In the W2 of September, the Indian government imposed several restrictions on rice exports by banning the export of 100% broken rice, which is predominantly used as cattle feed, and imposing a 20% export duty on several other grades of rice. India took this unexpected step in response to both a rise in domestic prices and decreased rice sowing in several key rice-producing states because of a sluggish monsoon. With limited rice supply in the market, the country has in general recorded a fall in exports as local demand and local prices continue to remain high. The fall in exports and now the trade restrictions could have a strong impact on the global rice supply as India accounts for about 40% of the international rice supply. India exports rice to more than 150 countries, and any reduction in its shipments is likely to put an upward pressure on food prices, which are already on the rise due to the changing climate, the frequent occurrence of droughts and heat-waves, and Russia's invasion of Ukraine.Table 1 summarizes the category of Indian rice exports and the corresponding duty imposed.
India is a crucial supplier of broken rice (less expensive) to some African countries that use it as a staple food. China was the top buyer of India’s broken rice, using it for animal feed as well as to make noodles and wine. Apart from the ban on exporting broken rice, a 20% duty on non-basmati exports is going to make Indian rice shipments uncompetitive in the world market. Out of the total non-basmati exported, almost 55% went to African countries—including Benin, Ivory Coast, Senegal, Togo, Guinea, Madagascar, Cameroon, Djibouti, Somalia, and Liberia. As supply from India falls for rice, it is anticipated that the prices for basmati rice and parboiled rice may also climb in the coming weeks due to inflationary pressure in the market.
It is expected that as rice importing countries start wrestling with dwindling supplies to feed their populations, they are likely to look to Vietnam and Thailand, the second and third-largest rice exporters, to meet their demand. The ban is expected to terribly impact India’s position in the world market as its competitors, Thailand, Vietnam, Pakistan, and Myanmar, tap the opportunities with quality rice and lower prices. The market dynamics will become more clear in the coming months when the rice-importing countries actually start feeling the brunt of the shortage caused by these trade bans. From the supply side, the current export restrictions may not necessarily improve the situation materially, implying that there remains an upside risk to rice prices. India might take actions to further curb rice exports, particularly in categories still exempt, which can shake the global rice trade dynamics.