The Basmati rice export market is set to witness a significant boost following the recent currency trade agreement between India and the United Arab Emirates (UAE). This development is expected to enhance the trade window via Dubai to Iran, thus reducing payment default risks and providing steady returns to Basmati exporters. The agreement aims to promote the use of local currencies (rupee and dirham) for cross-border transactions, offering exporters the advantage of avoiding fluctuations caused by foreign currency exchange rates.
During the 2022-23 fiscal year, Basmati rice exports from India recorded remarkable growth, reaching 4.56 million tonnes valued at $4.79 billion, up from 3.94 million tonnes in the previous fiscal. The unit value realization from exports also experienced an upswing, increasing to $1,050 per tonne, compared to $897 in the last year. Despite facing challenges such as the Ukraine-Russia conflict and partial restrictions on non-Basmati rice exports, the Basmati market displayed resilience and favorable price trends.
The trade agreement is poised to strengthen business ties with Iran, a critical destination for Indian Basmati rice and one of the top five importers. The All India Rice Exporters Association (AIREA) ‘s former president highlighted the agreement’s significance in facilitating smoother trade with Iran. Many Iranian businessmen have faced challenges in clearing payments despite existing rupee trade arrangements. The new deal is expected to streamline transactions and expedite exports to Iran.
Reduced risk of payment
One of the key advantages of the currency trade agreement is the reduced risk of payment defaults from Iran. This development will provide more certainty to exporters and fast-track Basmati shipments to Iran, fostering a conducive environment for higher exports in the future.
While the currency trade agreement between India and the UAE has been hailed as a game-changer for Basmati rice exports, its full impact is yet to unfold. With the India-UAE currency trade agreement set to usher in a new era of stability and convenience in Basmati rice exports, Indian exporters can look forward to a prosperous and thriving market. The collaboration between the two central banks promises to reduce currency fluctuation risks, enhance trade with Iran, and bolster the overall growth of the Basmati rice export industry.