India’s ‘Curry Problem’: Rising Food Prices and Export Bans Raise Global Concerns
Rising Onion and Pulse Prices Create ‘Curry Problem’ in Indian Food Market
Amid cooling tomato prices, onions have surged by 25% since June in the domestic market, while pulses used in preparing lentil soup have become around 20% pricier than at the beginning of the year in India. This situation has led to what some economists are calling a “curry problem,” as the cost of a standard vegetarian meal soared by a third in July alone.
Indian Government Takes Steps to Counter Food Inflation with Export Restrictions
In response to this, the Indian government has taken action to curb food inflation. After banning wheat in May 2022, India abruptly ceased non-basmati white rice exports last month. Additionally, the finance ministry imposed a 40% duty on onions to discourage exports and enhance domestic supplies. Furthermore, with a projected decrease in sugar production this year, the possibility of a sugar export ban has increased, according to Rajni Sinha, Chief Economist at CareEdge Group.
The government’s interventions might intensify with time, as analysts suggest. For example, since the sequential export limitations on rice have yet to curb domestic rice price inflation, there’s speculation that a more comprehensive ban might be considered, as stated in a recent note by global brokerage Nomura.
However, India’s assertive protection of domestic prices raises concerns of exporting food inflation worldwide, particularly concerning rice, sugar, and onions. In the past decade, India has emerged as the world’s largest rice exporter, with a 40% market share, and the second-largest exporter of sugar and onions.
FAO Reports Indica Rice Export Ban in India Fuels Global Rice Prices Pressure
The United Nations’ Food and Agriculture Organization (FAO) highlighted the surge in its Rice Price Index by 2.8% in July, driven largely by price hikes in the Indica variety of rice, the export of which India banned. This development has contributed to “upward pressure” on rice prices from other regions, according to the FAO.
The potential ramifications of this for global food insecurity, especially among the world’s poor, could be severe. Rice constitutes a significant portion of the staple diet for many in Asia and Africa, with India being a major supplier to these markets.
Global Food Prices Complexities: Trade Restrictions, Climate Impact, and India’s Dilemma
The convergence of various market factors, such as Russia’s Black Sea Grain Initiative ending after the Ukraine invasion and extreme climate conditions, has led to elevated global food prices despite economic slowdowns in certain regions. The World Bank anticipates its food price index to average lower in 2023 due to decreased oil and grain prices, yet future trends depend on the impact of El Niño weather events, which could further pressure food markets.
Amid uncertainties, suggestions to reverse India’s export bans on key commodities have arisen from various quarters, including the International Monetary Fund. While trade restrictions could curb inflation, they might also deter trust in the global trading system and hinder India’s reputation as a reliable supplier.
Despite these considerations, India’s focus on self-sufficiency and political motives may outweigh the potential downsides. Elevated food costs, especially during a critical political period, could impact electoral outcomes and consumption recovery, possibly compelling the government to maintain trade restrictions to control inflation within its borders.
