Will rice help bridge the widening trade deficit with China?

India has a huge trade deficit with China and this gap is rising with every successive year. In order to bridge this widening trade deficit, New Delhi has been pitching for market access for a variety of its goods to China, including non-basmati rice, sugar, rice and pharmaceuticals.

The General Administration of Customs of Chinese government and India’s Department of Agriculture, Cooperation and Farmers Welfare signed a protocol on phyto-sanitary requirements for exporting rice from India to China in June 2018 during Prime Minister Narendra Modi’s visit to China. This amended the 2006 protocol on phyto-sanitary requirements for exporting rice from India to China to include the export of non-basmati varieties of rice from India.

Consequent to this, the first consignment of Indian non-Basmati rice was shipped to China towards the end of September 2018 which included 100 tonnes of non-Basmati (white rice 5% broken) sent from Nagpur in India and received by China National Cereals, Oils and Foodstuffs Corporation (COFCO) which is one of China’s state-owned food processing holding companies.

Initially, Ministry of Commerce and Industry registered 19 rice mills and processing units for export of non-basmati rice after officials from China had inspected the rice mills that are capable of exporting non-basmati rice to China.

Few days back, five more rice mills have been cleared for exporting non-basmati rice to China, taking the total to 24 rice mills. China is the world’s largest producer and importer of rice and buys more than 5MT a year. India is the top exporter of rice in the world with total rice exports in the last fiscal year being 12.7 MT, an increase from 10.8 MT in the previous year. There is potential to export up to 1 MT of rice to China. This, if happens, will help reduce the fiscal deficit in trade between the two countries.

In our previous issue of TPCI Newsletter, we had mentioned of China lifting the ban on import of rapeseed meal from India. India was exporting US$161 million worth of rapeseed to China till 2011 when the ban was put in place. India has 500,000 tonnes of rapeseed meal surplus which can be exported to China. This waver on ban came into effect as a consequence of the US-China tariff war, as part of which China had imposed tariffs of 25% on a list of American products including rapeseed meal and soybean meal.

India is also looking forward to export agriculture products like rice and sugar and pharmaceutical products to China in order to bridge widening trade deficit.