India, the world’s top rice exporter, just slapped a 20% tax on some rice exports. It could further fuel food inflation

India — the world's top rice exporter — has slapped a 20% tax on shipments of some rice grades in a move that could worsen the food crisis.

The new export tax that affects some rice grades will take effect Friday, according to an announcement from India's finance ministry on Thursday. India also banned the exports of 100% broken rice, which is mostly used for animal feed, Bloomberg and Reuters reported, citing government notices.

The developments come as rice plantings in India have been impacted by a lack of rainfall in some areas this year, per the news agencies.

India accounts for about 40% of global rice exports, according to the US Department of Agriculture, or USDA. The country's moves to levy a 20% tax on some rice grades while restricting broken rice are expected to push up prices of the staple grain amid a surge in food prices worldwide.

China and the Philippines are the world's top two importers of the staple grain, according to the USDA.

As the prices of wheat and corn rallied this year on the back of the Ukraine war, rice prices remained relatively stable, giving inflation-weary consumers some reprieve. But India's latest move may change that, and shift demand from India to its competitors.

"With this duty, Indian rice shipments will become uncompetitive in the world market. Buyers will shift to Thailand and Vietnam," B.V. Krishna Rao, the president of the India Rice Exporters Association, told Reuters. The two Southeast Asian countries are the world's second- and third-largest rice exporters globally.

After wheat and sugar, rice is now the third major agricultural commodity in India to face export restrictions this year. The wave of food protectionism comes amid supply concerns and inflation fears.

Date: 09-Sep-2022