India exports rice to 140 countries of the world and accounts for 40% of the global rice trade. This makes it a significant player in the commodity and the fact that the next 3 top suppliers combined export less than what it does, makes it indispensable.
But what is more intriguing is the fact that India has put a ban on the exports of ‘non Basmati white rice’, which accounts for 75-80% of the total rice exports done by the country. Government has repeated the usual suspects behind this move – countering inflation and keeping the domestic price levels in check.
Fact check: it is true that inflation is high. Prices have increased by 11% in the past one year, and by 3% in the past one month.
However, a more nuanced and clever diplomatic game is at play in all this.
Food Corporation of India (FCI) is the nodal agency for procurement, storage, and distribution of grains in the country. As per reports, it had ~25.2 MT of rice and was due to receive additional ~19 MT from millers as at 1st April 2023. This means it had more than thrice the national buffer requirement of ~13.5 MT and this was before the new Kharif crop was planted (to the uninitiated: Kharif crop are sown before monsoon and paddy, being a water intensive crop, is majorly sown during this crop cycle).
Well, what then is the fuss all about? Why has India banned exports? It could easily increase the supply and bring the prices down, but instead India has decided to ban exports.
In the humble opinion of this writer, the reasons for this are as follows:
- The western block of developed countries had last week blocked the extension of the ‘Farmer Crop Subsidy Clause’ at the WTO. This clause gives developing countries the right to provide subsidy to its farmers and also procure the produce at ore determined rates under a national policy. India, being one of the biggest beneficiary under this clause, strongly opposed this move and countries like China, South East Asian nations, and many developing countries from Africa and LatAm rallied behind it. However, a deadlock has prevailed ever since.
- Russia has recently backed out of the grain deal that was brokered last year by the UN and Turkiye. This deal allowed grain shipments from Ukraine, which is one of the biggest grain suppliers in the world.
The effects of this are very severe. No grain supply from Ukraine means global food inflation and a ban of rice exports from India means an additional pressure by the rice eating countries on other crops that are actively consumed by the developed countries.
In a nutshell, India has played a very strong hand in the game of Geopolitics. It has taken a short term hit on its exports, but it has ensured a submission towards it’s demands at the global stage. As treacherous as it may sound, but India has skillfully played a move that should and ideally would lead the developed countries to a submission and ensure that India’s nation interests reign supreme even in a turbulent environment.
Let me know your thoughts.