Was banning basmati rice export the right way to contain inflation?

The export ban by India, therefore, has come to affect nearly half of the world’s population, for whom rice is the staple food. “Rice, especially in Africa, can certainly bring potential conflict or social unrest, which at this moment in time would be quite dangerous,” Lario said in an interview to Bloomberg. The move has triggered fears of global food inflation, hurt the livelihoods of some farmers and prompted several rice dependent countries to seek urgent exemptions from the ban. More than three billion people worldwide rely on rice as a staple food and India contributed to about 40% of global rice exports. The exported share of non-basmati white rice surpassed the share of basmati rice in the last two fiscal years. In FY23, India exported around 64 lakh tonnes of non-basmati white rice and close to 45 lakh tonnes of basmati rice. The most widely exported type was parboiled rice (78 lakh tonnes). Now, non-basmati white rice, which formed over a quarter of semi/wholly milled rice, has been taken off the market.

The U.S.’s dependence on India for semi/wholly milled rice was only 20% compared to Nepal’s 99%. In fact, the dependency was over 50% in 23 countries — eight of them in West Asia and nine in sub-Saharan Africa. The data hints that a part of the rush in the U.S., which sources 80% of its needs from elsewhere (mostly Thailand), could also be due to panic buying or the preference of NRIs for Indian brands. In September 2022, India had banned broken rice exports. The government has imposed a 20% export duty on parboiled rice and allowed export in Nepal, Cameroon, Malaysia, Philippines, Seychelles, Ivory Coast and Republic of Guinea.

These measures aimed at curbing retail inflation in rice which had been in double digits for the last one year. Back in India, the decision may bring relief to consumers as many of them, especially in the southern States, were paying over Rs. 50 for a kilo of rice. Climate change-related disasters such as extreme flooding in the north and relatively poor rainfall elsewhere have also impacted rice sowing this year. In August, a temporary MEP of $1200/tonne was imposed till October 15 on basmati rice shipment to restrict ‘illegal shipment of white non-basmati rice in the garb of premium basmati rice.’

The government is likely to reduce the minimum export price (MEP) of basmati rice to $ 850/tonne from $ 1200/tonne imposed in August following a series of consultations with exporters, farmers and state government officials in the key growing states of Punjab, Haryana and Uttar Pradesh.