India’s food price inflation in high gear

There has been no shortage since November of news reports and analyses about the food inflation. The 19% annual rise in fact masks widespread individual urban centres’ price shocks and individual food item trends. I have tried to unpack the year-on-year ‘national’ food inflation number using data from the Ministry Of Consumer Affairs, Food and Public Distribution – Department Of Consumer Affairs (Price Monitoring Cell). My guess is that this data is an under-estimate but is useful for spotting trends.

I collected prices for the 36 cities tracked by the PM Cell, monthly from 2007 December. Based on a small basket of staples (rice, wheat, atta, tur dal, sugar, gud, tea, milk, potato, onion, salt) a crude index shows that in 33 out of 36 cities, the 24 month (07 Dec to 09 Dec) rise in prices of items in this basket is more than 24%, and that in 23 cities it is more than 50%.

Food inflation 2009 over 2007 in Indian cities

About price increases in rural settlements I can find no organised information at all, although direct experience in western Maharashtra, Karnataka and Goa tells me that a staples basket can cost up to 2-3% more than in urban areas. (Agmarknet collects and maintains detailed mandi prices for farm produce but there is no comparable effort for rural retail food staples.)

The National Sample Survey 61st Round (2004 July-2005 June) on ‘Household Consumer Expenditure in India’ put down the finding that out of every rupee that the average rural Indian spent on household consumption, 55 paise was spent on food and mainly:
18 paise was spent on cereals
8 paise on milk & milk products
6 paise on vegetables
5 paise on sugar, salt & spices
5 paise on beverages, refreshments, processed food, purchased cooked meals, etc

Of the non-food expenditure 10 paise was spent on fuel for cooking and lighting.

I have tried to maintain this weightage in my calculation, but it is really no more than a crude reckoning because I haven’t been able to spend the time to clean up the publicly available data – querying the website database of Dacnet (Dept of Agriculture and Cooperation) or FCAMin returns report formats that are terribly messy, even though they contain useful data. (Although I think there may be differences even between these for the same foods and same date ranges.)

Based on what I have seen and heard on the field in Karnataka, Goa and western Maharashtra (and learnt about Gujarat and eastern UP from others) the available food basket seems to be shrinking (the so-called ‘coarse’ cereal group is conspicuously less), and where families have young and teenaged children there is pressure to buy processed and packaged snack foods (which is really a blight in our small rural markets). There are all sorts of oddities about the form that food takes in these markets – the price of a 50 gram pack of biscuits for example (Parle Glucose is the standard) has hardly moved in the last 3-4 years yet at the same point-of-purchase end, look at the way the prices of ground wheat have moved.

Then there’s fuel and transport to account for, more about which you’ll find here. This question needs much more work in 2010 to strengthen some of the reliable data we have with updates, and to try to build in what we see and hear and sense from conversations with those who live and work in all those tahsils and talukas and blocks and mandals. I feel very strongly that we are lacking in our data the presence and impact of the many linkages that connect and influence the rural farming/labour household. Many of the measures we have have served us well but I think need to be supplemented – how to integrate the lessons and findings from the comprehensive National Family Health Survey, the Sarva Shiksha Abhiyan, the many studies into the income-providing measures of NREGA.

Even though we worry about what the rural/urban poor household must spend on, the attraction to buy mobile phones amazes me. I have met young men who earn around Rs 4,000 a month but who have bought Samsung mobile phones costing Rs 5,000! Imagine spending more than a month’s income on a phone, I asked them, but they saw nothing worrying about their expenditure. Retailers who sell mobile phones used to keep the low cost and hardy Nokia phones which 3 years ago cost around Rs 1,700-1,800 (mine is still working), but not any longer, or they work at discouraging those who ask for the relatively cheaper phones. Much more than the hundred-dollar laptop we need the thousand-rupee mobile phone.

The image is of a chart I made for the project group I work with (part of the National Agricultural Innovation Project, it’s called Agropedia and you can read more about it here). This chart helps point to some patterns (you can download the hi-res image here). I’m curious for example about Gujarat, whose grain and commodity traders have a long and murky history of hoarding. The North-Eastern cities could be insulated to some extent from the regional transport subsidy (road and rail). Cities in the Deccan are relatively better off than North Indian cities. The big difference between Chandigarh and Mandi is puzzling.

In his hugely interesting paper, ‘India And The Great Divergence: Assessing The Efficiency Of Grain Markets In 18th and 19th Century India‘, Roman Studer (University of Oxford, Discussion Papers in Economic and Social History, Number 68, November 2007) has written: “Prior to the mid-nineteenth century, the grain trade in India was essentially local, while more distant markets remained fragmented. This is not to say that no grain was traded over longer distances, but the extent was very limited, as the prices from some 36 cities all over India still exhibited various characteristics of isolated markets.”

“First, annual price fluctuations were extremely high. Second, differences in price levels between markets were very pronounced and persisted until well into the nineteenth century. Third, apart from neighbouring villages or cities, price series from different markets did not show comovements at all.” Studer looked at century-old data, but we still have 36 cities to tell us about staple food retail prices! Also, the three characteristics he mentions can be seen today too.

Happy New Year!

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Woodfuel in the Western Ghats

Goatherds in Chikodi taluka, Belgaum district, Karnataka

The woodfuel-and-dungcakes energy mix for rural India is alive and well in the hills of Maharashtra’s Deccan. The indications are that a combination of factors is at work. There’s less income for smallholder farming households, those farming families which have earnings have seen their monthly household budgets squeezed by rising food prices, and energy costs at least the same or more. That’s why I’ve seen in November and December – when early mornings and nights are cool to chilly, and heating at home is needed – more evidence of woodfuel use.

If you ask the energy planners and econometricians, they’ll say that fuelwood markets are important and have a great influence on shaping demand. As a rule this is likely to be true, but what we’re seeing here has resulted from a variety of volatile conditions. Let’s look at some of the alternatives that rural households in the hills use. A cylinder of LPG (liquefied petroleum gas) costs about Rs 325 in a town in western Maharashtra (the 14.2 kg domestic cylinder). A sack of coal costs about Rs 300 to Rs 350 (20-25 kg) which will usually include the cost of transport (it’ll be carted along with other goods on the roof of an old jeep, in a tempo or lorry – state transport bus conductors are not partial to letting these sacks on board any more).

From the planners’ point of view, market conditions for wood are highly distorted due to government policies on fuel, energy and forests. That’s why discussing both demand and supply in the context of prices and market conditions is important, because in isolation the terms ‘demand’ and ‘supply’ for rural energy mean next to nothing.

It’s important too to a rural household that wood is a multi-use material. For instance, for eucalyptus, the thickest portion of the trunk can be used as timber, if the girth of the trunk, with bark, is more than 70 cm. Poles are used for scaffolding support and as roofing material. The dimensions of logs for use as poles are 3 to 6 metres in length, and 30 to 70 cm in girth (cut pieces of similar girth but shorter are used as pulpwood in paper mills). All smaller pieces, twigs, bark, and roots, which cannot be used elsewhere, are used as fuelwood. Thus there is no single wood market in a town or peri-urban settlement. I’ve found it safe to say that the set-up and behaviour of each market differs from others depending upon the range of species available, and the purposes for which each wood species can be put to use.

Hillside grasses, ghat in Kolhapur district, Maharashtra

All that said, the main point here is that the price of fuelwood has risen in the hills of Maharashtra’s Deccan. A buyer will now pay Rs 60 for a ‘maund‘ of ‘jungli‘ wood and Rs 80 for a ‘maund‘ of babul wood. Now a ‘maund‘ is around 37 kg, so that makes a metric ton of ‘jungli‘ wood worth about Rs 1,620 (without complicating the matter with discounts for weight) and a metric ton of babul wood is worth around Rs 2,160. That’s a pretty steep annual growth rate because at the start of the 2000s – according to those who know about these things in Kolhapur, Satara and Pune – the price of a ton of ordinary wood was around Rs 1,300 and they also said that the price then was twice what it had been (around 700/ton) a decade earlier.

This is both worrying and curious. Worrying because it means that sources of energy among some sections of the rural population are defaulting to the woodfuel-dungcakes mix. Worrying also because it means that natural and protected forests, orchard and scrub are being scoured for woodfuel. Curious because we are in 2010 going to be less informed about the relative importance of the three major biofuels to rural households: has the animal population grown in the last decade? have the growing number of bio-gas plants installed during the last 15 years taken away from the dungcake source? have commercial crops reduced the available quantities of husk and straw (and what’s the effect on these as animal feed? We know a lot less than we think, but we do know what a ‘maund‘ of babul costs so that it can heat a hill household in winter.

Elements of durable design

A 'new' but vintage ferry approaches the Panaji jetty from Betim, North Goa

Some designs need no improvement. The river ferries that ply on Goa’s rivers were put into service by the colonial Portuguese government in the early 1950s. Even though new bridges connect the many riparian communities, Goa’s citizens make heavy use of the flat-bottomed boats. This one is the latest addition to the hard-working fleet and was inaugurated a few days before I took this picture. More than two generations later, this vessel’s builders stayed faithful to the old blueprints. They did add another engine to this vessel to make it twin-screw. Their reason? In 2008 a fully-loaded ferry on this route (Betim-Panaji, across the river Mandovi) went adrift as its single engine failed, so this builds redundancy into a tried and tested inland water transport design.

‘Give us this day your markets’

Handing out food packets at a rally. With rising food prices, this could become a common sight in India's cities and towns.

The interests of US agribusiness and food exporters is being strenuously supported by a new report from the US International Trade Commission (USITC), released in November 2009, on ‘India: Effects of Tariffs and Non-tariff Measures on US Agricultural Exports’. The report has argued that India’s agricultural tariffs are keeping out American exports, that such obstruction is a concern to the USA, and that removal of these tariffs can result in a leap of up to 60% in US agricultural exports to India.

The USITC report has said: “Despite robust US agricultural exports worldwide, US exports to India are limited, both in value and in the range of products. In 2008, India received less than one-half of 1% of total US agricultural exports and ranked 39th among overseas markets for US agricultural products. Moreover, US agricultural goods accounted for only 6% of the Indian agricultural import market in 2008, compared to an 18% share of global markets.” The report has pointed to what it calls India’s “sizable and growing middle class” which is “expected to reach 500 million by 2025, which includes many affluent urban consumers interested in Western-style foods” as offering great potential for US agricultural business.

Rice fields in Goa. Why we need our rice to remain indigenous and locally available.

The report has complained that the “low level of US agricultural exports to India is a concern to the US agricultural community, business representatives, and policymakers”. The USITC report added that these groups view “high Indian tariffs and burdensome non-tariff measures (NTMs) as principal reasons impeding US products from entering the Indian market”. The study team stated that the USITC through this report has responded to a request by the Senate Committee on Finance for information and analysis on the effects of Indian tariffs and non-tariff measures on US agricultural exports and US agricultural firms operating in India.

There’s more in this report I wrote on the matter for Infochange India.

Declaration of war in Oslo

The sorry record of the Nobel Prize committee of the last 20 years became sorrier still when it awarded the current US president the 2009 Peace prize. The speech made by the recipient on 10 December 2009 to claim that award would have been sorrier still, if it was not instead a chilling reminder of the words and methods of George W Bush, the winner’s predecessor.

This year’s Peace prize award has joined together black farce, opera noir and state terror in a menacing new construction. One point in the short citation by the Nobel Committee for the prize awarded to Barack Obama reads: “His diplomacy is founded in the concept that those who are to lead the world must do so on the basis of values and attitudes that are shared by the majority of the world’s population.” An open-ended pledge to wage indefinite and murderous war is a “value and attitude shared by the majority of the world’s population”?!?

Obama acknowledged that he is the “Commander-in-Chief of the military of a nation in the midst of two wars” and presented war as a legitimate means of pursuing national interests. He declared that “the instruments of war do have a role to play in preserving the peace”, that “all responsible nations must embrace the role that militaries with a clear mandate can play to keep the peace” and that imperialist troops should be honored “not as makers of war, but as wagers of peace”. Since he has now been awarded the Nobel Peace prize, the Nobel Committee must quickly announce a new Nobel, for Inspired Propaganda, and award the first such prize to Obama’s speech-writer.

The more sensible of the world’s press has struck a note of resigned outrage today. Here’s Granma, the excellent Cuban newspaper, on the Nobel scandal:

“Para iniciar las guerras se necesitó un presidente inculto con mensaje directo y lágrimas fáciles —así era George W. Bush. Pero para continuar las guerras que no se podrían ganar, y al mismo tiempo mantener las ganancias suculentas de Wall Street mientras el pueblo se empobrecía más, se requería un presidente intelectual como Barack Obama, con capacidad de crear promesas hipnotizadoras, con sonrisa fácil y amigable, que haría olvidar por un tiempo al pueblo la incertidumbre económica del país. Como dice el refrán: no importa el color del gato, siempre y cuando cace ratones.”

[Translation]: To start the wars it took an uneducated president with direct message and tears it was so easy-George W. Bush. But to continue the wars that could not win, and at the same time maintain succulent gains on Wall Street while impoverishing more people, they needed a president like Barack Obama intellectual, able to create mesmerizing promises, with an easy smile and friendly, that would put the people for a time of economic uncertainty the country. As the saying goes: no matter the color of the cat as long as it catches mice.

And here’s Die Tageszeitung, Berlin’s excellent analytical daily, on the Nobel scandal:

“Das Thema Afghanistan griff Obama auch bei der Preiszeremonie in seiner Dankesrede auf. Die Menschen müssten akzeptieren, dass Staaten manchmal Kriege führen müssten, um ihre Bürger vor Terror oder feindlichen Regimen zu schützen. Kriege seien nie eine “glorreiche Angelegenheit”, sondern eine bedauerliche Notwendigkeit: “Eine gewaltfreie Bewegung hätte Hitlers Armeen nicht stoppen können. Verhandlungen können die Al-Qaida-Führer nicht dazu bringen, ihre Waffen niederzulegen.” In seiner Würdigung des Preisträgers versuchte Thorbjørn Jagland, Vorsitzender des Nobelpreiskomitees, die Entscheidung noch einmal zu begründen. Er griff dazu den Obama-Satz auf, der Preis sei wohl als Appell gemeint: “Präsident Obama hat das Nobelkomitee ganz perfekt verstanden.”

[Translation]: The issue of Afghanistan was taken on by Obama even during the awards ceremony in his acceptance speech. The people must accept that states must sometimes fight wars, to protect its citizens from terrorist or hostile regimes, he said. Wars are never a “glorious affair”, but an unfortunate need for “a nonviolent movement would not be able to stop Hitler’s armies. Negotiations can not take the Al-Qaeda leaders to lay down their weapons.” In its assessment of the winner Thorbjørn Jagland, Chairman of the Nobel Committee, tried to justify the decision again. He reached to the Obama sentence, that the prize was probably meant as an appeal: “President Obama has understood the Nobel Committee perfectly.”

And here’s the thoughtful and reflective Monthly Review, a reputed leftist journal, about the US military economy, in a comment in October 2008:

“The United States is unique today among major states in the degree of its reliance on military spending, and its determination to stand astride the world, militarily as well as economically. No other country in the post-Second World War world has been so globally destructive or inflicted so many war fatalities. Since 2001, acknowledged U.S. national defense spending has increased by almost 60 percent in real dollar terms to a level in 2007 of $553 billion. This is higher than at any point since the Second World War (though lower than previous decades as a percentage of GDP).”

And here’s the fearless and inspiringly independent-minded Le Monde, the French news daily, on the Nobel scandal:

“Le prix Nobel de la paix ayant été fondé par Alfred Nobel l’inventeur de la dynamite, peut-être n’y a-t-il pas lieu de s’étonner. Tout de même, la coïncidence est immanquable. Dix jours après avoir annoncé l’envoi de renforts en Afghanistan, Barack Obama est arrivé jeudi matin 10 décembre, à Oslo (Norvège). Le “war president” est couronné d’un prix Nobel de la paix. La Maison Blanche ne pouvait pas ignorer l’ironie. Depuis plusieurs jours, elle n’entend que cela. Le porte-parole Robert Gibbs a fini par être agacé. Barack Obama “comprend qu’il n’appartient pas à la même catégorie que Mandela ou Mère Teresa”, a-t-il dit. “Mais il est fier des gestes faits par son gouvernement pour renouer avec le monde”. Dans son discours, le président devait lui-même expliquer, comme Franklin Roosevelt en son temps, qu’il y a parfois des guerres justes et “nécessaires”.”

[Translation]: The Nobel Peace was founded by Alfred Nobel who invented dynamite, maybe is there not surprising. Still, the coincidence is inevitable. Ten days after announcing sending reinforcements to Afghanistan, Barack Obama arrived Thursday morning December 10 in Oslo (Norway). The “war president” is crowned with a Nobel Prize for peace. The White House could not ignore the irony. For several days she heard this. The spokesman Robert Gibbs came to be annoyed. Barack Obama “understands that he does not belong to the same category as Mandela or Mother Teresa,” he said. “But he is proud of gestures made by his government to revive the world”. In his speech, the president must explain himself, as Franklin Roosevelt in his time, sometimes there are just wars and “necessary”.

The legacies of Pusa

“In 1904, the Government of India began to recognise its responsibilities in the field of agricultural research. There was a large Government owned estate lylng unused in Pusa (Bihar) to which it was proposed to transfer the research station at Pemberandah. It had already become clear that the Indigo Industry could not be saved, and under these circumstances. However, before this scheme could mature it was superceded by a far more grandiose project under the initiative of the Viceroy Lord Curzon, for an All India Agricultural Service with Pusa as its Research Station under the Central Government and an Agricultural Department in each Province, with its research station and college at which district staff was to be trained.” This memory of more than a century ago comes via ‘Hugh Martin Leake: A Historical Memoir’, an article by N C Shah, in the Indian Journal of History of Science (2002).

Even more interesting is the role of A O Hume in the establishment of the agricultural sciences centre that Pusa became. “What did Hume hope to do? He began by stressing how much Indian farmers already knew about their soils and climate, about plowing, about crop requirements, and about weeding. (‘Their wheat-fields would, in this respect,’ he said, ‘shame ninety-nine hundredths of those in Europe.’) Still, Hume argued, Indian agriculture had not changed for thousands of years; yields were not two-thirds of what they might be.” This comes from the very absorbing chapter, ‘Agricultural Development in British India’, by Bret Wallach, in ‘Modernisation and the Culture of Development’, Johns Hopkins University Press, 1996.

Wallach continues: ” ‘First and foremost unquestionably stands the increased provision of manure … the crying want of Indian agriculture’. That was Hume’s starting point, and he proposed to develop fuelwood plantations “in every village in the drier portions of the country” and thereby provide a substitute heating and cooking fuel so that manure could be returned to the land. Such plantations, he continues, were ‘a thing that is entirely in accord with the traditions of the country–a thing that the people would understand, appreciate, and, with a little judicious pressure, cooperate in’.”

“Second on his list came an attack on rural indebtedness, chiefly by forbidding the use of land as security, a practice the British themselves had introduced. Hume denounced it as another of ‘the cruel blunders into which our narrowminded, though wholly benevolent, desire to reproduce England in India has led us.’ Third, Hume wanted government-run banks, at least until cooperative banks could be established.”

“Beyond these things, he noted, there were ‘innumerable other minor matters’ waiting for the department. They included the provision of seeds, the reclamation of salty soils, and plant breeding, a point on which he was astute enough to warn against selection merely for grain size: it was essential, he understood, to choose varieties suited to local physical and cultural conditions. He finished his list with a call for agricultural machinery, especially wind pumps, which he thought promising in a country where ‘gigantic wind-power (second only to the equally unutilised sun-ray power) is running to waste, utterly uncared for over the whole empire’.”

Climate finance, the new fiscal frontier

I’ve extracted two paras from a comment article published by Energy Bulletin, authored by me:

"The audience comprises investment banks, corporate and oligopolistic investors, and major compliance buyers all of whom will focus on how they can profit today from an increasingly diverse range of carbon-related investment opportunities which are being designed to enter the markets from 2010"

The numbers being prepared for discussion in København are staggering by any measure, at least to those who struggle to find money for social programmes, city infrastructure needs and social sector essentials like health and education. For those accustomed to constructing enormous virtual edifices of dizzying interlinks, this is finance redux with a new set of fundamentals that are defined by the science of climate change and by the growing list of acceptable technologies used to provide adaptation and mitigation methods.

And…

The point here, after half a decade of carbon trading and emissions and climate exchanges, is whether in fact the principles of sustainable development, social justice, equity to all – and especially – respect to and protection for the poorest and most vulnerable has been helped by the CDM and its constellation of allied activities. The short answer is ‘no’, and because that is the short answer, the future of any successor system – many will be unveiled at the København summit – is equally bleak in the terms that genuinely concern us. The evidence of failure on a global scale is in fact all around us.

There’s more to be read here

Concerning the Bank of Upper India, Meerut, 1915

You can see the difference when there is a certain kind of central banking cadre which is proud of the work it does. Take the Reserve Bank of India’s banking statistics. Although immensely useful to those in the banking and finance industry, and just as useful to those who draw the links between how money is spent and development programmes, hundreds and hundreds of rows and columns filled with numbers to the third decimal are – let’s face it – hardly as exciting as a Twenty20 game.

Enter a dash of history. The conservatively titled regular publication, ‘Statistical Tables Relating to Banks in India 2008-09’, reminds us stolidly that it provides “information on major items such as liabilities and assets, income and expenses, non-performing assets, financial ratios, spatial distribution of offices, number of employees and details of priority sector advances. It also provides bank group-wise monthly data on some of the major items such as aggregate deposits, liabilities to the banking system, assets with the banking system, investments, bank credit, and, sector-wise and industry-wise gross bank credit”.

And then it smoothly brings in the historical view (see pic left). “This publication had started prior to the establishment of the Reserve Bank of India. The first issue was brought out by the then Department of Statistics, Government of India in 1915 which covered data for 1914 and was brought out under the guidance of Mr. G. Findlay Shirras, the then Director of Statistics, Government of India. It is worth mentioning that Late Professor P. R. Brahmananda dedicated his book ‘Money, Income, Prices in 19th Century India’, published in 2001, to Mr. G. Findlay Shirras, among others. In order to commemorate the origin of this publication, the cover page of the first issue brought out in 1915 is reproduced in this volume.”

What an evocative cover page it is (see pic right)! The foreword continues: “The work relating to the publication was transferred to the Reserve Bank of India in 1939. The last issue, which incidentally was also the 25th issue, of the publication brought out by the Government of India was in 1941, with data pertaining to 1938. The first issue under the aegis of the Reserve Bank of India was brought out in 1941, with data pertaining to 1939 and 1940. The cover page of the last issue brought out by the Government of India and ‘Prefatory Note’ in the first issue brought out by the Reserve Bank of India as reproduced in Statistical Tables Relating to Banks in India 2005-06 are also given in this volume.”

“This is the 64th volume of the publication by the Reserve Bank of India,” say this issue’s authors. “If we count volumes published by the then Department of Statistics, Government of India, then this could be the 89th volume, marking the long history of continuity of this publication. This publication has continued for nearly a century underscores its relevance. It is also a tribute to the efforts and dedication of concerned officials first in the Government of India and now in the Reserve Bank of India.” Hear, hear. This volume has been brought out under the guidance of Dr. A. M. Pedgaonkar, Principal Adviser, and Dr. Balwant Singh, Adviser, DSIM, and for their historically sensitive presentation alone they deserve to take a bow.