India’s rice export ban: Asian countries will be hit hard – and those who benefit


Rice production in India has fallen by 5.6% year-on-year from September in the face of below-average monsoon rain, which has affected the harvest, Nomura said.

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India, the world’s largest rice exporter, has banned the shipment of broken rice — a move that Nomura says will reverberate across Asia.

In an effort to keep domestic prices in check, the government banned the export of broken rice and imposed a 20% export tax on several varieties of rice from September 9.

Nomura said the impact on Asia will be uneven and the Philippines and Indonesia are the most vulnerable to the ban.

India accounts for about 40% of global rice shipments and exports to more than 150 countries.

Exports reached 21.5 million tons in 2021. That’s more than the total shipment of the next four largest exporters of the grain – Thailand, Vietnam, Pakistan and the United States, Reuters reported.

But production has fallen 5.6% year-on-year from Sept. 2 in light of the below-average monsoon rain, which affected the harvest, Nomura said.

For India, July and August are the “most crucial” months for rainfall, as they determine how much rice is sown, said Sonal Varma, chief economist at the financial services firm. This year, uneven monsoon rain patterns during those months have reduced production, she added.

Major rice-producing Indian states such as West Bengal, Bihar and Uttar Pradesh will get 30 to 40% less rain, Varma said. Although rainfall increased towards the end of August, “the slower the sowing” [of rice] the greater the risk that the yield will be lower.”

Earlier this year, the South Asian nation curbed wheat and sugar exports to contain rising local prices as the war between Russia and Ukraine rocked global food markets.

Most affected

The Indian government recently announced that rice production could fall by 10 to 12 million tons during the southwest monsoon season between June and October, meaning crop yields could fall by as much as 7.7% annually, Nomura said.

“The impact of a rice export ban by India would be felt both directly by countries importing from India and indirectly by all rice importers, due to the impact on global rice prices,” said a recently released Nomura report.

Findings from Nomura show that the price of rice has remained high this year, with prices rising in retail markets at around 9.3% year-on-year in July, compared to 6.6% in 2022. Consumer price inflation (CPI) for rice also increased 3.6% year on year from July, up from 0.5% in 2022.

The Philippines, which imports more than 20% of its rice consumption needs, is the country in Asia most at risk from higher prices, Nomura said.

As Asia’s largest net importer of the commodity, rice and rice products account for 25% of the country’s food CPI basket, the highest share in the region, according to Statista.

Inflation in the country was 6.3% in August, according to data from the Philippine Statistics Authority — above the central bank’s target range of 2% to 4%. In light of that, India’s export ban would deal an additional blow to the Southeast Asian nation.

Likewise, India’s rice export ban will also harm Indonesia. Indonesia is probably the second worst affected country in Asia.

Nomura reported that the country relies on imports for 2.1% of its rice consumption needs. And rice makes up about 15% of his food CPI basket, according to Statista.

However, for some other Asian countries, the pain is likely to be minimal.

Singapore imports all of its rice, of which 28.07% will come from India by 2021, according to Trade Map. But the country is not as vulnerable as the Philippines and Indonesia as “the share of rice in the” [country’s] CPI basket is quite small,” Varma noted.

Consumers in Singapore tend to spend “a larger portion” of their spending on services, which seems to be mostly the case for higher-income countries, she said. Low- and middle-income countries, on the other hand, “tend to spend an even greater proportion of their spending on food.”

“The vulnerability needs to be viewed from the perspective of both the impact on consumer spending and country dependency [are] on imported foods,” she added.

Countries that benefit from this

On the other hand, some countries may be beneficiaries.

Thailand and Vietnam will most likely benefit from the ban in India, Nomura said. That’s because they are the world’s second and third largest rice exporters, making them the most likely alternatives for countries looking to fill the gap.

Vietnam’s total rice production was about 44 million tons in 2021, with exports of $3.133 billion, according to a report published in July by research firm Global Information.

Data from Statista shows that Thailand produced 21.4 million tons of rice in 2021, an increase of 2.18 million tons from the previous year.

With the increase in exports and India’s ban exerting upward pressure on rice prices, the total value of rice exports will increase and these two countries will benefit.

“Anyone currently importing from India will want to import more from Thailand and Vietnam,” Varma said.

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