The New Inflation Battle: India Vs. the Humble Onion

India's decision to impose a 40 percent export duty on onions may exacerbate food inflation in Gulf Cooperation Council (GCC) countries and disrupt supply chains, potentially leading to shortages and price fluctuations. However, the impact is expected to be temporary, and other onion-producing nations may respond to the higher prices by increasing their supplies. GCC countries may need to consider diversifying their sourcing of onions and bolstering domestic cultivation to mitigate future vulnerabilities.

The Indian government's efforts to control food prices, such as imposing taxes and export bans, may help contain inflation domestically but could lead to higher prices globally, particularly for rice, affecting countries that rely on food imports.

Erratic climate conditions in India, including a dry August, have led to a significant increase in food prices, with onions alone becoming 25% more expensive since June, causing concern about global food inflation as India is a major exporter of rice, sugar, and onions and is a key supplier to many Asian and African countries.