India's Food Security Policies in the Wake of Global Food Price Volatility
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View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Springer - Publisher Connector India’s Food Security Policies in the Wake of Global Food Price Volatility 14 Shweta Saini and Ashok Gulati Abbreviations APMC Agricultural Produce Market Committee BE Budget estimates C&F Cost and freight CACP Commission for Agricultural Costs and Prices CAGR/CARG Compound annual growth rate/compound annual rate of growth CAP Cover and plinth CCI Cotton Corporation of India CIF Cost insurance and freight CoP Cost of production CSO Central Statistics Office CV Coefficient of variation DAC Department of Agriculture and Cooperation DARE Department of Agricultural Research and Education DES Directorate of Economics and Statistics DFPD Department of Food and Public Distribution DGCIS Directorate General of Commercial Intelligence and Statistics DGFT Directorate General of Foreign Trade ECA Essential Commodities Act, 1955 Shweta Saini is a Consultant at the Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India. Ashok Gulati is Infosys Chair Professor for Agriculture at the Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India. S. Saini () • A. Gulati Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India e-mail: [email protected] © The Author(s) 2016 331 M. Kalkuhl et al. (eds.), Food Price Volatility and Its Implications for Food Security and Policy, DOI 10.1007/978-3-319-28201-5_14 332 S. Saini and A. Gulati F&V Fruits and vegetables FAO Food and Agriculture Organization FAQ Fair average quality FCI Food Corporation of India FFPI FAO Food Price Index FOB Free on board FY Financial year GCF Gross capital formation GDP Gross domestic product KMS Kharif marketing season MEP Minimum export price MSP Minimum support price MSR Marketed surplus ratio MMT Million metric tonnes NFSM National food security mission NWRs Negotiable warehouse receipts OGL Open general license OMSS Open market sale scheme OWSs Other welfare schemes PDS Public distribution system PMEAC Prime Minister’s Economic Advisory Council PSS Price support scheme Qtl Quintal SEZs Special Economic Zones STC State Trading Corporation TE Triennium ending TFP Total factor productivity TRQ Tariff rate quota USDA United States Department of Agriculture WDRA Warehousing Development and Regulatory Authority WTO World Trade Organization 14.1 Backdrop In a country which has a population of 1.25 billion and which still has the largest number of poor and malnourished people in the world, ensuring food security for the masses is one of the prime concerns of the government policy. It may be worth noting that an average Indian household still spends about 45 % of its total expenditure on food (NSSO 2013). The decade of the 2000s saw the overall GDP grow by an average annual growth rate of more than 7 %. With population growing by less than 1.5 % per annum, per capita incomes consequently rose by more than 5.5 % per annum, thus exerting pressure on food demand, and the pressure is only going to amplify in the foreseeable times. If India can raise its domestic food production at a pace faster than its domestic demand, it can at least 14 India’s Food Security Policies in the Wake of Global Food Price Volatility 333 have food available to feed its population from domestic sources. Otherwise, India would have to increasingly rely on food imports. India is already importing more than half of its edible oil consumption and about 15–20 % of pulse consumption from global markets. Any abrupt increase in the global prices of these commodities will therefore directly affect their domestic prices and consumption and thereby elements of food security. Domestic prices of important food commodities are also affected when the commodities are exported. India, for example, has been the largest exporter of rice from financial year (FY) 2011–2012 to 2014–2015, and its domestic prices are affected by what is happening in the global rice market. Against this backdrop, this paper looks at the issue of food security in India in the wake of recent global food price volatility, especially the price spikes of 2007– 2008 and the price surge in early 2011, when global food price index exceeded the previous peak from 2008. How did India react to global food price spikes of 2007– 2008? Could it protect its poor? What were the likely implications of India’s policy choices on global prices? What lessons can we learn from that experience in terms of providing reasonable stability in food prices, locally and globally, so that food security can be ensured for the masses? These are some of the questions that will be addressed in this paper. The paper is organized as follows: In Sect. 14.2, we study the global rice and wheat markets and how India is placed in it. Section 14.3 elaborates on the policy landscape of rice and wheat, the two primary staples in India. The section is subdivided into two parts where both the trade and the domestic policies are given. After elaborating on India’s policy response to the global food crisis of 2007–2008, we use the interconnectedness of the global and the domestic food prices to illustrate India’s competitiveness in the global markets. The subsection about domestic grain policies highlights the domestic grain dynamics and the major policy changes in the domain. The last section encapsulates the things that could be learned from the analysis in this paper and gives suggestions for the future with regard to the Indian grain trade market. 14.2 Global Rice and Wheat Markets and India Only 9 % of the total rice production was globally traded between 2013 and 2014 (see Figs. 14.1 and 14.2). This indicates a rather thin global rice market compared to wheat and corn, where 23 % and 13 % of the production was traded respectively. The rice supply in global markets is also highly concentrated: in 2013–2014, 80.4 % of the global rice supply came from five countries, namely, Thailand, Vietnam, the United States, Pakistan, and India. Globally, the production of all three staples is going up. The markets are expanding and so are the demands. Between 2011–2012 and 2013–2014, global exports of rice, wheat, and corn increased by 9 %, 5.4 %, and 24.9 %, respectively. This increase may also be due to the markets liberalizing after the 2007–2008 global food crisis, in which the major food exporters like India and Thailand restricted 334 S. Saini and A. Gulati 1000 987.7 988.1 886 868 800 715.4 723.4 697.3 658 600 465.8 471.9 477 475.5 MMTs 400 200 0 2011-12 2012-13 2013-14 2014-15 Rice Wheat Corn Fig. 14.1 Global production trend of the three staples—rice, wheat, and corn since FY 2011– 2012. Source:USDA 162.1 159.5 153.8 147.1 150 129.6 114.8 103.8 100.5 100 MMTs 50 39.1 39.4 42.6 42.6 0 2011-12 2012-13 2013-14 2014-15 Rice Wheat Corn Fig. 14.2 Trends in world exports (MMT). Source:USDA their food supplies and thus triggering an unprecedented global food price spike in history. As a net food exporter, India was bound to benefit from such global trend. We next examine the performance of the Indian agriculture exports. India exported more than US $42.6 billion worth of agricultural exports in 2013– 2014, while it imported agricultural commodities worth US $15.9 billion; India’s agriculture trade account had therefore a net surplus (Fig. 14.3). According to the WTO, India’s share in the total global export of agricultural products increased from 0.8 % in 1990 to 2.6 % in 2012. India emerged as the world’s largest exporter of rice. India has a gross cropped area between 190 and 200 million ha, depending upon the amount of rainfall during the monsoons. In 2013–2014, India produced about 106 million metric tonnes (MMTs) of rice from roughly 43 million ha (m ha) of rice planting area and 96 MMT of wheat from 29 m ha of wheat planting area. India’s share of rice and wheat production globally is roughly 22 % and 13 %, respectively (FAO, stat). 14 India’s Food Security Policies in the Wake of Global Food Price Volatility 335 45 Agri Xs Agri Ms 40 35 Large agri trade 30 surplus 25 US$ Bn 20 15 10 5 0 2008-09 2009-10 1998-99 1990-91 1991-92 1992-93 1993-94 1994-95 1997-98 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2012-13 2013-14 2014-15 1995-96 1996-97 2006-07 2007-08 2010-11 2011-12 Fig. 14.3 India’s exports and imports of agricultural commodities. Source: Agricultural Statistics at a glance (various issues) and the Department of Commerce. Note: Figures for 2014–2015 are estimates Rice and wheat are staple crops of the country and help in meeting a significant proportion of the daily caloric needs of the people. Close to 22 % of the population still live below the poverty line, as estimated by the Planning Commission based on Tendulkar poverty line (Planning Commission 2014). By international definition of US $1.9/day/capita, almost 21.3 % of the people in India lived below poverty line in 2011 (World Bank 2014). The largest mass of poor and malnourished people in the worldlivehere(WorldBank2013). Roughly about one-sixth of the world’s people and one-third of the world’s poor are Indians. One in every three malnourished children in the world is from India (HUNGaMA 2011).