The rice industry in India plays a vital role in the country’s agricultural sector — making significant contributions to India’s economic growth, foreign exchange earnings and employment rates. Thanks to the country’s large growing area and the preferential soil and climate conditions, India is now one of the world’s largest rice and basmati rice producers and exporters, representing over 20% of the world’s total supply. After suffering two years of financial stress caused by excess paddy supply and weak international demand, India’s rice industry, especially basmati rice, is expecting a rebound in 2018 from growing demand and low inventory prices.
India’s Rice Industry Analysis
Recent statistics released by the Government of India shows that total the production of rice in India decreased by 1.09%, or 1.1 million tonnes in 2014-15 to 105.5 million tonnes from the previous fiscal year. However, in 2016-17, the total rice production in India is forecasted to jump to 108.86 million tonnes, which will set a new record. The estimated figure is higher than the previous record production of 106.65 million tonnes achieved during 2013-14. It is also higher than the five-year rice production average of 105.42 million tonnes.
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India is a major rice producer, consumer, and exporter and continues to be the world’s largest rice exporter for the fourth consecutive year. Rice is the most important agricultural crop in India, contributing to more than 40% of the country’s total food grain production.
India also has a significant competitive advantage over rice exports in the global market. The country has high-yield, high-quality paddy, low production costs and is known to efficiently execute its contracted businesses from the east coast and west coast ports of India. The rice industry in India has seen a transformation in the last decade, with the growth of branded businesses in the domestic market and a strong impetus to export.
India’s Largest Rice Producing States
Currently, the largest rice-growing states in India are West Bengal, Uttar Pradesh, Andhra Pradesh, Punjab, Tamil Nadu, Orissa, Bihar, and Chhattisgarh, holding about 72% of the total rice-producing area and contributing 75% to the total rice production in the country.
West Bengal is the largest rice-producing state in India. The region has nearly half of its arable land under rice cultivation, which comes to about 5 million hectares of rice growing area. In the fiscal year of 2016, West Bengal produced over 14.8 million tonnes of rice, remaining as the highest rice-producing state in India. The rice industry in India is expected to continue producing at world-leading rates.
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Basmati Rice Exports from the Rice Industry in India
Basmati rice represents a small portion of the total rice produced in India. By volume, the share of Basmati rice is around 6%, but by value, Basmati rice accounts for 60% of India’s total rice exports. The exports of Basmati rice in India have increased from Rs. 10,890 cr in FY 2010 to Rs. 22,718 cr in FY 2016, representing a CAGR of 13%. Basmati rice exports represented 1.3% of all goods India exported in FY 2016, making it one of the most popular exporting products from India.
According to the report from Investment Information and Credit Rating Agency (ICRA), India’s exports of basmati rice may rise to US$3.46 billion, with volume to around 4.09 million tonnes (MT) in 2017-18, backed by a rise in average realizations. ICRA expects the exports in 2016-17 to be near US$3.23 billion with a volume of around 4 MT. The basmati rice industry in India experienced moderate growth due to declining international demand after peaking at US$ 4.51 billion in 2014-15; however, the global demand witnessed some stabilization in 2016-17, facilitating the export rebound in India’s rice industry
In the near future, the export demand for rice is expected to improve further, with Iran and China increasing their imports of Indian rice. In addition, the steady domestic demand growth would add to the overall improvement in realizations for the industry. Paddy production is expected to be lower in FY2017 by 15-20%, meaning that paddy prices of rice will be higher by around 20% in the current fiscal year and will likely to remain stable.
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