India seeks to avoid panic with targeted rice export curb

NEW DELHI: India’s potential clampdown on exports of broken rice shows the world’s top shipper trying to thread the needle of cooling domestic inflation without causing global panic.
The government is discussing curbs on broken rice exports, which account for a little under 20% of the country’s rice shipments abroad. While such a move has the potential to further disrupt global crop markets and worsen a hunger crisis, the impact is less severe than if it were to restrict all exports of the grain.
India accounts for 40% of global rice trade so any change in its export policy has huge implications for the billions of people who depend on the staple. During the 2007-08 food crisis, India blocked exports of non-Basmati rice, leading other producers like Vietnam to follow suit. That sparked panic buying, sending prices to more than $1,000 a ton, more than double the level now.
India’s focus on broken rice is unlikely to see a repeat of the 2007-08 food crisis, said Peter Timmer, Professor Emeritus at Harvard University, who worked with Asian governments on their policy responses during that period.
“I actually think this is a very responsible way for India to act, and I doubt there will be much foreign criticism,” he said.
India has responded to rising global commodity prices this year by limiting exports of sugar and wheat. After Russia’s invasion of Ukraine, Prime Minister Narendra Modi declared that his country was ready to “feed the world,” but changed course weeks later by restricting wheat exports to protect its own food supplies. This drew criticism from farm ministers of the Group of Seven nations, who said that such measures make the world’s food crisis worse.
With the potential trade curbs on broken rice, only about a fifth of India’s rice exports will be affected. This type of rice is fragmented during processing. The top buyers are China, which uses the grain for animal feed, and some poor African countries that import the grain for food as it tends to be cheaper.
Strike a balance
Any restrictions on broken rice will hurt a few countries, but it won’t cause a full-blown crisis on the global market, according to Satish Deodhar, professor at the Indian Institute of Management Ahmedabad. India will want to maintain a balance between its domestic requirement and export market, he said.
India’s rice production is under threat from a lack of rain in some major growing areas, including West Bengal and Uttar Pradesh, which account for a quarter of nationwide output. Planting has declined about 8% this season.
With grim prospects for a turnaround, it’s critical to prevent a surge in local prices by ensuring ample supplies of rice, said Garima Kapoor, an economist with Elara Capital. However, that means global costs will likely climb given that India ships more rice than the next four biggest exporters combined, she said.
While India is weighing curbs on rice exports, Thailand and Vietnam — the No. 2 and 3 biggest shippers — have agreed to cooperate on raising rice prices, an adviser to the Thai agriculture minister said. Such a step is aimed at boosting farmers’ income, but in reality it would be hard to implement due to quality issues and the likelihood for some buyers to flock to alternative suppliers.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *