Welfare Analysis of Changing Food Prices: A Nonparametric Examination of Export Ban on Rice in India

During the world food crisis of 2007-08, the price of staples soared rapidly. Higher food price impacts poor households more as they spend approximately three quarters of their income on food. Together rice and wheat provide more than 50% of the calorific intake in India. Apart from providing food security, millions of poor and small farmers depend on rice for their livelihoods. Using Indian Consumer Household Expenditure surveys for the years 2007-08 and 2009-10 the paper analyses the welfare generated by a ban on export of rice by the Indian government. The paper finds that the net impact of the ban on export of rice was positive, as it was able to cushion the Indian population (87% of whom are net consumers) from the adverse effects of the crisis. It also found that the poor in India aren’t homogeneous in nature. The majority of the rice-producing households that stand to gain from increased prices are relatively poor farmers. At the same time, the poor households that do not cultivate rice are most affected by price increase, as their budget share of rice is higher than richer households, who are more resilient to price rise. In particular, the wage labourers are affected significantly.