The global basmati rice market stood at $10.5 billion in 2017 and is growing at a CAGR of 11 percent. By 2022, the market is anticipated to be worth $18 billion. Since it has originated in the subcontinent, Pakistan and India are the main growers of basmati rice but Pakistan’s exports last year were half a billion dollars compared to India’s nearly $4 billion. Why?
One reason is Iran’s market for Basmati rice which is amongst the biggest in the world. The pseudo barter system that India set up with Iran allowed the former to buy oil on easy credit terms and pay in part through rice. This gave India access to Iran’s $1 billion rice market of which Pakistan’s share was $2 million in FY17.
Regardless of India’s blustering to the contrary, Trump’s sanctions on Iran’s oil imports will greatly curtail this market. One could hope that the recently created Pak-Iran trade committee will identify the opportunity and find a way to circumvent banking challenges but we all know that is not going to happen.
Even if Pakistan “reserves the right to pursue legitimate economic and commercial interests” with Iran, pre-Trump bilateral trade was languishing at $18 million in FY18. Despite the bold words, Pakistan will not risk losing US as its biggest export market nor provoke further American ire which is why trade has dwindled to nearly zero in recent months.
On the flip side, if India cannot export basmati rice to Iran, it will have a surplus on hand which will put downward pressure on basmati rice. If anything, Pakistan’s exports globally may face more competition on price from India once Trump’s sanctions are implemented.
The other big consumers of basmati rice are the GCC countries, mainly Saudi Arabia and UAE. While the oil producing bloc is the biggest consumer of Pakistan’s basmati rice, the country’s total exports are about a quarter of the 2 million ton demand of GCC countries. This has allowed India to capture the lion’s share, especially since there are several allegations of Pakistani rice being branded as Indian and being sold at higher prices via Dubai.
Pakistan does have a significant share in the EU. However, this has more to do with EU’s restrictions on the level of fungicide present in Indian basmati rice which will take a few crop cycles to weed out than on Pakistan’s ability to compete successfully internationally.
While a big market for basmati rice exists globally and Pakistan is one of the two exporters, its share is limited. Lack of ability to penetrate markets is one end of the equation. Given that India’s land under rice cultivation is 16 times that of Pakistan, and that Indian brands are household names while Pakistan’s branding of rice remains an issue, it is no wonder that India’s exports are eight times more than Pakistan’s.
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