India’s basmati rice exports to West Asia are expected to recover in the coming months after the US and Iran signed a peace agreement that includes the reopening of the Strait of Hormuz, which handles a significant share of global energy and cargo shipments.
India’s exports of basmati rice to West Asia had almost come to a standstill due to conflict-related shipping bottlenecks, higher freight costs and delays in contract execution. The Gulf region accounts for 60-70% of India’s basmati rice exports, valued at about $6 billion annually.
“Greater stability in the region is expected to improve trade flows and revive demand from key Gulf markets, providing a much-needed boost to India’s basmati exports in the months ahead,” said Satish Goel, president of the All-India Rice Exporters’ Association.
Following the by the US and Israel that started on 28 February, exports of basmati rice to the Gulf region fell to $281.97 million in April from $398 million in the corresponding month in the previous fiscal, according to the Directorate General of Commercial Intelligence and Statistics. Volumes dropped to 310,897 tonnes from 480,818 tonnes a year earlier.
Overall export earnings from the Gulf declined to $436 million in April from $551 million in the corresponding month of the previous year. Export volumes fell to 474,091 tonnes from 647,071 tonnes.
West Asia remains the backbone of India’s with Iran, Saudi Arabia, Iraq, the United Arab Emirates and Yemen among the largest buyers.
Executives said the restoration of navigation through the Strait of Hormuz is likely to improve vessel availability, reduce insurance premiums and revive buyer confidence across the key markets in the region. However, exporters cautioned that a sustained recovery would depend on successful implementation of the agreement and continued stability in the region.
Restoring confidence
They added that a sustained peace agreement and normalization of trade conditions in the region could help restore buyer confidence and accelerate fresh orders. After signing the agreement, Iran and the US will engage in a 60-day negotiation period regarding the Iranian nuclear programme and disposal of its enriched uranium.
Given the Gulf’s dominant position in India’s basmati export basket, a recovery in demand from the region is expected to significantly boost overall exports.
“We expect that stuck consignments, amounting to around 70,000 tonnes, will be cleared once the ports resume normal operations. We are hopeful that as lines and ports begin functioning properly, we will regain the lost volumes in the coming months,” said Vijay Setia, an exporter from Haryana.
However, trade experts remain cautious and are taking a wait-and-watch stance.
“We remain rather pessimistic at this stage, given the high level of uncertainty… However, if the pact is signed and implemented in its true spirit, normalization may not take long. Should things progress as expected, exports are bound to rebound,” said Biswajit Dhar, a trade policy expert from Delhi-based think tank Council for Social Development.
A query mailed to the commerce ministry remained unanswered till press time.