Exploring the political aspects of the rice trade in South Asia

Rice has been traded across South Asia for centuries. The basic practices and relationships that formed the core of this commerce still play a role in defining the political economy of rice trade between India, Nepal and Bangladesh today. However, the advent of modern states and globalized trade practices have created a new layer of distortions. This layering of the old and the new, of age-old social hierarchies and the imperatives of the democratic state, lies at the core of many of the drivers and challenges facing the sector today.

A study by The Asia Foundation focuses on the trade of non-basmati rice in the region as a way of understanding elements of the political economy of the food trade in South Asia. They found that the trade of rice is guided less by the impulses of liberal trade than the necessity of maintaining stable prices in domestic markets. The best explanatory variables for fluctuating trade volumes in the region are the vagaries of the weather, exchange rates and political relations. In the many instances of flood or drought induced demand for rice, regional rice trade plays an important role in cushioning against the unpredictable precipitation patterns that come with climate change. This adds an urgency to resolving the trade distortions at border-crossings in the region.

The deeply entrenched practices of commercial players in the rice trade remain intact. Several layers exist between the farmgate and the border, preventing the fair flow of export revenues to the farmer. Each of these intermediaries – aggregators, commission agents, millers, exporters – are businesses seeking to grow capital by taking risks and reinvesting profits. This prevents farmers gaining additional benefit from export income.

When practical, trade policy opens up new sources of demand for a surplus Indian market while allowing South Asian importers to contain inflation at home. In the near and intermediate-term, lowering the cost of trade will help lower consumer prices, particularly in Bangladesh and Nepal and perhaps improve access to nutrition in those countries. Improved trade facilitation measures will help, but a key condition of lowering the cost of trade is achieving stability in tariff rates. A combined approach could have important positive implications for food security in South Asia.

The full report is available here, and for more information, please contact Dr Aditya Pillai (aditya.pillai@asiafoundation.org).

NewsTamara Jackson