India’s Balancing Act:

Controlling Rice prices amidst

a potential Global shortage
Holiday Homework
By Vikram Prabhuram
XII – G1, 38
1.1: Introduction

In July 2023, the worlds largest exporter of rice, India, restricted its exports of
Rice to the world by about 95% from the year before. [1]
India finds itself at a crossroads. While ensuring domestic food security is
paramount, India’s actions in the rice market have significant global
repercussions.

The Rationale behind the ban

India’s decision to not only curb exports heavily, affecting developing countries
especially, but also to store over thrice the required amount of buffer stock in
rice. [2]
This is due to a variety of reasons. Geopolitics and unfavourable weather
conditions[4] have exposed global food chains to supply shocks, resulting in
international food price inflation. This put domestic food security at risk,
making cutting exports a viable solution. Therefore, the Indian Government
restricted exports to safeguard domestic customers from price shocks and allow
farmers to enjoy competitive prices. This has caused significant impacts
domestically and globally.

The Impacts
Domestically, this could be a double-edged sword for farmers in India. While
the government hopes for a stabilizing effect on domestic rice prices, potentially
benefiting some producers, the ban specifically targets non-basmati white rice, a
widely cultivated variety. This could lead to a decline in demand for non-
basmati rice, potentially lowering income for farmers specializing in its
production. The impact might be uneven, potentially widening the income gap
between basmati and non-basmati farmers. Here, the long-term implications of
the ban on crop choices and agricultural planning remain to be seen.

Internationally, prices of rice have already flown up, reaching a near 12-year
high.[3] The restriction on non-basmati rice exports disrupts established supply
chains, potentially leading to shortages and price hikes in importing countries.
This could exacerbate food insecurity in vulnerable regions, particularly in
Africa and Southeast Asia, where rice is a staple food. The ban also raises
concerns about potential retaliatory measures from other rice-exporting
countries, further destabilizing the global market.
The Indian rice export ban is a complex issue with far-reaching consequences.
While the government seeks to ensure domestic food security, the ban's impact
on farmers, consumers, and the global market is yet to unfold fully. India has a
big part to play in controlling global rice prices, and concerns have risen over
India hoarding rice from the global market.
Close monitoring of domestic rice prices, exploring alternative market
interventions, and international cooperation are crucial for navigating these
uncertainties. The need to balance domestic needs with global responsibilities
becomes paramount. Only through a well-crafted strategy can India navigate
this situation and ensure a stable rice supply for both its own population and the
wider world.
1.2: Objectives and Purpose

This project aims to comprehensively analyze the multifaceted consequences

and reasoning of India's rice export ban, enacted in July 2023. It delves beyond
the immediate surface-level impacts, seeking to understand the long-term
ramifications for Indian farmers, consumers, and the global food market.
This project seeks to provide a comprehensive and nuanced understanding of
the consequences of India's rice export ban. With the objectives stated below,
the purpose of this project is to –
 Affect Policy Decisions
 Inform Stakeholders
 Enhance knowledge of readers.
1.2.1: The Rationale
 Analyze official government communications and policy documents.
 Identify potential weather or geopolitical causes.
 Identify deeper reasonings.
1.2.2: Alternate Policy Options
 Research alternative options, like buffer stock management or targeted
subsidies.
 Analyze the potential impacts of these alternates.
1.2.3: Domestic Market Analysis
 Research impacts on both rice producers and consumers.
 Assess potential changes in rice consumption and potential unintended
consequences, like shortages.
 Evaluate the effectiveness of the policy for the present and the future.
1.2.4: International Market Analysis
 Assessing the shifts in prices and demand of rice post-restrictions.
 Predicting the long-term impacts on the global market.
1.2.4: Envisioning Long term shifts
 Predicting potential policy.
 Investigate possibilities of new trade alliances or partnerships.
1.3: Research Questions

The following are the Research Questions to help guide our project.

1. Were there any major weather events or geopolitical situations impacting

global food supplies in the months leading up to the ban?
2. Beyond immediate food security concerns, were there any underlying
economic or political motivations for the rice export ban?
3. Could a combination of alternative strategies have achieved similar goals
as the export ban while minimizing disruptions to the global market?
4. Did the Export ban minimize supply shocks to the consumers?
5. How has the affordability and accessibility of rice changed for different
income groups in India since the ban?
6. Was the export ban successful in providing better prices for farmers?
7. What were the positive and negative ramifications of the ban on
Domestic market?
8. What policies will/can India implement in the future concerning this
situation
9. What were the changes to the global rice price?
10.What were the changes made to global supply chains?
11. Is there a risk of retaliatory measures from other rice-exporting countries
in response to the restriction?
12. How will India re-enter the export market of rice after the ban? (if/when
they ever do)
1.4: Relevance and Importance

Rice, the lifeblood of billions, faces a situation of significant uncertainty due to

India's export ban. This research project delves into the complexities
surrounding this ban, not just for its domestic implications but for its far-
reaching consequences on the global food market. Here's why this topic is
critically relevant and demands our focused attention.
India is the world's largest producer of rice, accounting for an average of 120
million metric tons annually – that's roughly 22% of global rice production.[5]
India has been the world’s largest rice exporter for over a decade, accounting for
an average of 40% of the global rice trade.
India is also a part of a lot of Global supply chains, like exporting to the world’s
largest importer of rice, China or to developing countries in Africa.
World rice prices have also gone up by 22% since the ban, showing the impact
of India’s presence in the Rice market.[6]

India’s restriction of exports is not only relevant to the global market, but also to
the largest population in the world. The rice industry employs millions of
farmers and contributes substantially to India's agricultural GDP. The ban's
effectiveness in controlling domestic rice prices and its impact on farmer
incomes are crucial factors to analyze.
If the ban disrupts the domestic market significantly, it could lead to unintended
consequences like food shortages or economic hardship for rice farmers, further
complicating the situation.
It is also important for the consumers, due to the threat of supply shocks and
rising food prices, due to many geopolitical and environmental factors.
Rice is also important to study in India because of the depleting groundwater
table and the threat of it drying up due to all the rice cultivation.
Understanding these domestic intricacies alongside the global ramifications is
essential for crafting a well-rounded analysis of the rice export ban's true
impact.
1.5: Review of Literature

1.5.1: ORF Research Foundation - Leveraging the Rice Export Ban

for Crop Substitution in India [7]

Summary: This research paper by the Observer Research Foundation examines

the potential impact of India's rice export ban on crop cultivation patterns. The
authors argue that the ban, while aiming to control domestic rice prices, could
create opportunities for farmers to shift towards alternative crops like pulses or
oilseeds. The paper explores the potential benefits of crop substitution, such as
improved farm incomes, diversification of agricultural production, and reduced
pressure on water resources. However, the authors acknowledge the need for
government support and market reforms to ensure a smooth transition for
farmers.
Strengths: This paper offers a unique perspective by analyzing the potential
long-term impact of the ban on crop choices. It highlights the possibility of
using the ban as a catalyst for agricultural diversification in India.
Weaknesses: The paper lacks empirical data on the actual extent of crop
substitution since the ban's implementation. Additionally, the long-term viability
and profitability of alternative crops for farmers require further exploration.

1.5.2: IFPRI Blog - India's Export Restrictions on Rice Continue to

Disrupt Global Markets, Supplies, and Prices [8]

Summary: This article focuses on the international repercussions of India's rice

export ban. The authors analyze data showing a significant rise in global rice
prices since the ban's enactment. They argue that the ban has disrupted
established supply chains, leading to shortages and price hikes in rice-importing
countries, particularly in Africa and Southeast Asia. The blog post emphasizes
the potential threat to global food security posed by the ban, especially for
vulnerable populations reliant on Indian rice imports.
Strengths: This source provides timely data and analysis on the immediate
global market effects of the ban. It highlights the potential consequences for
food security in developing countries.
Weaknesses: The blog post offers a shorter analysis and may not delve into the
complexities of the domestic factors that led to the ban.

1.5.3: Cogent Economics and Finance: Trade determinants and

opportunities for Indian rice: a dynamic panel gravity model
perspective [9]

Summary: This research article explores the determinants of India's rice trade
using a dynamic panel gravity model. The authors analyze factors like
production costs, infrastructure, trade policies, and geographic proximity to
understand what influences India's rice exports and imports. The study identifies
transportation costs, infrastructure deficiencies, and non-tariff barriers as
challenges to Indian rice exports. It also highlights potential opportunities for
India to increase rice exports to certain regions by improving infrastructure and
negotiating favorable trade agreements.
Strengths: This article employs a quantitative approach to analyze the
determinants of India's rice trade.
Weaknesses: It doesn't directly address the ban's impact on trade determinants
or future opportunities. However, it provides valuable background information
on the pre-ban landscape of Indian rice trade.