Home Nepal live Lack of rain could dampen India’s battle against inflation – here’s why

Lack of rain could dampen India’s battle against inflation – here’s why

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At a time when nations are grappling with soaring food prices and runaway inflation, India’s ability to produce rice is in jeopardy. Due to a lack of rainfall in some regions, particularly West Bengal and Uttar Pradesh, which account for a quarter of India’s production, the total area sown to rice has declined by 13% so far this season.

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With Bangladesh, China, Nepal and some Middle Eastern countries among its main customers, India exports rice to more than 100 countries. In the coming weeks, the United States is expected to produce a bountiful wheat crop and Ukraine has sent its first shipment of grain since the Russian invasion.

Traders fear that a drop in rice production could make it harder for India to fight inflation and lead to export curbs. For the billions of people who depend on basic food, such a decision will have important ramifications. To protect food security and maintain local prices, the government has already restricted wheat and sugar exports from India, which accounts for 40% of the world’s rice trade.

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Meanwhile, Indian rice prices have risen, reflecting production concerns. Due to insufficient rains and increased demand from Bangladesh, prices of some types have jumped more than 10% in the past two weeks in major producing states like West Bengal, Odisha and Chhattisgarh, according to Mukesh Jain, rice shipper manager Sponge Enterprises Pvt. According to him, export prices free on board could rise to 400 dollars per ton by September, against 365 dollars currently.

Asia produces and consumes the majority of the world’s rice, making it essential for the region’s political and economic stability. Rice prices were subdued due to ample production and stocks, unlike the surge in wheat and maize prices following Russia’s invasion of Ukraine, which helped prevent a worsening of the the food crisis.

The success of the Indian monsoon and rice harvest will have a significant impact. According to some agronomists, there is still time to sow more and make up part of the deficit. August to September is expected to have typical rainfall, which could increase agricultural production.

Farmers are less optimistic. Rajesh Kumar Singh, 54, a farmer in Uttar Pradesh, said he only planted rice on half of his seven acres (2.8 hectares) of land due to a lack of rain in June and July. “The situation is really precarious,” he said.

Rice prices are coming under pressure, said Himanshu, a professor at Jawaharlal Nehru University, who goes by only one name. “Rarely does sowing take place after mid-July, so hope for recovery is unlikely,” he said, adding that a drop in production is a risk for inflation. .

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Rice could be a new hurdle in India’s fight against inflation. This year, consumer prices have continued to breach the Reserve Bank of India’s 6% tolerance level, leading to a dramatic rise in interest rates. As the impact of lower commodity prices, such as those for fuels and vegetable oils, is somewhat offset by the weakening of the rupee this week, the central bank could raise borrowing costs further.

If geographic disparities in rainfall persist, it could negatively impact agricultural production, negatively impacting economic growth and inflation, according to Sonal Varma, an economist at Nomura Holdings Inc.

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As Indian paddy production is set to decline in several states, the government should consider reviewing its policy of allocating rice to ethanol production, says Siraj Hussain, former secretary of India’s Ministry of Agriculture .

India is looking to boost ethanol production by using surplus sugar and rice as part of efforts to cut its fuel costs. Soaring food prices following the war in Ukraine increased the risk of famine and sparked a “food versus fuel” debate.

“At this point, it’s difficult to estimate the exact level of production loss,” Hussain said. But at current prices, there is little justification for allocating rice to ethanol production, he added.

(With contributions from the agency)

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