In this edition of ITEN Global Trade Insights, we delve into the recent developments surrounding India’s ban on non-basmati rice exports. Imposed on 22nd July, 2022, the ban is India’s response to soaring domestic rice prices and has significant implications for global food security.

This report elucidates the repercussions of this decision on international trade and food security, particularly highlighting the plight of countries heavily reliant on Indian rice. We also shed light on the lessons to be learnt by other nations like Ghana and how they can mitigate potential fall-out from such policy changes. Join us as we navigate through these complex ramifications, offering a comprehensive understanding of this critical global trade issue.

India’s recent imposition of a ban on non-basmati white rice exports, a move meant to protect domestic food security amid surging inflation and climate-induced crop failures, has sent tremors through the global food markets. This report deciphers the far-reaching implications of India’s decision, its impact on global food prices, and the ensuing lessons for countries, particularly Ghana.

India is the world’s leading exporter of rice, accounting for up to 40 percent of global rice exports. In July 2023, India imposed restrictions on exports of specific Indica white rice, citing concerns about domestic food security. This move has sent shock waves through the global food market, raising concerns about the impact on food security in other countries.

India’s export restrictions are likely to have a significant impact on global rice prices. The country is a major supplier of rice to African countries, and the ban is expected to lead to higher prices for rice in these countries. This could have a disproportionate impact on poor and vulnerable populations who rely on rice as a staple food.

The ban is also likely to have a knock-on effect on other food prices. Rice is a major input in many food products, such as bread, pasta and noodles. The higher cost of rice is likely to lead to higher prices for these products, which could further impact food security in vulnerable populations.

India’s dilemma

Seeking to safeguard domestic food supplies and control spiralling living costs, India’s Government has banned non-basmati rice exports, leveraging this decision as a shield against potential price escalations. This resolution comes at a critical juncture when India braces for national and state-level elections.

The Indian Government has defended the ban, arguing that it is necessary to ensure food security for its own citizens. However, critics argue that the move is protectionist and will only serve to drive up prices for rice in the global market. They also point out that India has a history of imposing export restrictions on food commodities, which has often had negative consequences for other countries. It remains to be seen how India’s export restrictions will impact global food security. However, it is clear that the move has raised concerns and could have a significant impact on the international rice market.

The global impact

With India contributing over 40 percent to global rice exports, this ban directly affects nations, especially in Asia and Africa, which heavily rely on Indian rice. Further compounding the situation is Russia’s recent backing out of an agreement ensuring the safe passage of Ukrainian grain, setting the stage for potential spikes in global food prices and pressure on supply chains.

The FAO Food Price Index showed that global food prices rose by 1.3 percent in July 2023. This was the first increase in three months, and it was driven by rising prices for cereals, vegetable oils and dairy products. The FAO All Rice Price Index increased by 2.8 percent in July 2023 to reach its highest level since September 2011.

This was driven primarily by price increases in the Indica market segment, which were further amplified by India’s ban on non-parboiled Indica exports. The ban is expected to lead to a shortage of rice on the global market, which could lead to further increases in rice prices and have a significant impact on food security in countries that rely on rice imports. This is a major concern for policy-makers around the world.

Ghana’s food security concerns

Given Ghana’s considerable dependence on Indian rice – 36 percent of rice imports originate from India – this ban poses a significant threat to its food security. With an import growth rate of 10 percent from 2018 to 2022 for semi-milled or wholly-milled rice from India, Ghana may need to reconfigure its import strategy and diversify its rice import sources to offset potential deficits.

ITC data proposes alternative suppliers like Vietnam, Thailand, China, Pakistan and the United States of America; however, such transitions could come bundled with new challenges, such as price variations, trade barriers and quality differentials.

Takeaways for Ghana and other nations

1. Emphasise food security measures

Robust policies to protect domestic food supplies against market and climate volatility are essential for food security. This includes measures, such as:

• Maintaining strategic food reserves to buffer against temporary supply disruptions.
• Providing financial support to farmers to help them weather difficult times.
• Investing in research and development to develop new crop varieties that are more resistant to pests and diseases.
• Promoting sustainable agricultural practices that can help to mitigate the effects of climate change.

2. Foster climate resilience

Investment in climate-resilient agricultural practices is vital to cushion against unpredictable weather patterns and associated crop losses. This includes measures, such as:

• Adopting drought-tolerant crop varieties.
• Using water-efficient irrigation techniques.
• Building flood control infrastructure.
• Developing early warning systems for extreme weather events.
  

3. Diversify food supply chains

Reliance on a single country or a few countries for staple food imports can create vulnerabilities. Diversification can mitigate risks linked to policy shifts or production shortages. This includes measures, such as:

• Importing food from a variety of countries.
• Investing in domestic food production to reduce reliance on imports.
• Supporting regional trade agreements that can help to facilitate the flow of food between countries.

4. Enhance local agricultural investment, particularly in rice sub-sector

Greater emphasis on local agriculture, including farmer support, subsidies and improved farming techniques, can diminish import dependence. This includes measures, such as:

• Providing financial assistance to farmers to help them purchase inputs and equipment.
• Investing in agricultural research and development to develop new crop varieties that are more suitable for local conditions.
• Providing technical assistance to farmers to help them adopt sustainable farming practices.

In addition to these measures, it is also important to raise awareness of food security issues and encourage people to make informed choices about their food consumption. This includes promoting the consumption of local, seasonal foods and reducing food waste.

Conclusion

India’s non-basmati rice export ban highlights the intricate interconnectedness of global food markets, emphasising the urgency of strategic planning in the face of climate change and food security challenges. It serves as a reminder for nations like Ghana to focus on diversifying food supply chains, investing in local agriculture, and developing robust food security policies to ensure a sustainable and resilient food supply for their populations.