Sugar is not just another commodity in India. It is the lifeblood of over 50 million farmers and the backbone of rural politics. When India experiences setbacks in the global sugar markets, it is not merely trade figures that are at risk, but also livelihoods across Uttar Pradesh, Maharashtra, and Karnataka. So, even if the recent export shortfall may appear small, it’s a warning sign: India’s competitive advantage is eroding while Brazil tightens its grip on the market.
Every economy possesses distinct assets that serve as its hallmark in global trade. For Brazil, these include soy and sugarcane; for the United States, technology and finance; and for India, rice, pharmaceuticals, and sugar. But now, one of India’s signature exports is fading—and the world is noticing.
In January 2025, India authorised the export of 1 million tonnes of sugar until 30 September. This measure wasn’t particularly ambitious; rather, it served as a balancing mechanism to ease inventory pressures, stabilise domestic prices, and safeguard the incomes of over 50 million sugarcane farmers. However, by the end of the season, sugar mills in the country are expected to export only 775,000 tonnes, resulting in a shortfall of approximately 225,000 tonnes.
At first glance, this deficit may appear modest, given India’s annual sugar production of nearly 35 million tonnes. However, in the context of global trade, this shortfall is significant. It signals a gradual decline in India’s competitive edge, a steady consolidation of Brazil’s market dominance, and the potential risk that India slips from being a strategic supplier to an opportunistic one. Consequently, the issue of sugar extends beyond domestic surpluses and farmer payments; it concerns whether India can maintain its status as a credible counterweight in a market increasingly shaped by Brazil.
The economic instruments of Revealed Comparative Advantage (RCA) and Herfindahl-Hirschman Index (HHI) help us understand why. Collectively, they reveal that the issue extends beyond merely unsold sugar; it concerns India’s ability to sustain its long-term role in the global sugar order.
Competitive exporter to swing supplier
Introduced by Béla Balassa, RCA serves as a metric to assess whether a country is truly competitive in exporting a particular product. If a nation’s share of global exports of a commodity exceeds its overall share of world trade, the RCA value exceeds 1, indicating a natural competitive advantage.
In recent decades, India’s RCA in sugar has often exceeded 1. This advantage is attributed to the country’s extensive cane-growing regions, milling infrastructure, and supportive policy measures that have collectively created strong competitiveness across Asia, Africa, and the Middle East. However, this year’s export shortfall highlights emerging weaknesses.
First, there is a domestic pricing discrepancy, as Indian sugar is currently priced above global benchmarks, prompting buyers to opt for more affordable suppliers. Second, cost inflation is a significant concern. The politically sensitive procurement prices for cane are set above market levels, thereby inflating costs. This issue is worsened by inefficient logistics, elevated energy prices, and inconsistent quality standards, all of which contribute to a decline in competitiveness. Third, Brazil presents a competitive edge, with Brazilian sugar being approximately $25 per tonne cheaper. Supported by economies of scale, mechanisation, and logistical efficiency, Brazil offers both cost-effectiveness and reliability.
Should these trends continue, India’s RCA is at risk of sliding toward 1 or even falling below it. Such a development would transform India from a competitive exporter into a “swing supplier”, engaging in global markets only when domestic surpluses allow. The shift, while subtle, would be significant: India would lose its position as a dominant force in the sugar industry.
It’s about global market stability
The HHI serves as a metric for assessing market concentration. An HHI value below 0.15 suggests a competitive or unconcentrated market environment, whereas a range of 0.15 to 0.25 signifies moderate concentration. Values exceeding 0.25 denote a concentrated market.
The global sugar trade is already sitting in the danger zone. In 2023-24, Brazil accounted for approximately 51 per cent of total exports, while Thailand and India made up the remainder, leaving only a small share to be distributed among other exporters. Calculating from this distribution, the HHI of the global sugar market is around 0.34, categorising it as “highly concentrated”.
Each time India falters, Brazil steps in to fill the vacuum. This increases its market share as well as the global HHI. Over time, the process embeds Brazil’s dominance, thereby making the market more vulnerable.
If Brazil were to emerge as the “Saudi Arabia of sugar”, it would lead to limited alternatives for buyers, heightened price volatility, and increased geopolitical risk. India’s role as a counterbalance is not just a matter of national interest; it is crucial for maintaining global market stability.
Farmers, mills, policy cycles
Domestically, the implications are equally serious. Sugar mills depend on export revenues to sustain liquidity and pay farmers. Failure to meet quotas results in delayed payments to farmers, an issue of significant political and social sensitivity in cane-growing regions.
Accumulated unsold inventories eventually lead to a decline in domestic prices, necessitating government intervention through subsidies, minimum support prices, or export restrictions. This results in a reactive policy cycle: India engages in exports when surpluses are large, imposes restrictions when supplies tighten, and provides subsidies when prices decrease. Such inconsistency weakens its credibility with global buyers, who value reliability in addition to competitive pricing.
India has already achieved 20 per cent ethanol blending in petrol five years ahead of schedule—a milestone that highlights the government’s capacity for implementing bold policy measures. However, ethanol is a double-edged sword. While it helps absorb surplus sugar and advance energy objectives, excessive diversion may weaken India’s export reliability. The challenge lies in calibrating ethanol usage not as a replacement, but as a stabiliser—one that supports rather than supplants India’s position as a credible global sugar supplier.
Why India matters
Given the heavy concentration of the global sugar market, India’s presence carries weight far beyond its national borders. When India reduces its participation, importers from Asia to Africa become more dependent on Brazil, worsening price volatility and threatening food security in vulnerable economies.
Beyond mere trade, sugar also embodies diplomacy. For smaller importing nations, India’s reliability as a supplier fosters trust and goodwill—a form of soft power. Repeated failures in this regard risk both market share and influence.
To maintain India’s competitive advantage in the sugar industry, it is imperative to focus on more than merely increasing production. It calls for lower costs, modernised sugar mills, and a consistent export policy. Market diversification, particularly in Africa and the Middle East, is essential to reduce dependence on a handful of buyers. Above all, India must invest in trade diplomacy, pushing for equitable trade regulations and positioning itself as a voice for countries unable to sustain a sugar market dominated by a single supplier.
It is noteworthy that Brazil’s currency, the real, is facing short-term constraints due to external account pressures and trade uncertainty—a reminder that its export model is not completely safe. In such moments of currency stress, India can position itself as a cost-competitive supplier and stable alternative to buyers who worry about exchange-rate volatility.
Failure to act will result in the erosion of comparative advantage, the consolidation of Brazil’s dominance, delayed payments to farmers, and a decline in India’s reputation as a reliable supplier. Once lost, credibility will be challenging to restore.
The outlook still offers hope. A strong monsoon has the potential to enhance India’s output by approximately 18 per cent, reaching an estimated 34.9 million tonnes. It’ll create the space to double exports in the subsequent season. However, volume alone is insufficient. In order to sustain its status as a leading sugar power, India must defend its competitiveness, counterbalance Brazil’s dominance, and restore the confidence of international buyers.
The critical question is whether India will respond to the wake-up call or quietly allow Brazil to claim a sweet share of the market.
Bidisha Bhattacharya is an Associate Fellow, Chintan Research Foundation. She tweets @Bidishabh. Views are personal.
(Edited by Prasanna Bachchhav)