Pakistan Benefit Restriction — Can Pakistan benefit from the restriction on rice exports in India? — full coverage and analysis on Nai Khabar. Below we break down the key facts and what this development means.
“On the last Friday, I learned from friends that there is a shortage of rice in nearby stores. I thought it was just a rumor because I knew that India had a good rice production, so it couldn’t be true. However, messages on WhatsApp started coming from friends and relatives, saying that both rice and flour were unavailable. Later, when I went to the shop, I saw that the rack where rice and flour were kept was empty.
“Krishna B Kumar, who has been living in the state of Dallas in the United States for the past 12 years, says that he has never seen such a situation. He says, ‘Neither rice is available, nor flour, and wherever available, it is being sold at two to three times higher prices.'”
On July 20th, the Indian government imposed an immediate ban on non-basmati white rice, which is the largest category in the country’s rice exports. This decision was taken to control the increasing demand and prices of rice in the country. It should be noted that India is the largest rice-producing country in the world, and this decision could potentially lead to an increase in rice prices in the global market.
Why did India have to take this step? According to the Indian government, there has been a continuous increase in rice prices in the local market. Within one year, rice prices saw an 11.5% increase, and during the last month alone, there was a 3% increase. To curb the rise in rice prices in the local market and ensure availability of rice, the government had previously imposed a 20% export duty on non-basmati white rice on August 8th last year. However, despite this duty, there was still an increase in the export of white rice.
The production of white rice in India increased from 33.66 lakh metric tons in March 2021-2022 to 42.12 lakh metric tons in 2022-2023 (September-March). In the current fiscal year 2023-24 (April-June), the white rice production was approximately 15.54 lakh metric tons, which is 35% higher compared to the previous year’s production during the same period (April-June).
The government attributes this rapid increase in rice production to changing geopolitical and climatic conditions worldwide, including phenomena like El Niño, which have affected rice-producing countries.
However, India has not imposed any restrictions on the export of Basmati rice.
In an interview with BBC, Rajeev Kumar, the Executive Director of the Rice Exporters Association of India, stated that “The price of rice has decreased by 4 rupees per kilogram at the national level, hence the government’s efforts to reduce the price of rice have been successful. However, Thailand and Vietnam have increased the prices of rice by 10 percent, which will have an impact on global food prices. Our real competition is with Thailand and Vietnam.”
So, is the price of rice really increasing in the global market?
The International Monetary Fund (IMF) has said that restrictions on India’s rice exports could have an impact on global food inflation. The IMF’s Chief Economist, Pierre-Olivier Gourinchas, said, “We will ask the Indian government to lift the restrictions on rice exports because it can have implications for the world. It could have an effect similar to the restrictions on Ukrainian exports, which led to an increase in wheat prices in other countries. This will affect prices at the global level this year.”
This week, the price of rice exported from Vietnam reached its highest level in the past decade, making Vietnam the third-largest rice exporting country in the world after India and Thailand. Rajeev Kumar stated, “In my opinion, it is better for farmers to have higher demand for their products. When you impose restrictions on exports, it is evident that the demand for their products decreases. Farmers will not get a good price, and it directly affects their livelihood.”
He further added, “India supplies rice to 165 countries globally, which is the result of hard work by rice traders. Due to this, the demand for Indian rice has increased worldwide. If we look at the global trade, India holds a 42% share in the international market. If this restriction continues for a long time, we may lose this market. India is a major player in this market, and if it steps back, prices will rise worldwide. Rajeev Kumar also expressed concern about China and the Philippines, who typically buy rice from Thailand and Vietnam, as they will now have to purchase rice at higher prices.
Former President of the All India Rice Exporters Association, Vijay Setia, also shared his concerns with BBC, stating that this restriction will harm India’s image. Countries that import Indian rice may experience price hikes, benefiting countries like Vietnam, Pakistan, and Thailand, as they can sell their rice at higher prices. World trade includes around 45 million tons of rice exports, out of which India’s share is 22 million tons. This includes both basmati and non-basmati rice. If you subtract 18 million tons from this, you can estimate the impact it will have on the international market.”
Can the restriction on India benefit Pakistan?
Pakistan is also a major exporter of rice, but its exports are comparatively lower than India’s. According to Haseeb Ali Khan, the Senior Vice Chairman of the Rice Exporters Association of Pakistan, during the fiscal year 2021-2022, Pakistan exported 4.5 million tons of rice, of which 3.7 million tons were non-basmati rice. This resulted in a foreign exchange earnings of $2.64 billion. However, in the fiscal year 2022-2023, Pakistan’s rice exports decreased, with 3.1 million tons of non-basmati rice exported and earning $2.1 billion in foreign exchange. The reasons for this decline were attributed to factors such as floods and heavy rains, as well as unrecorded rice exports to Iran and Afghanistan amounting to 300,000 tons.
Another reason for the decline was a decrease in the agricultural land dedicated to rice cultivation. However, Haseeb Ali Khan suggests that Pakistan could benefit from the restriction on India’s white rice exports. He mentioned that favorable weather conditions have been observed this year, and if there are no flood-related issues, Pakistan is hopeful of setting a new record for rice exports. The cultivation area for rice this year is reportedly around 6 million acres.
However, the extent of this benefit also depends on how long India’s restriction on rice exports remains in effect. As per the information available to them, the restriction is in place until August 30. Pakistan’s rice harvest typically starts at the end of August.
Haseeb Ali Khan also noted that there is already a trend of increasing rice prices in the global market. Last year, rice was priced at around $370 per ton, but this year, it is expected to be close to $500 per ton. Due to India’s imposed restriction, there is anxiety in the global market, and buyers are making advance orders from other countries like Indonesia. One dealer has reportedly already booked an advance order for 30,000 tons of rice from Indonesia.
