India’s domestic rice production is expected to increase to 137.8 million tonnes in 2023-24 from 135.7 million tonnes in 2022-23, according to the Infomerics Ratings – Indian Rice Industry Outlook Report. India is the second largest producer and largest exporter of rice in the world. India produces 26 per cent of the total rice production in the world and contributes 35 per cent to the global rice trade.
The author, Dr. Manoranjan Sharma, Chief Economist, Infomerics Ratings, of the report, also mentioned that the increase in paddy sown area from 404.50 lakh hectare in 2023 to 414.50 lakh hectare in 2024 showed that overall rice production in the current year would be record highest. Rice is an important source of food production in the world. Globally, around 525 million tons of rice is produced each year. China (28 per cent), India (26 per cent) and Bangladesh (7 per cent) are the major producers, collectively producing more than 318 million tonnes. In India, 332.3 million tonnes of foodgrains were produced in 2023- 24. Rice accounted for 137.8 million tonnes of the production, constituting more than 40 per cent of the total food grains production. Rice is a staple for more than half of the world population, particularly in Asia and developing countries. It is the most common staple food in India. It forms 55.3 per cent of rural and 53.20 per cent of urban per capita cereal consumption. Rice has an average per capital monthly consumption of 5.32 kg in rural and 4.281 kg in urban areas. In states such as Andhra Pradesh, Assam, Chhattisgarh, Odisha, Tamil Nadu and Telangana, rice makes up greater than 90 per cent of monthly cereal consumption.
As per the report the stock of rice in central foodgrain food which had remained within stock limits (operational + strategic stock) in the past years exceeded the full capacity in 2024-25, implying there would be no shortage in rice supply to meet unexpected contingency. Overall rice production has been consistently increasing over the years. The surplus rice production has translated into increasing consumption and increase in central stock. Surplus rice production has made India an exporter, with rice exports constituting the major component of the agricultural exports.
The Price Index
Domestic Price Irrespective of the high productions, the report has mentioned that the overall Wholesale Price Index (WPI) has increased from 121.8 in 2019-20 to 151.4 in 2023-24 representing an WPI inflation of 24.3 per cent over the past 5 years while WPI Food Index has increased by 21.8 per cent in the corresponding period. Paddy prices have increased by 16.19 per cent while price of non-basmati rice have increased by 17.46 per cent. The rise in prices of paddy and non-basmati have been lower than WPI inflation. But a larger increase in price of basmati rice compared to WPI has been seen during the corresponding period. Rice is a key component of CPI and its allied index Consumer Food Price Index (CFPI). CFPI is constructed from the components of CPI and has a weightage of 47.25 per cent. It tracks the food inflation in the economy. Rice has a weightage of 4.71 per cent in the CPI. In CFPI, rice forms a vital component having a weightage of around 10 per cent. CPI has increased from 154.7 in August-2020 to 193 in August-2024 representing an CPI inflation of 24.76 over the past 5 years while CPFI has increased by 28.89 per cent in the past 5 years, implying that food inflation has been rising at higher rate than overall inflation. Further, inflation of rice-other sources has increased at a faster rate than both CPI and CFPI.
The CFPI inflation growth has been above 8 per cent in the current year, peaking at 9.36 per cent in June-2024. It reduced to 5.66 per cent in August-2024 due to efforts taken by government to control food inflation. But provisional estimate of CFPI expects it to increase to 10.87 per cent in October-2024. To contain food inflation various efforts were undertaken, in case of rice, initiatives such as free supply of food grains under Pradhan Mandri Garib Kalyan Yojana, selling of Bharat branded food grains were implemented. The full effect of these initiatives will be felt in future.
Minimum Support Price It is also shown that the value of MSP for paddy has progressively increased over time reflecting the rising overall cost of production.
Second highest Minimum Support Price (MSP) growth was seen in the Kharif Marketing Season (KMS) – 2023-24, where a hike of Rs 143 was announced. In KMS 2024-25, a hike of Rs 117 was announced representing a growth of 5.36 per cent.
Bonus Payment
States such as Karnataka, Kerala, Tamil Nadu, Jharkhand Maharashtra, and West Bengal have offered bonus for paddy. This practice of offering bonus needs to be discouraged to avoid price distortions across states.
State government declares bonuses over and above the MSP declared by central government. These bonuses may be provided with the objective of covering the difference in central and state government production cost estimates. But these bonuses have a distortionary effect on market prices of paddy across state.