India has imposed a 20% duty on exports of parboiled rice with immediate effect, a move that could further reduce shipments from the world’s largest exporter and lift global rice prices, which are already trading near their highest levels in 12 years.

Last month, India surprised buyers by imposing a ban on exports of widely consumed non-basmati white rice, following a ban on broken rice exports last year.

The ban prompted some buyers to increase purchases of parboiled rice and lifted its prices to record highs, said a Mumbai-based dealer with a global trade house.

“With this duty, Indian parboiled rice would become as expensive as supplies from Thailand and Pakistan. There is hardly any option for buyers now,” the dealer said.

India exported 7.4 million tonnes of parboiled rice in 2022.

In July, the United Nations food agency’s rice price index jumped to its highest level in nearly 12 years as prices in key exporting countries jumped on strong demand after India imposed restrictions on the exports.

India accounts for more than 40% of world rice exports, and low inventories with other exporters mean any cut in shipments could inflate food prices already driven up by Russia’s invasion of Ukraine last year and by erratic weather.

India has now imposed restrictions on all kinds of non-basmati rice, which poor consumers in Africa and Asia usually prefer, said a New Delhi-based dealer with a global trade house.

“Global rice prices had begun to moderate in the last few days after rallying more than 25% due to India’s restrictions last month. However, prices are expected to rise again,” the dealer said.

The recent curbs on exports of food commodities demonstrates the sensitivity of the government of Prime Minister Narendra Modi to food inflation ahead of a general election nearly next year.

His administration has extended a ban on wheat exports after curbing rice shipments in September 2022. It also capped sugar exports this year as cane yields dropped.

The ministry of finance said in a notification on last Saturday that India will impose with immediate effect a 40% export duty on onions up to Dec. 31 in an attempt to improve domestic availability of the vegetable,

India’s annual retail inflation rose sharply to a 15-month high of 7.44% in July from 4.87% the previous month.

Food inflation, which accounts for nearly half of the overall consumer price basket, hit 11.51%. Retail food inflation was at its highest since January 2020.

Prices of some of the most used vegetables in Indian kitchens, including tomatoes, onions, peas, brinjal, garlic and ginger, have more than doubled in the last few months.

India is heading for its driest August in more than a century, with scant rainfall likely to persist across large areas, partly because of the El Niño weather pattern, two weather department officials told Reuters on Friday.

August rainfall, expected to be the lowest since records began in 1901, could dent yields of summer-sown crops, from rice to soybeans, boosting prices and overall food inflation, which jumped in July to the highest since January 2020.

S&P Global on last Thursday projected the Indian economy to grow by an average annual rate of 6.7% to March 2031, driven by manufacturing and services exports and consumer demand, despite short-term challenges from rate hikes and a global slowdown.

S&P retained its earlier forecast of 6% growth for the current fiscal year ending March 2024, noting even at this rate, India will be the fastest growing economy in the G20.

Last month, the International Monetary Fund raised its growth forecast for India by 0.2 percentage points to 6.1% for the current fiscal year, while the central bank has forecast 6.5% rise.

“While the world is in the midst of an unprecedented period of transition and uncertainty, India faces a defining opportunity to capitalize on this moment,” said the S&P Global in its report “Look Forward: India’s Moment” released in Delhi.

Meanwhile, Thailand is benefiting from India’s rice export ban and has no reason to halt its own shipments as it has sufficient output for exports and domestic consumption, its commerce minister said on Monday.

India in late July ordered a halt to its largest rice export category in a move that will roughly halve shipments by the world’s largest exporter of the grain, triggering fears of further inflation on global food markets.

The Indian ban provides an opportunity for Thai rice producers, especially in Africa which consumes large volumes of rice from India, minister Jurin Laksanawisit told a press briefing.

“With India’s export ban, global prices rise as volumes drop ... farmers can sell paddy rice at higher prices,” he said.

Agencies