India considers curbs on exports of commodity to cool inflation

NEW DELHI • India's potential clampdown on exports of broken rice shows the world's top shipper trying to thread the needle of cooling domestic inflation without causing global panic.

New Delhi is discussing curbs on broken rice exports, which account for a little under 20 per cent of India's rice shipments abroad.

While such a move could further disrupt global crop markets and worsen a hunger crisis, the impact is less severe than if it were to restrict all exports of the grain.

India accounts for 40 per cent of the global rice trade so any change in its export policy has huge implications for the billions of people who depend on the staple.

During the 2007-08 food crisis, India blocked exports of non-basmati rice, leading other producers like Vietnam to follow suit. That sparked panic buying, sending prices to over US$1,000 a tonne, more than double the level now.

India has responded to rising global commodity prices this year by limiting sugar and wheat exports. After Russia's invasion of Ukraine, Indian Prime Minister Narendra Modi declared that his country was ready to "feed the world", but changed course weeks later by restricting wheat exports to protect its own food supplies.

This drew criticism from farm ministers of the Group of Seven nations, who said that such measures make the world's food crisis worse.

India's rice production is under threat from a lack of rain in some major growing areas, including West Bengal and Uttar Pradesh, which account for a quarter of nationwide output. Planting has declined about 8 per cent this season.

With the potential trade curbs on broken rice, only about a fifth of India's rice exports will be affected. This type of rice is fragmented during processing.

The top buyers are China, which uses the grain for animal feed, and some poor African countries that import the grain for food as it tends to be cheaper.

Any curbs on broken rice will hurt a few countries, but would not cause a full-blown crisis, said Professor Satish Deodhar at the Indian Institute of Management Ahmedabad. But Ms Garima Kapoor, an economist with Elara Capital, said global costs will likely climb given that India ships more rice than the next four biggest exporters combined.

BLOOMBERG