JOIN USAlthough prime minister Manmohan Singh considers rising food inflation to be a sign of growing prosperity, the reality is very harsh and painful. Rising food inflation, which continues for the 4th successive year now, has hit the aam aadmi like never before. Adding fuel to fire is the periodic rise in petrol prices.
For over four years now, at every media discussion that I am invited to, I am appalled at the economic ignorance that prevails. They go on harping again and again on what the textbooks would prescribe as the plausible reasons behind any runaway inflation.
Whether it is any member of prime minister’s Economic Advisory Council or the Planning Commission or one of the senior officials of the RBI, the answers you get are all the same: food inflation is because of low production; with rising incomes there is a shift in demand towards nutritious foods thereby increasing the prices of fruits, vegetables and milk products; and because the farmers are being paid a higher procurement price, the consumers have to pay more.
Now let us look at the each of the arguments separately. The common refrain that one hears is that food prices are on an upswing because production is unable to match the growing demand. For several months now, you have watched with concern news reports of foodgrains rotting in godowns.
While lakhs of tonnes of wheat and paddy are allowed to rot, we are being told that there is need to increase crop production. Ever since the TV channels began highlighting the grain wastage, except for lip-sympathy, the government has not made any significant allocation for creating additional storage space. In such a depressing scenario, how will more production help? Where will the government store the additional produce? Will it too not go waste?
Every year, as per official figures more than 16 lakh tonnes of foodgrain rot in godowns. The quantity of wheat and rice that becomes sub-standard and unfit for human consumption and which has to be sold for manufacturing alcohol and goes as cattle feed is several times more.
When Manmohan Singh equated inflation with prosperity, he was trying to say that with more income in hand people have shifted to nutritious diets. The demand for fruits, vegetables and milk products has shot up as a result. This too is untrue, and has no scientific basis. Since this is a frequently asked question, I did some computation of the production estimates.
The per capita daily availability of fruits and vegetables is 480 grams. The per capita requirement for a balanced diet is roughly 80 grams, against which the actual consumption is much low. Therefore it becomes apparent that there is at least six times more availability of fruits and vegetables in this country than what is required. So where is the shortfall? Why are the prices of fruits and vegetables sky-rocketing when the availability is in abundance?
False assumptions
In any case, the argument that with rising incomes the intake of nutritious food products in the food basket expands is also not based on any empirical evidence. The 2007 National Sample Survey Organisation (NSSO) tells us that cereal consumption has been on a steady decline, with no corresponding increase in the intake of more nutritious eggs, vegetables, fruits and milk.
It means hunger has been on a rise and is now more widespread and well-entrenched. The feeling was that with the changing food habits, people have shifted from cereals to nutritious foods. This assumption too does not hold true anymore.
The decline in cereal consumption has more or less followed a steady pattern in the rural and urban areas, of course, much faster in the rural areas. Per capita cereal consumption per month in the rural areas across the country has fallen from 13.4 kg in 1993-94 to 11.7 kg in 2006-07.
The decline has been sharper between the period 2004 and 2007 when just in three years, cereals consumption fell from 12.1 kg to 11.7 kg. In the urban centres the decline was from 10.6 kg in 1993-94 to 9.6 kg in 2006-07. In a largely vegetarian society, cereals constitute the single important source of nutrition and therefore its importance in the Indian context is well established.
Moreover, if the claim was true, India’s ranking in the 2010 Global Hunger Index prepared by the International Food Policy Research Institute should have improved. India continues to rank 67th among 81 countries, faring much lower then Pakistan, Sudan and Rwanda. If people had started eating more, I see no reason why India should be ranked so low in the hunger index.
And finally how true is the argument that food prices are going up because farmers have been paid a higher procurement price? Wheat, rice and sugarcane are essentially the three major crops where farmers have received a higher procurement price.
Interestingly, wheat and rice are not the crops where food inflation is hurting the poor. In case of sugarcane, after a hike in prices in 2009, sugar prices have stabilised even though the growers are getting a higher price. It is in case of fruits and vegetables, which do not receive any benefit of procurement prices, where the market prices have made a hole in the pocket of average consumers.