GROUP DESCRIPTION:

Title: Group Mid-Term Assignment

Subject: Consumers, Firms and Markets
Batch: 2023-25 Section: F Group No: 5
Total Words in the Assignment: Total pages:
Group Members:

SR.NO. NAME ROLL. NO.

1 Ananya Mishra 2023507
2 Anurag Shrivastava 2023508
3 Harsh Singh Chandel 2023516
4 Prachi Pungalia 2023566
5 Tanmay Navneet 2023585

NEWS HIGHLIGHTS:
Centre bans export of non-basmati white rice
Why India is crucial to global rice trade?
It accounts for more than 40% of world’s rice export. It’s rice shipment in 2022 was more than
next 4 exporters combined – Thailand, Vietnam, Pakistan and The USA. It exports rice to more
than 140 countries. India exported 17.86 mt of non-basmati rice in 2022 including 10.3 million
tons of non- basmati white rice.
Rice stocks in the central pool as on July 1st is estimated to be around 48.65 million tons, almost
13% less than the same period last year.
Last year government imposed a duty of 20% on all non-basmati rice export but it has failed to
curb the export as international prices were high .

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Introduction:
To encourage domestic rice supply and control inflation, the Indian government has
decided to ban the export of non-basmati white rice with immediate effect. Non-basmati white
rice constitutes a significant portion of India's total rice exports, accounting for approximately
25-30% of the overall volume. The ban comes when rice prices have surged by over 11.5% in
the past year and 3% in the past month. Concerns over rice production due to erratic rainfall in
central growing states have further fueled the government's decision. With the ban in effect,
India seeks to stabilize its rice market amidst fluctuating international prices and ensure
sufficient stocks for domestic consumption.
Moreover, the ban was spurred by the recent hike in rice prices, which has been
adversely affecting the economy. The inflation rate has reached alarming levels, prompting the
government to take urgent action. With rice prices rising by over 11.5% in the past year and
3% in the last month, it has become imperative to control the outflow of this essential
commodity. By restricting non-basmati white rice exports, the government hopes to curtail
speculative trading activities and stabilize domestic prices, ensuring access to affordable rice
for Indian consumers.
In addition to these economic reasons, the geopolitical landscape and climatic
conditions in other rice-producing nations have also contributed to the ban. High international
rice prices, driven by geopolitical tensions and El Nino concerns, have created a surge in
demand for Indian non-basmati white rice in the global market. While this has been favorable
for exporters, it has strained domestic supplies. The ban serves as a strategic move to strike a
balance between fulfilling international demand and safeguarding domestic interests.

Supply Demand Shifters:

In the context of the Non-basmati rice ban in India, supply and demand shifters are factors that
can influence the equilibrium price and quantity of non-basmati rice in the market. Here’s an
explanation of these shifters:

1. Supply Shifters: These are factors that affect the quantity of non-basmati rice supplied
by producers. Some examples include:
 Government Policies: Changes in government regulations, such as imposing or lifting
a ban on non-basmati rice exports, can significantly impact the supply in the domestic
market.
 Weather Conditions: Crop yields can be affected by weather events like droughts,
floods, or extreme temperatures, leading to fluctuations in supply.
 Technological Advancements: Innovations in agricultural practices and technology may
increase or decrease the production capacity of non-basmati rice.
 Input Costs: Changes in the prices of inputs like seeds, fertilizers, and labor can
influence the supply of rice in the market.

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2. Demand Shifters: These are factors that affect the quantity of non-basmati rice
demanded by consumers. Some examples include:
 Population Growth: An increase in the population can lead to higher demand for food,
including non-basmati rice.
 Income Levels: Higher incomes often lead to greater food consumption, which can
increase the demand for rice.
 Price of Substitutes: If the price of alternative grains or rice varieties changes, it can
impact the demand for non-basmati rice.
 Cultural Preferences: Consumer preferences for certain types of rice can influence the
overall demand in the market.
During a ban on non-basmati rice exports, the supply shifters become particularly important as
they can disrupt the regular flow of rice in the market. Additionally, the demand shifters can
also play a role, especially if there are changes in domestic consumption patterns or if
alternative grains become more popular due to the ban. It’s important to note that these factors
interact and can create complex dynamics in the market, leading to fluctuations in both the
price and quantity of non-basmati rice available in India.

Elasticity:
 Non-basmati white rice being a staple food for more than 3 billion people world-wide
has an inelastic demand.
 Increase in price of non-basmati rice globally due to export ban in India has not
affected the demand much in foreign countries
 Due to increase in price of non-basmati rice there has been slight growth in demand of
other staple food which is known as cross elasticity.

Government intervention:
Causes of government intervention:
 Russia-Ukraine war: As soon as Russia withdrew from the Black Sea grain deal, news
of a shortage in global supply started coming out. As a result, prices of rice in the
international market Increased. Indian exporters would have taken advantage of this
and such a situation would have resulted in a shortage in the domestic market.
 Increasing trend in prices: The price of non-basmati white rice increased by 11%
compared to the previous year, in the current month it grew by 3%.
 Distribution of rice at nominal prices: After the emergence of covid, government started
 distributing foodgrains at minimal prices. This impacted the government reserves of
rice.
 Ineffective export duty: In the month of September 2022, India had imposed 20% export
 duty on non-basmati white rice. Even after imposition of duty, exports kept on
increasing.

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  Adequate availability in domestic market: Adverse weather conditions like occurrence
of El-Nino would have impacted the productivity and availability of rice.
 To control domestic inflation.

Impact of demand-supply shifters/government intervention:

Impact of demand and supply shifters/ government intervention.

On Domestic Market:
 Traders will now supply additional stocks in Indian markets. Prices were decreased by
Rs.1-2 within 24 hours of the ban.
 Biggest beneficiary will be low-income group who consume cheap non-basmati rice.
 Decrease in prices of non-basmati white rice in domestic market.
 Control of inflation in India.
 Increase in domestic storage, which had got reduced due to distribution during covid
times.

Fig: 1 - Domestic Market Fig: 2 - International Market

On International Market:
 Rice prices in top exporting countries has been rising due to India’s ban. Vietnam’s 5%
broken rice was offered at $515-525 per metric tonne, highest since 2011.
 Thailand’s prices were also highest since Feb 21 at $545 per metric tonne.
 Increase in global prices. Poor countries of Asia and Africa will be particularly hit.
 Fear of increase in global inflation.
 Hoarding, panic buying in international market. For example, prices for a bag of non-
basmati white rice increased from $24 to $34 after India’s ban.
 It will hamper production of biofuel like ethanol which is largely dependent on
availability at grains at cheaper price.

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On Government:
 It will affect 80% of India’s rice exports.
 It will lead to loss of export duty to government.
 It will lead to loss of export earnings.
 This will affect income of farmers and traders.

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References:
(2023, July). Retrieved from https://www.pib.gov.in/PressReleasePage.aspx?PRID=1941139
Alam, M. (2023, July). News 18. Retrieved from News 18:
https://www.news18.com/explainers/why-india-banned-export-of-non-basmati-white-
rice-lets-explore-the-reasons-8410849.html
Bizz Buzz. (2023, July). Retrieved from https://www.bizzbuzz.news/economy/non-basmati-
rice-price-skyrockets-in-the-us-as-india-bans-exports-1234909?infinitescroll=1
Economic Times. (2023, July). Retrieved from
https://www.telegraphindia.com/business/centre-bans-export-of-non-basmati-rice-to-
boost-domestic-supply-keep-prices-under-check/cid/1953520
Hindustan buzz. (2023, July). Retrieved from
https://www.thehindubusinessline.com/economy/agri-business/india-bans-white-rice-
exports-with-immediate-effect/article67101659.ece
MANCOMBU, S. R. (2023, july ). Hindu business line. Retrieved from
https://www.thehindubusinessline.com/economy/agri-business/india-bans-white-rice-
exports-with-immediate-effect/article67101659.ece
Telegraph India. (2023, July). Retrieved from
https://www.telegraphindia.com/business/centre-bans-export-of-non-basmati-rice-to-
boost-domestic-supply-keep-prices-under-check/cid/1953520

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