Will India’s new 40% export duty on onions worsen food inflation in the Arab world?

An Indian labourer carries a sack of onions on his shoulder at a wholesale market in Chennai on February 1, 2019. (AFP)
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Updated 25 August 2023
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Will India’s new 40% export duty on onions worsen food inflation in the Arab world?

  • Move by Indian government could lead to higher prices, if not immediate shortage, of the vegetable
  • Experts say recent decisions by India underscore the risks of Arab overreliance on a single supplier for kitchen staples

RIYADH/NEW DELHI: In an era of increasing global interdependence in a wide range of sectors, from energy supplies to food security, the effects of decisions and events in one country rarely remain limited to that country.

Take the India government’s recent move to impose a 40 percent duty on onion exports in a bid to calm rising domestic prices. The announcement has prompted concern in import-dependent countries of the Gulf Cooperation Council area about securing adequate supplies of the vegetable.

India, the world’s leading onion exporter, said the duty is in the “public interest” and will remain in place until December 31. What this means for GCC countries is that local markets must brace for possible price fluctuations of a staple of the kitchen.

“Since onions are a basic ingredient in cooking, the 40 percent export duty levied by India will add to food inflation in the (Gulf) countries, given the already strained supply chains for wheat and rice,” Anupam Manur, an economist at public policy research and education organization the Takshashila Institution in Bangalore, told Arab News.

According to the Observatory of Economic Complexity, the UAE imported $41.7 million of onions from India in 2021, which made the country the fourth-largest importer of Indian onions that year.

The volume of Emirati imports of onions from India has been rising in recent years. In 2020, the value of the trade was $34.8 million, up from $27.7 million in 2019. The increase is likely due to the UAE’s growing population and the normally relatively low price of Indian onions.

The imposition of the new export duty could well raise the price of onions across the GCC region and eventually lead to shortages, affecting consumers and businesses. As a result, families accustomed to having onions as a key part of their daily diet might be compelled to adapt their cooking habits.

India said it imposed the duty to boost domestic supplies and thereby bring down rising local prices. “Onion prices had been inching up over the last three weeks,” Pushan Sharma, research director of Mumbai-based CRISIL Market Intelligence and Analytics, told Arab News.

“As per data from India’s Ministry of Consumer Affairs, onion prices on Aug. 19 reached over 30 rupees ($0.36), which is 20 percent higher than last year.”




A vendor cleans and sorts onions at a stall in the market in Bengaluru on April 7, 2023. (AFP)

The effects of a fickle climate on crops have also played a role in the apparent shortages of local supplies.

“High rainfall in July 2023 in key producing regions of Maharashtra and Karnataka damaged the stored onion crop,” said Sharma. “Traders had around 2.5 million tons of onions stored and it is estimated that around 10 to 20 percent of the stock got damaged.

“The rabi season, or winter crop, which produces 70 percent of India’s onion requirement, typically matures in March. However, this year we saw high temperatures in February and unseasonal rainfall in March, which caused early maturity of the rabi crop and reduced the shelf life of this year’s rabi onion crop from six to five months.”

With the rabi crop expected to be depleted by early September, prices have increased further.

“The effect of the price rise will be immediate and will gradually accentuate,” said Manur.

“The news of the export duty will have already reached households and traders, who will put in higher buy orders which, by itself, will lead to a price hike. The price of onions in the market tomorrow would have already factored in a future price rise.”




Pushan Sharma said that high rainfall in July 2023 in key producing regions of Maharashtra and Karnataka damaged the stored onion crop. (AFP/File)

The imposition of a high export duty is not unprecedented. India took similar actions to stabilize the domestic price of wheat by banning exports in 2022, restricting rice shipments in July this year, and lowering import duties on edible cooking oils.

“Sudden supply shortages are not new, especially in the agricultural and food sector,” said Manur. “A recent example is the global wheat shortage when Russia invaded Ukraine.

“Despite the fear, countries around the world coped. Some had to dig into their reserves, while other countries expanded their production to meet the demand. Something similar will happen here as well. Other producing nations will respond to the higher prices and increase their supplies.”

Given that New Delhi has said the export duty will be applied only until the end of this year, the hope is that any price hikes will be temporary.

“The increase in onion prices is expected to be short lived,” said Sharma of CRISIL Market Intelligence and Analytics. “Consumers are expected to bear the brunt of higher prices (in the absence of export curbs) only during the lean period (until the end of September or early October).

“From October onward, when kharif (monsoon or autumn season) and late kharif supplies will come into the market, prices are expected to trickle down to their regular levels.”

However, abrupt changes in export policies could result in importers looking elsewhere for more reliable sources.




The imposition of a high export duty is not unprecedented. India restricted rice shipments in July this year. (AFP)

As far as wider economic relations between India and GCC countries are concerned, “this move is not going to affect trade dynamics because it is only a short-term measure,” Ajeet Kumar Sahoo, assistant professor at the Center for International Trade and Development at Jawaharlal Nehru University in New Delhi, told Arab News.

“I don’t see that onions can impact the balance of payment with other countries. But there is no doubt that the consumers of other countries will be having a limited supply of onions, so that prices of onions will be higher, but that would be for the short term.”

Muddassir Quamar, also an associate professor at Jawaharlal Nehru University, similarly believes trade relations between India and the GCC bloc will continue to grow in strength regardless of the onion crisis.

“In the short term it might increase the food import bill for the GCC countries but might not affect long-term trade relations as food imports fluctuate and are dependent on agricultural production and market-control policies of individual countries,” he told Arab News.

Food security is a concern for Arab countries and so the current situation with onion imports raises important questions about the reliability of supply chains. But any temporary shortage of onions is not expected to cause any major problems.

“This will not have an impact on food security, per se, as onion is a flavoring agent rather than a purely nutritional one,” said Manur. “So, citizens of the GCC may experience blander food but will not see a threat to food security.”




An Indian worker uproots onions at a farm at Vasna Keliya village near Dholka, some 35 kms from Ahmedabad on December 4, 2018. (AFP)

Nevertheless, major importing nations in the Arab world might need to start considering strategies to diversify the sourcing of onions, or even bolster domestic cultivation, to mitigate the possible effects of this vulnerability in future.

“Every country has to take this issue very seriously, especially with the likes of food items, lifesaving drugs, and petroleum products,” said Sahoo.

“They have to find alternatives, otherwise the future will be very difficult. Every country has to have self-sufficiency, especially in food, water and energy.”

Fortunately, the Kingdom and the other GCC countries appear to be doing just that by developing strategies to protect their supply chains from disruption.

“Saudi Arabia has recently initiated a food security authority to deal with such incidents and I expect something similar happening in the rest of the GCC countries,” Talat Hafiz, a Saudi economist and financial analyst, told Arab News.




Talat Hafiz, a Saudi economist and financial analyst.

A number of additional measures could be available for GCC governments to mitigate the effects of the export duty, including subsidies for consumers and widening the global pool of onion suppliers. Simply shifting to other suppliers might not be a viable long-term solution, however.

“It can be expected that the other exporting countries — Pakistan, China and Egypt — will hike their onion export prices in response, given their limited surpluses for exports and the sudden supply gap,” said Manur.

“In the short run, a supply crunch can be expected but increased prices could lead to higher production in the next agricultural cycle.”

 


Strong Middle East representation as World Economic Forum unveils annual meeting agenda

Updated 6 sec ago
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Strong Middle East representation as World Economic Forum unveils annual meeting agenda

  • Leaders from Israel, Iran, Syria and Palestine to be key speakers at event, which will address ongoing conflicts in the region and explore its future prospects
  • US President-elect Donald Trump set to appear; organizers highlight growing presence of Global South and tout ‘parity’ among developing and developed countries

LONDON: The Middle East will have a significant presence at the annual meeting of the World Economic Forum next week, reflecting the growing influence of emerging markets, the organization said on Tuesday.

Mirek Dusek, the forum’s managing director, said he was “pleased” with the increase in the number of representatives from emerging markets expected to attend the event. He added that the “proportion is growing this year. We’re seeing particularly strong numbers, for example, from the Middle East, also from South Asia.”

Nearly 3,000 people from more than 130 countries, including 900 business leaders, are expected to attend the annual meeting, which will take place in Davos, Switzerland, from Jan. 20 to 25.

The forum has faced repeated criticism from some for being an elite gathering focused on the traditional major powers and big business, but Dusek highlighted the growing presence of leaders from the Global South. He said participation among developing nations was now “on parity” with that of developed countries.

The theme of this year’s meeting is “Collaboration for the Intelligent Age” and it will address “five distinct but interconnected thematic priorities,” the forum said, reflecting its efforts to navigate a complex geopolitical and economic landscape.

“(The agenda) is linked, first and foremost, to this deep sense of being on the cusp of a new era for the world economy, or at least in transition to a new situation for the world economy,” Dusek said.

Key discussions will consider the transformative effects of rapid technological advances, including developments in artificial intelligence, as well as the challenges arising from geopolitical fragmentation and the need to foster global collaboration during what Dusek described as a “key time for the world economy.”

The forum will also address issues such as economic growth, trade and investment, exploring “new sources of growth in this global economy.” It will examine how the public and private sectors can invest in the development of human capital and create quality jobs to help build modern and resilient societies.

The forum’s president and CEO, Borge Brende, said: “It is our 55th annual meeting taking place in Davos, and it is happening against the most complicated geopolitical backdrop in generations. But still, in the fragmented and partly polarized world, there are still areas where we can collaborate.”

The Middle East is expected to play a pivotal role in the discussions, as the forum addresses ongoing conflicts in the region and its future prospects.

Syria’s foreign minister, Asaad Hassan Al-Shaibani, is scheduled to present his country’s plans for the future after the fall of the Assad regime in December after its 52-year rule.

The humanitarian crisis in Gaza will also feature prominently in discussions, alongside efforts to rebuild trust and promote reconciliation in the region. Israeli President Isaac Herzog, Palestinian Prime Minister Mohammed Mustafa, Iranian Vice President Mohammed Reza Aref, and the UN’s special envoy for Yemen, Hans Grundberg, are among the key speakers who will address the issues.

“We were very close (to a full-scale conflict) between Israel and Iran, and I don’t think we’re out of the woods yet,” said Brende, as he expressed hope that the forum will serve as a platform “for peace, reconciliation, and addressing humanitarian suffering.”

Rebuilding trust between institutions and efforts to address climate change are other longstanding priorities for forum, and organizers said these will remain central to the discussions.

Amid concerns that such topics have been “losing ground” amid other political and economic challenges, Gim Huay Neo, the forum’s managing director, reiterated its focus on finding and implementing tangible solutions.

“There will be multiple dialogs that will be really focused around tangible action that companies and governments can take to support the net-zero, nature-positive transition pathways and, more importantly, how they can work together to build partnerships that can enable and empower the action in a faster and much more skilled manner,” she said.

In a surprise announcement, Brende said US President-elect Trump, whose inauguration coincides with the opening day of the forum, would participate via a digital address. He is expected to outline his administration’s plans for implementing its policies, in particular his pledge to end the war in Ukraine.

Ukrainian President Volodymyr Zelensky will also deliver a special address and take part in a question-and-answer session.

In total, 60 heads of state and government will take part in the event, including European Commission President Ursula von der Leyen and Chinese Vice Premier Ding Xuexiang.


Saudi Arabia to offer 5k sq. km of mining exploration opportunities in 2025: Alkhorayef

Updated 15 January 2025
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Saudi Arabia to offer 5k sq. km of mining exploration opportunities in 2025: Alkhorayef

RIYADH: Saudi Arabia is promoting upcoming exploration opportunities across 5,000 sq. km mineralized belts in 2025 as the Kingdom continues its steadfast growth in the mining sector, according to a minister. 

Speaking at the Future Minerals Forum in Riyadh on Jan. 15, Saudi Arabia’s Minister of Industry and Mineral Resources Bandar Alkhorayef said that the Kingdom’s mining sector is the fastest growing globally, with a mineral potential estimated at $2.5 trillion. 

This allocation of new exploration sites to tap mineral wealth is part of Saudi Arabia’s efforts to establish mining as the third pillar of the Kingdom’s industrial economy. 

Earlier this month, Saudi Arabia allocated five sites for establishing mining complexes in the Makkah and Asir regions as part of the nation’s strategy to attract quality investments, enhance transparency, and support local communities.

“Guided by our Vision 2030, Saudi Arabia’s mining sector has become the fastest growing globally, with a mineral potential estimated at $2.5 trillion. Our focus on regulatory frameworks, innovation, and infrastructure development has helped the Kingdom to become the top-tier destination for mining investment and exploration,” said Alkhorayef. 

He added: “This year also, we are promoting upcoming exploration opportunities across 5,000 sq. km of promising mineralized belts. Our exploration incentives program, launched only last year, is already giving results with six companies receiving funding.” 

Alkhorayef said that Saudi Arabia has also launched the Mining Innovation Studio aimed at turning Riyadh into a global hub for the industry and accelerating cutting-edge technologies.

“This is just one step toward realizing Riyadh’s vision of becoming the Silicon Valley of mining,” added the minister. 

During the speech, Alkhorayef said that events like FMF are crucial to elevating the mining sector and ensuring sustainable growth of the industry. 

Highlighting the progress of the forum, the Saudi minister added that the FMF has evolved and grown, with the number of attendees increasing from 3,500 in 2022 to over 20,000 in 2025. 

“Within a few years, we could make FMF the most prominent international platform for minerals around the world, contributing to forming the future of the sector and achieving sustainable growth,” said Alkhorayef. 

He added: “This year, under the theme, ‘The Year of Impact,’ we gather with a shared commitment to tackle some of the most pressing challenges of our times; ensuring a sustainable energy transition, addressing critical mineral shortage, and fostering economic prosperity for all.” 

During the talk, the minister added that this year’s FMF will also witness the launch of the first-ever regional leadership roundtable focussing on Africa, Central Asia, and Latin America to create a “powerful global minerals impact.”

He further said the forum will also witness several debates featuring industry leaders tackling issues such as resource depletion, sustainability, and stakeholder engagement. 

“Future Minerals Forum 2025 is promising to be a catalyst for actionable solutions and transformative change,” said Alkhorayef. 


Saudi Arabia’s annual inflation rate rises by 1.7% in 2024: GASTAT

Updated 15 January 2025
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Saudi Arabia’s annual inflation rate rises by 1.7% in 2024: GASTAT

  • Inflation rate remained among the lowest in the Middle East and globally,nflation rate remained among the lowest in the Middle East and globally
  • GASTAT highlighted a 0.8 percent year-on-year increase in food and beverage prices in 2024

RIYADH: Saudi Arabia’s annual inflation rate for consumer prices increased by 1.7 percent in 2024 compared to the previous year, driven primarily by higher housing costs, official data revealed. 
According to the General Authority for Statistics, housing rental prices rose by 10.6 percent year on year in 2024, significantly contributing to the overall rise in inflation. Costs for housing, water, electricity, gas, and other fuels collectively increased by 8.8 percent last year compared to 2023. 
Despite the uptick, Saudi Arabia’s inflation rate remained among the lowest in the Middle East and globally, reflecting the Kingdom’s effective measures to ensure economic resilience and mitigate global price pressures. 
The rate also fell short of projections made by the World Bank in October 2024, which had estimated Saudi Arabia’s inflation to remain steady at 2.1 percent last year and 2.3 percent in 2025, both below the Gulf Cooperation Council average. 
In its latest report, GASTAT highlighted a 0.8 percent year-on-year increase in food and beverage prices in 2024. Costs for restaurants and hotels rose by 2 percent, while education expenses increased by 1.3 percent over the same period. 
The report noted declines in several categories. Clothing and footwear prices dropped by 3.4 percent, led by a 5.8 percent decrease in ready-made clothing prices. Similarly, furnishing and household equipment costs fell by 3.4 percent, and transport prices declined by 2.4 percent. 
Prices for entertainment and culture decreased by 1.3 percent, largely due to a 5.9 percent decline in audio-visual equipment prices, further emphasizing the nuanced shifts in consumer price indices across different sectors. 
Annual inflation holds steady in December 
In a separate report, GASTAT noted that Saudi Arabia’s annual inflation rate remained stable at 1.9 percent in December 2024 compared to the same month in 2023. 
Housing rents increased by 10.6 percent yearly in December, with villa rental prices rising by 9.9 percent during the same period. 
“The increase in this section (housing) had a significant impact on the continuation of the annual inflation pace for December 2024 due to the weight formed by this section, which amounted to 25.5 percent,” GASTAT stated. 
Costs for housing, water, electricity, gas, and other fuels rose 8.9 percent compared to the previous year, underscoring the sector’s influence on inflation. Food and beverage prices increased by 0.8 percent year on year in December, driven by a 2.8 percent rise in meat and poultry costs. 
Personal goods and services expenses grew by 2.2 percent in December, influenced by a 20.2 percent surge in jewelry, watches, and precious antiques prices. Education costs also rose by 1.1 percent, primarily due to a 1.8 percent increase in fees for intermediate and secondary education. 
Furnishing and home equipment prices dropped by 2.8 percent in December, while clothing and footwear expenses declined by 2.2 percent. Transportation saw a 2.5 percent decrease year on year, largely attributed to a 3.9 percent reduction in vehicle purchase prices. 


Oil Updates — crude inches up, but uncertainty over sanctions impact caps gains

Updated 15 January 2025
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Oil Updates — crude inches up, but uncertainty over sanctions impact caps gains

SINGAPORE: Oil prices rose on Wednesday trimming losses from the previous day, as the focus turned back to potential supply disruptions from sanctions on Russian tankers, though gains were capped as the market awaited more clarity on their impact.

Brent crude futures edged up 11 cents, or 0.1 percent, to $80.03 a barrel by 8:15 a.m. Saudi time, after dropping 1.4 percent in the previous session. US West Texas Intermediate crude climbed 23 cents, or 0.3 percent, to $77.73 a barrel after a 1.6 percent decline.

Prices slipped on Tuesday after the US Energy Information Administration predicted oil would come under pressure over the next two years as supply would outpace demand.

“The dominant driver has been all about the Russian oil sanctions lately, compounded by a streak of stronger US economic data,” said Yeap Jun Rong, market strategist at IG.

“The key question remains on how much Russian supply will be lost in the global market and whether alternative measures can offset the shortfall,” said Yeap, adding that in the near term oil may give up some of its sharp gains from the past week.

The market also found some support on Wednesday from a drop in crude stockpiles in the US, the world’s biggest oil consumer, reported by the American Petroleum Institute late on Tuesday.

“Oil prices are trading firmer in early morning trading in Asia today after API numbers showed that US crude oil inventories fell more than expected over the last week,” said ING analysts.

The analysts added that while crude oil stocks in the country’s flagship storage hub Cushing, Oklahoma, increased by 600,000 barrels, inventories were still historically low. Cushing in the delivery location for WTI futures contracts.

The API reported US crude oil stocks fell by 2.6 million barrels in the week ended Jan. 10, according to market sources citing the API figures. They added that gasoline inventories rose by 5.4 million barrels while distillate stocks climbed by 4.88 million barrels.

A Reuters poll showed analysts expected US crude oil stockpiles fell by about 1 million barrels in the week to Jan. 10. Stockpile data from the Energy Information Administration, the statistical arm of the US Department of Energy, is due at 6:30 p.m. Saudi time.

On Tuesday, the EIA trimmed its outlook for global demand in 2025 to 104.1 million barrels per day, while expecting supply of oil and liquid fuel to average 104.4 million bpd.

It predicted Brent prices would fall 8 percent to average $74 a barrel in 2025, then fall further to $66 a barrel in 2026, while WTI would average $70 in 2025 and fall to $62 next year.


World Economic Forum adds Aramco facility to its Global Lighthouse Network

Updated 15 January 2025
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World Economic Forum adds Aramco facility to its Global Lighthouse Network

  • The network recognizes industrial sites that use advanced technologies to boost performance, operations and sustainability
  • North Ghawar Oil Producing Complex is the 5th Aramco facility to earn a place in the network

LONDON: The World Economic Forum has added Aramco’s North Ghawar Oil Producing Complex to its prestigious Global Lighthouse Network.

It is the fifth Aramco facility to earn a place in the network. The company said the addition honors its efforts to enhance operational and environmental performance.

Nasir K. Al-Naimi, the company’s upstream president, described the achievement as testament to the company’s focus on innovation and operational excellence.

“It validates our journey towards a truly digital and lower-carbon-emissions future, where technology empowers us to optimize our processes, reduce our environmental impact, and deliver exceptional value to our customers and shareholders.”

The Global Lighthouse Network, established by the forum in 2018 in collaboration with management consultancy McKinsey & Company, recognizes industrial facilities worldwide that have leveraged Fourth Industrial Revolution technologies to achieve measurable improvements in financial performance, operations and sustainability, and reduce environmental impacts.

The Aramco facility was one of 17 industrial sites worldwide added to the network on Tuesday. It now comprises 189 facilities worldwide, and Aramco is the only energy company represented by more than three facilities. The North Ghawar site is located in Al-Ahsa Governorate in the Eastern Province.