India restricts rice exports as commodity prices surge

India imposed controls on exports of several varieties of rice on Friday, in a move likely to affect the global market for one of the most commonly eaten staple foods as commodity prices surge following Russia’s invasion of Ukraine.

The country — the world’s leading exporter of rice, accounting for about 40 per cent of the global trade — imposed a 20 per cent duty on unmilled white rice, husked brown rice and semi-milled or wholly-milled rice. The restrictions do not apply to basmati rice, India’s best-known variety of the grain.

The finance ministry announced the move late on Thursday, saying that “circumstances exist which render it necessary to take immediate action”.

Prime Minister Narendra Modi’s government has taken steps to shore up food security and constrain inflation caused by the supply disruptions of the Covid-19 pandemic and the war in Ukraine.

Ashok Gulati, a professor at the Indian Council for Research on International Economic Relations, said the export curbs would “help tame the domestic inflation in cereals”. 

“India has been exporting almost 40 per cent of the global trade, and that brought down global prices,” he said. “Part of this competitiveness comes from huge subsidies on fertiliser and power, and this is an effort to recover part of those subsidies.” 

India’s monsoon rains have been uneven this year, raising concerns about a drop in rice production and higher food prices at a time when the costs of imported foodstuffs are rising.

Inflation is running at about 7 per cent, above the 4-6 per cent target band set by the Reserve Bank of India, which has increased lending rates three times this year in a bid to contain prices.

India imposed restrictions on exports of wheat and sugar this year, but had held off doing the same for rice, for which prices have not risen as quickly as some other foods.

India exported $8.8bn worth of rice in the 2020-21 financial year, the latest full year for which statistics are available. Its biggest markets for non-basmati rice included Nepal and Bangladesh, the United Arab Emirates, Iraq, Malaysia and west Africa.

Vietnam and Thailand are the next largest exporters of rice and are expected to step up their own exports of the grain.

The Thai government mooted the idea of developing a cartel with Vietnam and other south-east Asian producers this year that would have boosted their pricing power, but the plan has not materialised.