Rice export ban - nothing but a political gimmick!

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Bikky Khosla | 20 May, 2008
Today India, the world's second-biggest rice producer after China, has a selective ban on export of rice - strange but true!

The government justifies this ban as a step to tame runaway inflation. However, with the general elections scheduled to be held by May 2009, the move, I feel, is more of a political gimmick than an economic decision.

Commerce Secretary G.K. Pillai was himself quoted by the media as saying, "...this being an election year we will be cautious with exports". This speaks volume about the lack of concern that the authorities have for exporters.

After this ban was clamped, the authorities are seen doing damage control and now there are signs of easing the ban if not doing away with it completely. Amidst this uncertainty however, the worst affected are the rice exporters. Several rice importers have threatened lawsuits against Indian exporters for default on commitments...and that's not all! They have started negotiating with Pakistan and Thailand for their requirements.

What the Indian thinktank does not seem to understand is the fact that such bans might contain price pressures in the short term, but they could hurt future growth and will only contribute to the government's large debt burden.

And the government's justification of the ban too, has very less takers. They say 'the ban would have affected the profits of exporters in the wake of the steep rise in rice prices globally, but otherwise, the people in the country would have to pay global prices for these essential items. This is the trade-off and the government has opted for shielding the domestic consumers from spiralling prices of food-grains'.

The government didn't have the foresight to realize that because of this selective ban, exporters are losing their earnings, and most importantly, their credibility in the global markets.

But why would they care...it's election time and logic holds no good when it comes to making decisions. As of now, I guess we have to live with this...sad but true!