India has imposed a 40% export tax on onions as domestic prices of the vegetable surge, raising concerns about the global impact, particularly on major importers. The move aims to ensure ample domestic supply and curb inflation, and the tax will be in effect until December 31, according to the Ministry of Finance. Onions’ retail prices in India have risen approximately 20% year-on-year, averaging around 30.72 Indian rupees (37 cents) per kilogram on August 19.
Heavy rainfall in key onion-producing areas in July caused damage to stored onion crops, contributing to the domestic price increase. The rise in onion prices is part of a broader trend of elevated vegetable, fruit, and grain costs in India due to factors such as adverse weather conditions. The country’s July inflation reached a 15-month high of 7.44% compared to the previous year, largely attributed to surging domestic food prices.
India is a crucial supplier of onions to countries like Bangladesh, Malaysia, Sri Lanka, and parts of the Middle East. The export tax is expected to raise onion prices for these nations. India, which accounts for more than 12% of the global onion trade, is the world’s largest exporter of onions. Although the tax may lead to temporarily higher global onion prices, experts predict the impact will be short-lived until October, when more onion crops are anticipated to enter the market.
Onions are a staple ingredient in traditional South Asian dishes and are part of India’s consumer price index basket. This move follows India’s past interventions to manage onion supplies, including an export ban in 2019 due to reduced harvests caused by excessive rainfall.
