India, the world’s largest rice supplier, is considering banning the export of all types of rice except basmati. Bloomberg writes that this is due to the increase in domestic prices. In this way, the Indian authorities want to avoid the risk of accelerating inflation.
The ban will affect about 80 percent of India’s rice exports. India’s share in world rice trade is about 40 percent. While this move will bring down prices in India, the already high price in the world market may still go up. It should be noted that Azerbaijan also meets the majority of rice imports at the expense of India. In this case, how will India’s export ban affect the price of rice exported to Azerbaijan?
The increase in the price of rice is not related to the increase in prices
Economist Parviz Heydarov stated that the reason for the ban on rice is the increase in transportation costs: “The desire of India and Pakistan to impose restrictions on rice exports was observed even last year. This is also related to a number of problems. The reason why rice-exporting countries impose restrictions is the increase in the price of fuel products. That is, it is not due to the decrease in rice production in India and the increase in prices. “They want to use rice as a raw material in the country due to the increase in the price of fuel in the world.”
Prices of rice in the domestic market will rise
According to the economist, the government is forced to take mitigating measures: “We can meet our domestic demand with 15 percent strength. We buy the rest from outside. The situation with India suggests that depending on how market prices develop, the government will probably be forced to remove customs duty on rice exports from India. Because we buy 40 percent of our imported products from India. Therefore, restrictions imposed by India will inevitably affect our market. Despite the mitigation measures of the government, if this situation continues, the prices of rice in the domestic market will rise. “If India imposes restrictions on exports, it will definitely affect our imports.”
Our domestic demand can be met up to 35-40 percent
According to P. Heydarov, the way out of this situation is to increase Azerbaijan’s internal strength: “When such force majeure situations arise, there are no immediate ways out. In any case, if our market is formed by rice products from India and Pakistan, our appeal to other countries will insure the situation in the short term, not in the long term. In order to be insured in the long term, we need to take care of production in our southern regions and other areas. Experts say that it is possible to increase rice production and paddy supply in these areas. Even our domestic demand can be met up to 35-40 percent. In this field, there is also a state program “On the development of rice farming in Azerbaijan” covering the years 2018-2025. This program envisages meeting the country’s demand for rice through local production, as well as substituting imports. There are 2 years left until the end of the program. But it is not known to what extent this program has been implemented. The longer we depend on exports, the more tension will arise in the domestic market as a result of such force majeure situations.”
“Our market is looking for an excuse to raise prices”
Akif Nasirli, an expert on economic issues, thinks that there are monopolistic tendencies in the domestic market. This affects the price increase: “India is the largest supplier of rice in the world. If he takes such a step, it will lead to an increase in the price of rice in the world market. This decision will also seriously affect the Azerbaijani market. Even if we talk about it, the price of rice may rise.”
There will be a decrease in our rice imports
A. Nasirli noted that if the increase in the price of rice reduces the demand for it, our imports may decrease: “The ban to be applied in India will cause an increase in the value of our imports. Suppose that the annual demand of Azerbaijan was one thousand tons of rice. Because the price of that rice will increase, our import value in the trade balance will also increase. But rising prices in the country may reduce the demand for rice. For this reason, a decrease in our rice imports will be observed.” (“Kaspi” newspaper)
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