India is experiencing a historic drought, which is threatening the global supply of agricultural commodities, including sugar and cotton. The country produces around 20% of the world’s sugar and is a major exporter of cotton. The lack of rain is causing lower-than-average yields, and the government has imposed export curbs to prioritize domestic consumption. This has led to higher prices for sugar and cotton, which is likely to ripple throughout the economy.
India is one of Sri Lanka’s largest sugar suppliers. According to the World Trade Organization, Sri Lanka imported $58.2 million worth of sugar from India in 2021.
The El Nino weather pattern is causing droughts in India and other parts of the world. This is reducing the supply of agricultural commodities, which is driving up prices. Speculators are also contributing to the rise in prices.
The Indian government has imposed export curbs on sugar and rice to prioritize domestic consumption. This is further reducing the supply of these commodities on the global market, which is driving up prices.
Higher prices for agricultural goods could ripple throughout the economy. In Japan, prices of cakes and candies rose 11.6% on the year in September, while prices of clothing and footwear rose 3.4%. Both outpaced the 3% increase in the overall consumer price index.
The uptrend in prices is likely to continue, as weather-based supply concerns for agricultural products are unlikely to be resolved at this point.