India restricted the export of broken rice and imposed a tax on other major varieties of rice in a move that would add to global inflationary pressure and exacerbate the food supply disruption caused by the Russia-Ukraine conflict. The country levied a 20% tax on the export of white and brown rice, which account for 60% of India’s global sales. Basmati and parboiled rice are exempt from the ban.
Why Has India Put a Ban on Rice Exports?
The production of rice in India was affected by a scanty rainfall during monsoon. The poor harvest of rice comes after a season when wheat output was also unexpectedly low. India is self-sufficient in food grain production, and the public distribution system that ensures food security for low-income households mostly relied on wheat. As wheat supplies decreased, rice covered the shortfall. With the ban on rice exports and the imposition of additional taxes, India took a third and significant step to restrict food exports because of concerns about supply shortages and inflation. In May 2022, India restricted the export of wheat and sugar owing to concerns that output was being affected by heat wave in the country.
Impact on the Indian Economy
India’s move to halt the export of broken rice could result in the country losing its market share as countries that struggle to feed their people could switch to Vietnam and Thailand, the second-largest and third-largest exporters of rice, respectively. Rice loading at Indian ports stopped, and there are close to one million tonnes of grain trapped there due to the refusal of buyers to pay the additional 20% export charge on top of the negotiated contract price. There are sufficient stockpiles of rice in government warehouses, but less procurement of wheat already led to an increase in the distribution of rice under the state-run free food and grain program. This could indicate a reduction in rice buffers and an increase in the prices of rice locally in the months ahead.
Global Impact
The global food supply is already under pressure from shortages of wheat, corn, and cooking oils, and is now at risk of further disruption owing to the shortage of rice. Such significant disruption in global supply, coupled with an all-time high in global consumption, would increase prices and contribute to food inflation. India is a major supplier of broken rice at a lower grade to several countries in Africa and Asia that use broken rice as a staple food. China is another major consumer of India’s broken rice, using it to make noodles, wine, and animal feed.
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