty of food stocks in the long run. The government should prioritise increasing domestic yield with a focus on advanced irrigation techniques and use of high-quality fertilisers.
Arya Roy Bardhan is a Research Assistant at the Observer Research Foundation