Rotting Rice in India Fuels Discontent About Modi’s Food Policy

Informed i’s Weekly Business Insights

Extractive summaries and key takeaways from the articles carefully curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Since 2017 | Week 369 | October 4-10, 2024 | Archive

Rotting Rice in India Fuels Discontent About Modi’s Food Policy

By Pratik Parija | Bloomberg Businessweek | October 4, 2024

Extractive Summary of the Article | Listen

As of late September, about 3 million metric tons of unmilled rice was in storage in Chhattisgarh, some 800 miles southeast of New Delhi, alone.  Images of decaying rice have gone viral on social media, with the country’s stockpiles reaching an estimated record amount just as this year’s harvest was set to begin.

In May 2022, to keep domestic prices in check and ensure a steady supply for a program that provides free grain for 800 million people, Prime Minister Narendra Modi began imposing restrictions on food exports, at first banning shipments of wheat and later adding curbs on rice and sugar. The moves by India, the world’s leading rice exporter, roiled international markets and angered farmers adversely affected by falling prices.

Following this year’s successful monsoon growing season, Modi’s government in September relaxed some of the restrictions—the most significant change being an end to the export ban on non-basmati white rice introduced in July 2023.  But there is still an export duty on parboiled rice and a minimum price imposed on shipments abroad of the white variety of the grain, and nothing has changed for exports of wheat and sugar.

Modi must strike a delicate balance, ensuring the welfare of farmers and keeping a lid on consumer food prices, which have increased at an average rate of about 8% this year. Ahead of this year’s general election, farmers had been protesting, demanding a legally guaranteed floor on prices. Although Modi won a third five-year term in June, his Bharatiya Janata Party lost dozens of rural seats in the vote.  Prior to state elections in October and November, the government has made other policy tweaks to placate farmers.

India’s rice exports from April to August, at 6.4 million tons, were down by 24% from the same period a year earlier, government data show. The curbs contributed to higher global prices, affecting buyers across the Middle East, Southeast Asia and Africa.

Rice stocks held by the Food Corporation of India (FCI), which buys grain from farmers at guaranteed prices and distributes to the poor for free, stood at about 32 million tons on Sept. 1, up 39% from a year earlier.  To clear some of the surplus, the government has decided to sell as much as 2.3 million tons of the rice from the state reserves to ethanol producers—a controversial practice in a country that’s No. 111 out of 125 nations counted in last year’s Global Hunger Index.

The curbs on outbound shipments may have needlessly hurt farmers, as they don’t solve high domestic food prices. That’s because a significant share of the retail cost of food comes from processing, packaging and transportation.

3 key takeaways from the article

  1. Images of decaying rice in India have gone viral on social media, with the country’s stockpiles reaching an estimated record amount just as this year’s harvest was set to begin.
  2. In May 2022, to keep domestic prices in check and ensure a steady supply for a program that provides free grain for 800 million people, Prime Minister Narendra Modi began imposing restrictions on food exports, at first banning shipments of wheat and later adding curbs on rice and sugar. The moves by India, the world’s leading rice exporter, roiled international markets and angered farmers adversely affected by falling prices.
  3. The curbs on outbound shipments may have needlessly hurt farmers, as they don’t solve high domestic food prices, which have increased at an average rate of about 8% this year. That’s because a significant share of the retail cost of food comes from processing, packaging and transportation.

Full Article

(Copyright lies with the publisher)

Topics:  India, Global Trade, Export Restrictions, Rice, Global Rice Price

Be the first to comment

Leave a Reply