Indian Basmati Rice (the Queen of Fragrances) has been cultivated in India for over two millennia. During which time it has developed a global reputation for its distinct taste and aroma that is unmatched by any other variety of rice. The demand for Indian Basmati Rice has skyrocketed over the past few years, particularly in fast-growing economies such as China and India. This article explores the current state of the global demand for Indian Basmati Rice, including market size and trends, as well as key factors driving growth in this sector and how these might impact the demand going forward.
India is the top exporter of basmati rice
A large part of India’s annual grain output is marketed as basmati rice. In 2016, India exported a total of 1.7 million tons of milled rice, much of which was likely basmati rice. According to preliminary data from USDA Foreign Agricultural Service (FAS), India exported 1.3 million tons. USD1 billion worth of milled rice in 2017 (February–November). By comparison, according to FAS figures, Iran, a close competitor and major exporter of basmati rice from West Asia sold less than half that amount during that period. Exports from Pakistan also were higher than those from Iran but well below what was shipped out by India or Thailand.
India accounts for 50% of total exports
Many large importers of basmati rice, such as Japan and Saudi Arabia, come from countries with strong trade relations with India. For example, Saudi Arabia is a major oil supplier to India and accounts for 6% of India’s total imports. Therefore, because of a long-standing trade relationship, Saudi Arabia is able to maintain stable demand levels when other markets (such as Europe) are being hit by global shortages. In fact, Saudi Arabia accounts for 50% of total exports and consistently maintains import levels of around 3 million metric tons.
Japan is the largest importer
Japan is among India’s top 5 importers of rice and accounted for 10% of all imports in 2020-21. China was another important buyer that year with shipments of close to 2 million tons or 9% of all imports, although volumes have been declining since a record high of 7 million tons in 2014-15. The Philippines accounted for 8% of overall imports while Thailand (3%), Iran (2%), and Turkey (1%) rounded out the major buying countries. Just as in other markets, importing rice from India usually competes with local production; and indeed almost all Japanese imports came from paddy sales by farmers who produce basmati rice domestically.
China and Korea are major buyers too
Both China and Korea have strong demands for high-quality rice, which is exactly what India produces. Both countries have been importing a lot of rice from India in recent years to meet their demands. They import around 20 percent of all basmati rice grown in India every year. In fact, Basmati is one of the top three kinds of rice exported by India. About 40 percent or more than $5 billion dollars worth comes from just four states – Punjab, Haryana, Uttar Pradesh, and Bihar. This clearly indicates that basmati is extremely popular across borders and cultures since it’s not only imported by neighboring countries but even from a distant country like China!
Why do customers prefer basmati rice?
Basmati rice is a cultivar of long-grain rice grown in India. The grains are slender and have a pearly appearance due to their coating of starch. The rice has a unique fragrance and taste, described by some as musky or nutty. When cooked, basmati rice becomes very tender and retains its aroma. It has an optimal eating quality at 50% relative humidity or lowers with no coolants required. Due to these qualities, many customers prefer basmati over any other type of rice.
The global demand for imported basmati rice is projected to increase at a CAGR of 8.8% from 2016 to 2020. Growing demand from countries such as the U.S., Canada, Mexico, Australia, and the U.K., among others is a key driver for India’s basmati rice exports. This market has witnessed substantial growth in demand because of the growing population and income levels. Additionally, import demand is influenced by changing lifestyles that influence food consumption patterns as well as other factors such as religious beliefs and health benefits associated with high-quality foods including basmati rice that are naturally gluten-free and are low in fat content.
Prices will increase in the coming years as production costs rise
The world’s largest producer of basmati rice in India, accounting for nearly 80% of global output. However, India has been experiencing droughts in recent years due to a lack of rainfall. Which has significantly reduced its production. In addition, several exporters have been temporarily banned from exporting basmati rice over issues regarding labor rights and price-fixing. All these factors point to an increase in the prices of Indian basmati rice exports into markets around the world. As India continues to push hard to reverse labor laws. That bar children under 14 from working as full-time farm laborers. And workers under 18 from handling pesticides. It will be interesting to see if other countries are willing to compensate India with high prices. If not, expect even higher prices going forward.
Basmati Rice Production in India
In India, basmati rice is mostly grown in the northern states of Punjab, Haryana, Uttar Pradesh, and Bihar. The production area is estimated to be between 1.5 million hectares and 2 million hectares. In 2018, the total area under basmati rice cultivation in India is estimated to be around 1.73 million hectares. The productivity of basmati rice in India is around 1,275 kilograms per hectare. Which is slightly lower than the global average of around 1,500 kilograms per hectare.
The production of basmati rice in India is primarily confined to the Indo-Gangetic plains, where it is cultivated for more than two decades. In 2019-20, India’s rice production was estimated at around 91.3 million tons, which was lower than the previous year’s output. Indian farmers are facing tough challenges from a lack of rainfall and higher input costs, which resulted in lower production. The country’s basmati rice production is projected to increase in the long run.