Sonia Gandhi, Manmohan Singh and the 2008 global rice crisis

I’ve been catching up on old NPR podcasts during my runs. The podcasts are usually short and informative. My ears perked up when one of them mentioned India and had a quote from Government funded think tank official, P.K. Joshi, in the familiar thick Indian accent (familiar because I have it too!).

Apparently, a decision by the Government of India in 2007 helped trigger a global food crisis in 2008. The amazing part was that this crisis was triggered (and contained) not by any actual change in the production or supply of food, but by changes in the expectations and fears of people and governments the world over. And as usual by greed and incompetence. I do not recall reading much about this in the Indian media. So it was particularly interesting that a decision by Sonia Gandhi and Manmohan Singh (obviously not by them alone, but they are responsible being at the top of the decision-making hierarchy then) led to people in Philippines and West Africa going without food. If I recall correctly, Sonia Gandhi headed the National Advisory Council (NAC) which is behind the Food Security Act, among other legislation.

The podcast is from 2011 - NPR Planet Money podcast – How Fear Turned a Surplus into Scarcity. Following is a summary of the events taken from the podcast and other news sources.

The Government of India decided to create the Food Security Act under the Right to Food in 2007. This required more than 60 million tonnes of rice and wheat to be available in India. Wheat being expensive, the emphasis was on making more rice available since India had plenty of it.

“To make sure there was plenty of cheap rice on hand, Indian officials made it illegal for most Indian rice to leave the country. In October2007, they blocked exports of all non-Basmati rice.” 

India was the second largest of rice globally at the time. This sudden anticipated reduction in supply led to a dramatic rise in prices (20% overnight in some cases), limiting rice exports in other countries like Egypt, Vietnam and hoarding in countries like Philippines.

“Early in 2008, Egypt, Pakistan and Vietnam all started limiting the amount of rice that they would export. Government officials in Thailand, the world's leading rice exporter, started talking about setting up a cartel of rice exporters, similar to OPEC.”

“During the first four months of 2008, the price of a ton of rice on the world market went from $300 to $1,200.”

Poor people who couldn’t afford the high prices had to reduce their consumption of rice. I suppose it would be hard to determine and quantify whether any deaths occurred due to this artificial crisis.

The crisis was eventually solved by getting Japan to announce that they will sell some of their unwanted rice to Philippines. I do not know if the sale actually went through but apparently the announcement itself was enough to calm down prices.

In this narration, the American economists emerge, unsurprisingly, as the heroes who rescued the world from the crisis. I wouldn’t be surprised if there were other factors at play.

Listen to the podcast for more interesting nuggets on this story; especially on how an American economist tried to get himself heard by GoI officials… “you try to get a word through channels…try to get key players in the Indian government that a ban is going to be very very difficult for the world…”. I wonder who these key players were. Perhaps one of them was this guy.