Chawal Is The New Oil

Source: The post is based on the article “Chawal Is The New Oil” published in The Times of India on 4^th August 2023.

Syllabus: GS 3 – Indian Economy –Growth & Development

Relevance: About ban on the export of rice

News: Russia’s decision to abandon the Black Sea grain deal is contributing to the global food price volatility. Further, India’s ban on exporting certain varieties of rice is further exacerbating the situation as India has a 40% share of world rice exports.

What are the reasons for imposing a ban on the export of rice?

Political Reasons: There are political reasons like the upcoming election which has made the government control the rising prices domestically.

Strategic Reasons: The government is using export restrictions not only for managing domestic inflation but also as a leverage tool.

In 2022, despite the wheat ban, India made exceptions for discretionary export approvals to support neighboring and vulnerable countries.

As a result, Egypt, which imported 80% of its wheat requirements from Russia and Ukraine, became the largest recipients of Indian wheat.

This support from India in the midst of the crisis helped in improving the bilateral relations between the two countries.

Hence, India strategically utilized a commodity to safeguard its political interests and it is likely to adopt a similar approach for the recent rice export ban.

Read More: India’s rice export curbs could prove too myopic for its good

What may be the impact of ban on farmers?

The ban may upset those farmers who benefit from high-priced exports.

However, the government has taken this political risk because the number of large farmers with surplus for export or to sell under the MSP is relatively small compared to the majority of Indian subsistence farmers.

Moreover, while the MSP offers protection to farmers during periods of low global cereal prices, export curbs serve as a trade-off during years of high global prices.

What lies ahead?

Using essential commodities, including food for securing geo-political interest is not a new concept. Oil has been often used to secure geo-political interest by the OPEC countries in the response of geopolitical events.

Even the American President Eisenhower used food to support newly independent developing countries and gain their allegiance against communism.

Hence, prioritizing critical international relationships through a focused export program offers India greater benefits than a free market approach in cereals trade.