India banned export of wheat since May 2022, in the wake of the Russian invasion of Ukraine and global grain crisis. In July 2023, shortly after the collapse of the Black Sea Grain Deal, India banned the export of non-basmati white rice. So let’s understand what’s happening.
In the 1950s and 1960s, India was a net importer of foodgrains. After the Green Revolution, India became a net exporter, thanks to the high yielding varieties of wheat and rice. This was pivotal to alleviate food shortages as occurred, for example, in the Bengal famine of 1943 and the Bihar famine of 1966-1967. Centralised procurement of wheat and
non-basmati rice at MSPs motivated farmers to increase the gross cropped area of wheat and rice, especially in northern India.
The below graph shows the increase in rice and wheat production in India from FY 1951 to FY 2022.
Data Source : Agricultural_Statistics_at_a_Glance_2022_0.pdf (agricoop.nic.in)
Both have increased but rice has increased 6.5 times whereas wheat has increased a whopping 17.5 times. It is expected that in the future, wheat production will surpass rice. Another interesting fact is although more than half of Indians consume rice as staple food, total consumption is still around 70 mn tons, and out of the remaining, around 23 mn tons were exported in FY 22 (40% of global exports) and rest is stocked.
Infact India's rice production has shown a compound annual growth rate (CAGR) of 2.6% in the past decade, while consumption has grown at 1.3%.
Its interesting to note that with increasing production of rice and wheat, there has been a decline in proportion of coarse cereals to total cereals between 1961 and 2011 from 25% to 5%
Decreased consumption of coarse cereals has affected iron intake.
Anemia is a major public health problem in India affecting more than half of all women and children under 5 years.
So recently , interest has risen in increasing production of coarse cereals for their nutritive value, along with their water efficiency, climate resilience in semi arid conditions, and ability to grow on poor soils. In addition, coarse cereals are C4 crops and consequently less susceptible to reduced iron, zinc, and protein content than C3 cereals (eg, rice, wheat) as atmospheric concentration of carbon dioxide rises.
Although cereal production in India has increased manyfold since the Green Revolution, but population has increased faster. So at a national scale, the contribution of cereals to total per capita calorie consumption declined on average from 81% in 1983 to 70% in 2011 for rural households and from 70% to 60% for urban households. Due to rise of processed food consumption among rising middle class, the more well-off families today are becoming less dependent on cereals for their calorie intake.
Ok so there are 4 types of rice in India :
Traditionally Basmati Rice dominated India’s export basket, but since last two years it has dropped to the third number as depicted in the table above and graph below. Perhaps the demand of non-basmati varieties from neighbouring countries, Africa and also the Indian diaspora abroad may have caused this.
Causes and objectives behind the ban
Food inflation in India => Tomato, Onion, etc. prices rose since May 2023. In July 2023, CP inflation rose to 7.44% and Food inflation to 11.5%. Ref. to Beacon Podcast for details.
2023 is an El Nino year => reduced rainfall in Asia & India
Indian Elections 2024 => Govt. can’t afford to have depleted cereal stocks
Collapse of Black Sea Grain Deal => Russia no longer providing its ports for export of Ukrainian grains to the rest of the world
Trading by China => It was suspected China is reselling Indian rice at higher price to SE Asian countries, rather than self-consuming it
Effects of the ban
Domestic prices cooled - Domestic supplies assured. Hence domestic prices expected to drop.
Farmers demotivation - Domestic production may decrease since the ban is declared during the paddy sowing season. So farmers may shift to other crops (but it may be good). But it can lead to further domestic inflation of both non basmati and basmati varieties, which goes against the very objectives of the ban.
Demand for MSP hike (since export profits are hit)
Global grain crisis
Hoarding and speculation
Diplomatic relations of India maybe affected. But India is allowing rice export to countries in dire need on request basis..eg Bhutan and Indonesia
Humanitarian cause - Africa, Nepal (99% dependent) etc. are main importers of Indian rice. As India is a leader of the global south, it might backfire India trying to stop rice to these developing countries. But it should be noted that India exported rice during the Covid crisis when others like Thailand stopped exporting. Moreover the export-banned non basmati white rice is only 25% of India’s rice exports.
Opportunity for Thailand and Vietnam to make windfall profits by exporting rice at higher prices.
Way forward
Several factors are seen to have guided the cereal ban decision. Many critics are calling it as a knee-jerk reaction to inflationary pressures. They say that Indian rice consumption of 70 mn tonnes annually could be well served despite exports, due to sufficient production & 4 times the prescribed stock of 13 mn tonnes.
Export traders are suggesting that India can hike export duties instead of blanket ban. The high international prices would still enable export profits.
But it should be re-emphasized that India hadn’t stopped rice exports during Covid time and the present export ban would affect only 25% of India’s rice exports. Moreover domestic food security and inflation spike are genuine concerns behind this move.
Now the possibility of revoking this ban may strongly depend on the kharif (aman) rice harvest in October. Till then, keep track of the news and if you haven’t already, do subscribe to Beacon.