India achieved self-sufficiency in food grains in the 1970s thanks to the Green Revolution. Yet, with a growing population, rising incomes and substantial unsatisfied demand among the poor, it is clear that the country cannot do without continued high growth in agricultural production.
The implications of rapidly increasing demand both for human consumption and animal feed in the medium to long run need a rigorous assessment. Grain production has become a matter of concern not only in India but also at the global level. The question is, would India be able to increase food production in the coming years with nearly stagnant net cropped area? This implies that additional food demand has to be met through productivity enhancements. With a billion-plus population, developments on India’s food supply-demand equation have important implications for global food security. This is particularly relevant after the adoption of the Agreement on Agriculture (AOA) through which a single global market for agriculture is evolving.
The author is a team member of a project on agricultural outlook sponsored by FAO (Food and Agriculture Organization of United Nations) and ministry of agriculture. He has carried out estimates on supply and demand balances in food grains and edible oils in medium-term future. Some findings are summarised in this article.
Indian agriculture has made great strides in providing food security for its people. The food grain production has increased from 130 million tonne in 1980-81 to 265 million tonne during 2013-14. However, production of food grains in the post-liberalisation era has remained the subject of wide fluctuations. Production hovered around 200 million tonne for almost a decade beginning from 1996-97 to 2005-06. Production peaked at 210 million tonne in 1999-2000 and further increased to 213 million tonne in 2001-02. However, a severe drought in 2002-03 caused a sharp fall in production to a new low of 175 million tonne.
The production recovery in the succeeding four years after drought was not spectacular. Due to the good harvest supported by a normal monsoon in the year 2007-08 and 2008-09, the country was able to achieve the 10th Plan target of food grain production of above 230 million tonne.
Among different crops, the most inspiring increase appeared in the case of coarse cereals the production of which increased from around 30 million tonne in the mid-1990s to 40 million tonne in 2007-08 and further to 43 million tonne in 2013-14. Production of pulses remained stagnant to around 14 to 15 million tonne, the level India had achieved around the late 1980s or early 1990s. However, a new peak of 19 million tonne of pulses production was achieved in the year 2013-14 which might be the result of area expansion under Food Security Mission Pulse Programme.
In the case of oilseeds, the new peak achieved in 2013-14 is 32.7 million tonne, the previous being 24 million tonne achieved in 1996-97. The total food grains production increased at a rate of 2.7 per cent in the 1980s, which decelerated to 2.1 per cent in the 1990s and came down further to less than 2 per cent in the 2000s. Growth rate was significant in the 1980s and 1990s but was insignificant in 2000s.
Only Gujarat, Haryana, Punjab, Andhra Pradesh, Odisha, and West Bengal observed significant positive growth rate in production in the post-liberalisation period (1995-96 to 2009-10), while Kerala observed significant negative growth rate during the same time. In comparison, in the pre-liberalisation period (1980-81 to 1994-95), all the major states observed significant and positive growth rates in the production of food grains. Even among the states that observed positive and significant growth rates in the post-liberalisation period, only in Gujarat, Andhra Pradesh, and Odisha was the growth rate higher in the post-liberalisation period as compared to the pre-liberalisation period. In all other states, the trend of growth rate was lower in the post-liberalisation as compared to the pre-liberalisation period.
Decline in the production growth rate could be an outcome either of decline in area or decline in the yield growth rate, or of both. The area trends of food grains present a very dismal picture, not only for the post-liberalisation but for the pre-liberalisation period as well. During the entire period of 1980-81 to 2009-10, the area under food grains observed a significant but negative trend in the growth rate at -0.2 per cent per annum. Thus, a shift in cropping pattern is taking place from food grains to non-food grains since the beginning of the 1980s or even before that. This change is visible in almost all the states as there is hardly any state that has observed any significant positive growth rate in area under food grains during both the pre- as well as post-liberalisation periods. Therefore, decline in production in the post-liberalisation in comparison to the pre-liberalisation period was not caused by the decline in area, but the sole reason was decline in the yield rate of food grain production. This is evident from the trend growth of yield.
During the pre-liberalisation period, food grain yield increased at 3 per cent per annum. In comparison, in the post-liberalisation period, the yield growth rate was only 1 per cent. Almost all the major states observed significant and positive growth rate in yield in the pre-liberalisation period, while in the post-liberalisation period; only Uttar Pradesh, Gujarat, Punjab, Haryana, Odisha, Andhra Pradesh, West Bengal, and Kerala observed a significantly positive growth rate. Even in these states, positive growth rate in yield was lower in the post-liberalisation period compared to pre-liberalisation period except for the state of Gujarat.
The slowdown in the progress of irrigation among almost all crops since the mid-1990s provides eloquent explanation for the fall in productivity of most food grains and oilseeds crops during the post-liberalisation period. However, some reversal in the falling trends in the irrigated area are visible following increase in the public sector investment in the agricultural sector in the post-mid-2000s. The U-turn in public investment in agriculture in recent years has set a positive incentive for private investment. The consumption of fertilisers witnessed impressive growth over the past few years after witnessing slow and uneven growth in the late 1990s and early 2000s. It is interesting to note that the agriculturally less-advanced states like Bihar, Madhya Pradesh, Gujarat and Andhra Pradesh witnessed huge increases in per hectare fertiliser consumption in the last decade.
The increasing trends in outstanding loans from institutional sources was also observed. Institutional loans increased by 13 per cent in the pre-liberalisation period that increased to 15 per cent during post-liberalisation. As with the increasing trends in fertiliser consumption and spread of institutional loans, the share of tractor, power tillers and use of electricity in agriculture for lifting water and other purposes has also increased after the 1990s. These are encouraging signs for Indian agriculture and are expected to set a positive tempo for agricultural productivity.
With rising incomes and changing tastes, diversification in the consumption basket is happening all over the country. A clear trend away from cereals and pulses and towards high value crops like animal products (milk and meat), fruits and vegetables and edible oils was observed from the National Sample Survey data on consumption.
The decline in consumption of cereals was observed not only during the post-liberalisation period (1996-2009) but was prevalent in the pre-liberalisation period (1987-1995) too in both rural and urban areas. At the all-India level, negative trends in consumption were observed for rice, wheat and coarse cereals during both pre- and post-liberalisation periods for rural as well as urban areas. In most cases, these negative trends were significant.
In the case of pulses, negative trends in consumption were observed for rural and urban areas during pre-liberalisation. However, consumption trends for pulses reversed during the post-liberalisation period even though the trends were insignificant. Edible oil consumption trends were positive but insignificant during the pre-liberalisation period, both in rural and urban areas. These trends became significant and their volumes also increased during the post-liberalisation period for rural and urban areas. The broader trends were the same in different regions in spite of regional differences in consumption patterns.
For demand projections, the baseline assumes a national income growth rate of 6 per cent per annum for the forecast period, i.e., 2010 through 2020. The high growth scenario imposes a much more ambitious growth rate of 12 per cent per annum while medium growth assumes a reachable target as of now up to 9 per cent growth per annum. In the baseline scenario, food grains demand for human consumption is expected to increase marginally from 161 million tonne in 2009-10 to 172 million tonne by the end of 12th FYP and 179 million tonne by 2020-21. This increase in demand of food grains would be on account of increase in demand for rice and wheat while demand for other inferior cereals following the past trend would continue to decline on account of rising incomes.
Demand for pulses would go up from about 9.8 million tonne in 2009-10 to 11.4 million tonne by 2016-17, and touch 12.5 million tonne during the projection period up to 2020-21. If the future income grows at 12 per cent per annum, aggregate demand for food grains for human consumption would come down (on account of diversification of consumption basket with higher income) to 160 million tonne by the end of the 12th Five-Year Plan. If the economy continues to grow at the same rate, the food grains demand would almost stagnate at that level. This decline in demand with high growth would not only be in coarse cereals but also in superior cereals like wheat and rice.
Demand for pulses would however increase in the high growth rate scenario by up to 13 million tonne by the end of 12th Plan and further to 16 million tonne by the end of 2020-21. However, if income growth remains in at the medium rate of 9 per cent per annum, there could be a positive effect on demand for cereals both on account of lower income (less diversification of consumption basket) and rising population. In the this scenario, food grains demand could go up to 166 million tonne by the end of 12th Plan and would further increase to 169 million tonne by the end of 2020-21. It is interesting to note that in all the three scenarios, growth rate in demand of cereals including the demand of individual cereals, e.g., rice, wheat or coarse grains both in 2009-2016 and 2009-2020, would be less than that of population growth rate. The growth in demand for pulses for human consumption, meanwhile, would far exceed that of the population growth rate in all the three scenarios and may therefore have an adverse effect on future food security.
Edible oils demand for human consumption is expected to increase from 9.8 million tonne in the base year (2009-10) to 14 million tonne by 2020-21 with the baseline growth rate of 6 per cent. If the economy in future grows at 12 per cent per annum, edible oil demand would skyrocket to 22 million tonne by the end of 2020-21. However, in the medium growth scenario, the demand for edible oils would increase at an insipid rate of up to 17.3 million tonne by the end of 2020-21. The growth rate in demand of edible oils would be less than 3 per cent per annum in the baseline scenario, 8 per cent in the high growth scenario and 5 per cent per annum in the medium growth scenario.
Thus, demand for edible oils is expected to increase at a much faster rate as compared to demand for food grains for human consumption in all the three scenarios. The estimates for SFW (seed, feed and wastage) were worked out using the trend analysis of gap between aggregate food supply and demand after adjusting for net imports and changes in the government stocks. The overall food grains use as SFW would increase from 34 million tonne in the early 1990s to 76 million tonne by 2016-17 and 85 million tonne by the end of 2020-21. The ratio of SFW to total food grains’ production would increase from 19 per cent in the early 1990s to 22 to 29 per cent by the end of 2020.
The aggregate demand (direct + indirect) for food grains is projected to increase from 239 million tonne from the baseline (2010-11) to 249 million tonne by the end of the 12th Plan and 264 million tonne by the end of 2020-21 if the economy grows at 6 per cent per annum. However, if the economy spurs on at 12 per cent, the demand for food grains by 2020 would be much less – 247 million tonne – because of the rapid diversification of the consumption basket from food grains to high value food items in the event of a higher per capita income. If, meanwhile, economic growth comes to the medium level of 9 per cent per annum, aggregate demand for food grains would cross 237 million tonne by 2016-17 and exceed 255 million tonne by the end of 2020-21.
In the case of superior cereals, the aggregate demand for wheat would come closer to that of rice because of increased demand of wheat as feed for animal use. The aggregate demand for these two cereals is expected to be between 90 and 100 million tonne each by the end of 2020-21, depending on different growth scenarios. The aggregate demand for coarse cereals could increase from 40 million tonne in the baseline to 42 million tonne in 2020-21 in the high growth scenario and 46 million tonne in the low growth scenario. Similarly, aggregate demand for pulses is expected to grow from 18 million tonne in the baseline scenario and rise to between 24 and 27 million tonne, depending on various growth scenarios. Lastly, edible oil demand would increase at a much faster rate than that of food grains; from 10 million tonne in the baseline scenario to between 14 and 22 million tonne by 2020-21.
The production of food grains is expected to grow from the present peak of 265 million tonne in 2013-14 (251 million tonne in 2014-15), to touch 264 million tonne by the end of 12th Plan and further to 286 million tonne in 2020-21 if input usage grows at pre- liberalisation (1980-81 to 1994-95) trends.
In the optimistic scenario of post-liberalisation (1995-96 to 2009-10) trends, food grains production could touch 271 million tonne by the end of the 12th Plan and 307 million tonne by the end of 2020-21. The area under food grains is expected to either remain stagnant at 125 million hectare in the optimistic scenario or decline slightly in the alternate scenario. Exports were mostly volatile as their quantum observed a huge increase with the opening up of the Indian economy in the mid-1990s. If the opening up process continues at a faster rate in the medium run, food grains exports would increase rapidly. But, inward looking policies may slow down exports
Looking at the commodity composition, the rise in food grains production would mainly come from rice and wheat production growth. Rice production would increase from about 106 million tonne at present to above 130 million tonne by the end of 2020-21, while wheat production would increase from 96 million tonne at present to 106 million tonne by the end of 2020-21. The production of coarse cereals and pulses would remain constant at the present level of 43 and 19 million tonne, respectively or may observe slender increase. Meanwhile, oilseeds production is expected to increase from 32 million tonne at present to around 50 million tonne by the end of 2020-21. Regarding the area under different crops, wheat and rice are expected either to maintain their present level or undergo minor expansion. Pulses, meanwhile, would have minor area contraction. The area under coarse cereals would certainly contract while oilseeds would see expansion in their area regardless of growth situations. Rice would have a major share in the growth story of food grains exports which is pegged to rapid economic expansion. In addition to rice, some contribution would also be made by coarse grains.
Looking at the balance sheet, whether India will have manageable food grains demand in the medium-term by the end of 12th Five Year Plan and in the long-term by the end of 2020-21 will depend critically on what happens on the international trade scenario especially that of India’s exports of rice and coarse grains.
In the closed economy scenario by the end of 12th Plan as well as by 2020-21, the picture looks affirmative form both the optimistic (high demand and supply situation) as well as pessimistic (low demand and supply) scenario as in both the cases available supply exceeds that of demand. However, when we include likely exports of food grains in aggregate demand during this period, the balance sheet becomes slightly narrow in both the low and high demand supply scenarios. However even in the face of open economy, aggregate supply will still exceed that of demand and overall balances would remain in surplus in low and high demand supply scenarios. In the latter scenario of high demand supply in the face of open trade, demand would come closer to supply and the food security will be challenged although overall it still remains surplus by around 10 million tonne.
In the lower demand and supply scenario with open trade, supply will exceed demand and there would be huge net surplus of around 40 million tonne in 2020-21. In the high demand and supply scenario, however, the surplus will be reduced to around only 10 million tonne in 2020-21. The crops among food grains that will have adverse balances would be pulses, which will continue in shortage in all scenarios (of low as well as high demand and supply) because of its short supply compared to increasing demand for human consumption. Like in the case of pulses, balances of oilseeds are also already adverse as part of the demand at present is being met by imports. The demand-supply balances will further turn adverse and in the given circumstances we are expected to continue import a huge amount of oilseeds/edible oils.
