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Posts Tagged ‘milk

The plot to cripple the Bharatiya kamadhenu

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To focus your attention on the terrible fate that threatens our indigenous breeds of cow and buffalo, here are the connections, which are now more than 45 years old, between the period that led to Operation Flood (or ‘white revolution’ as it was also called) and with it the campaign to increase the supply of milk in India by steadily weakening the desi gou, and the situation we have today of a National Dairy Support Project, which continues to do the same.

A little history. At the end of the 1960s, surplus dairy products from what was then the European Community were sent to India through the World Food Programme (WFP). This dairy produce was sold to cooperative and state dairies in Mumbai, Kolkata, Delhi and Chennai, ‘reconstituted’ with local milk and sold to city consumers. This project was known as Flood I and was to end in 1975. It continued until 1981.

From the Chapter on Agriculture and Food Management (page 181), the Economic Survey 2016-17, Volume 2, uses language like “terminal value of assets, in this case the no-longer-productive livestock” and warns about social (that is, the Hindu cultural view) policies which “drive this terminal value precipitously down” affecting “private returns… in a manner that could make livestock farming less proftable”. The Finance Ministry and India’s macro-economic planners see our gou and buffalo only as milk producers or sources of meat, and calculate only what it costs to keep them producing or profitable.

Three years earlier in 1978 Flood II had begun. This extended Flood I to the whole country, and was financed by a loan from the World Bank’s International Development Association (IDA) and direct aid from the European Community. Flood II was to conclude in 1985 but was extended until 1987.
In the late 1980s this nearly twenty-year long programme was considered to have:
* improved the living conditions of 10 million families of milk producers by adding 13 million litres of milk per day to the cooperative dairy industry’s processing capacity
* created a milk distribution network covering 142 cities with more than 100,000 inhabitants
* created the infrastructure needed to carry out programmes to promote dairy production, such as artificial insemination, vaccine production, the manufacture of compound foodstuffs
* raised daily milk consumption to 180 grams per inhabitant “to obtain a nutritionally balanced diet”

Now to our recent past. On 15 March 2012 the World Bank approved a National Dairy Support Project (project number P107648) for India. The project began on 22 June 2012, was reviewed in April 2015, had an original closing date of 31 December 2017 which has been revised now to 29 November 2019. It has three components which are: ‘Productivity Enhancement’ (US$193.80 million), ‘Milk Collection and Bulking’ (US$77.30 million) and ‘Project Management and Learning’ (US$22.00 million).

The World Bank’s description of project number P107648 is:
“The National Dairy Support Project (NDSP) which supports India’s National Dairy Plan, Phase I (NDP-I), aims to cover about 40,000 villages across 18 participating dairying states with investments in Productivity Enhancement (e.g., high genetic merit bulls, disease-free semen production, doorstep artificial insemination services, ration balancing program, fodder development) and Milk Collection and Bulking (e.g., village-level infrastructure such as bulk milk cooling units).

Brazenly ‘free market’-oriented in its advice and advocacy, Niti Aayog has mentioned only breeding in its section on livestock, in the policy paper on ‘Doubling Farmers’ Income: Rationale, Strategy, Prospects and Action Plan’, March 2017. The usual complaint of low milk productivity, growth in milk output needed, better feed and nutrition for animals are found in this think-tank’s MNC-directed view.

The description continues: “At its inception, this eight-year project was expected to directly benefit about 1.7 million rural milk producing households through its interventions, a large majority of whom are small holder producers with six animals or less.
“Cumulatively till date, 158 End Implementing Agencies – EIAs (e.g., milk unions, milk federations, dairy producer companies and livestock development boards) are implementing 364 sub-projects across 18 states with a total outlay of Rs. 1904 Crores (USD 292 million), out of which Rs. 318 Crores (USD 48.9 million) are contributed by the EIAs. These participating states account for nearly 95 per cent of India’s milk production, over 87 per cent of the breedable cattle and buffalo population and 98 per cent of the country’s fodder resources. To date, over 2.7 million milk producers have benefited from overall NDP interventions in breed improvement, animal nutrition and bulk milk collection.”

For each of the years 2013 to 2016, the National Dairy Support Project has required the import of “frozen in-vivo produced” and “pure bred” Holstein, Friesian and Jersey bulls. This is to continue for 2017 to 2019 so that the 100 million doses “target” of the artificial insemination programme is reached.

This is the brief outline and background of the government-managed, World Bank-directed programme to weaken generation after generation of our desi gou through a machiavellian plan of cross-breeding them with foreign cattle (Holstein, Friesian and Jersey), so that the gou-based economy of Bharat will be destroyed and replaced by a dairy products industry designed and controlled by multinationals that include Nestlé, Danone, Lactalis, FrieslandCampina, Fonterra, Dean Foods, Unilever, Kraft Heinz, Schreiber Foods and 11 others. It will also be partly controlled by Amul, Mother Dairy, Kwality, Hatsun Agro, Heritage Foods, VRS Foods, Anik Industries, Parag Milk Foods, Creamline Dairy Products and others who greedily want their share of what is calculated to be a market sector worth more than Rs 80,000 crore. There is no desi gou, nor the reverence to kamadhenu. There are only products, consumers and an arsenal of sickening technology and breeding programmes that if not stopped now will result in the remaining 39 desi gou breeds losing their desi qualities.

It is this that lies behind the Rashtriya Gokul Mission that was launched in December 2014, the National Programme for Bovine Breeding, the National Mission on Bovine Productivity that was launched in November 2016 (which includes the Pashu Sanjivni for identification of animals in milk using UID, embryo transfer technology labs with IVF facilities, the e-pashu haat portal, the National Bovine Genomic Centre for Indigenous Breeds), the National Kamdhenu Breeding Centres (one in Andhra Pradesh and another in Madhya Pradesh), and the three subordinate organisations: Central Cattle Breeding Farms, Central Herd Registration Scheme, Central Frozen Semen Production and Training Institute.

This is the horrifying extent of what has been done since 2012, the methods for which were introduced over 45 years ago, and which are now frighteningly augmented by the unchecked and unregulated animal genomics.

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Visiting our total household food budget

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RG_pvt_final_cons_exp

Twice as much over the 11 years until 2009-10, and three times as much over the 10 years until 2012-13. That has been the increase in rupee expenditure for this basket of foods.

The data is from the private final consumption series, calculated by the Central Statistics Office (CSO) of the Ministry of Statistics and Programme Implementation (MoSPI). The totals (left scale of the chart) is in thousand crore rupees.

In this chart I have shown the expenditure (in current rupees) for: Cereals and Bread, Pulses, Sugar and Gur, Oils and Oilseeds, Fruits and Vegetables, Milk and Milk Products, and Meat Egg and Fish. These totals also indicate the size in rupees of the food industry – but do not include the processed and packaged food industry.

The rise in consumption expenditure expressed in rupees is a money measure alone, and not a quantity or volume measure. We can see that the portion of milk and milk products in this group has gone up from just over 18% to 25% over 14 years, and the portion of meat, eggs and fish has gone up from just under 9% to 12.5% over the same period.

From 2006 the rising trend of expenditure on fruits and vegetables became steeper than the rising trend of cereals and bread. In 2005-06 the portion spent on fruit and vegetables in this group was just over 26% and that has risen slightly to 28% in 2012-13. In contrast for cereals and bread, the portion of 27.5% in 2005-06 has dropped to just over 21% in 2012-13.

Indexing food prices the FAO way

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The FAO food price index for 2013 October which includes the calculation and measurement changes. Spot the differences? I can't.

The FAO food price index for 2013 October which includes the calculation and measurement changes. Spot the differences? I can’t.

Why has the Food and Agriculture Organisation (FAO) changed the way it calculates the monthly FAO Food Price Index? But hold on, let us scrutinise first what the FAO Food Price Index is for 2013 October.

The FAO has said: “The FAO Food Price Index rose slightly in October, averaging 205.8 points. This was 2.7 points, or 1.3% above September, but still 11 points, or 5.3% below its October 2012 value. The slight increase was largely driven by a surge in sugar prices, although prices of the other commodity groups were also up.”

The usual blue pair.

The usual blue pair.

In substance, this sort of commentary for the FAO monthly food price index barely differs from the standard tedious template, in tone and tenor, that FAO has applied throughout 2013. The tone has been, as we begin to close 2013, that food prices have not moved very much through the year, and the tenor has been that food price volatility is being reined in.

Based on the evidence provided by real prices I experience in India – real markets (or bazaars or mandis) in which real vendors sell actual produce to real household buyers – I have no idea what the FAO Food Price Index is talking about. Nor do tens of millions of urban and rural households all over the world when they try and correlate the numbers of the FAO index to what they must confront every time they make a food purchase.

This is because of what the FAO Food Price Index measures which, I wearily point out, is a criticism levelled time and again. Why call it a food price index when it is in fact a food exporters’ and importers’ price indication?

Impressive equations, but where's the connection with the local markets you and me buy our veggies from?

Impressive equations, but where’s the connection with the local markets you and me buy our veggies from?

Now, with a change in its calculations, the FAO index includes the following 23 commodities: wheat (10 price quotations monitored and reported by the International Grains Council), maize (1 quotation) and rice (16 quotations) for cereals; butter, whole milk powder, skimmed milk powder (2 quotations for each) and cheese (1 quotation) for the dairy group; poultry (13 quotations), pig (6 quotations), bovine (7 quotations) and ovine (1 quotation) for the meat dairy group; sugar (1 quotation); the oils group consists of one oil price quotation for soybean, sunflower, rapeseed, groundnut, cotton seed, copra, palm kernel, palm, linseed and castor. This construction, thus, includes the use of 73 price series.

The FAO has said: “The Index, which is a measure of the monthly change in international prices of five major food commodity groups (including 73 price quotations), has undergone some changes in the way it is calculated, although the new approach did not significantly alter the values in the series.” (See the Food Outlook released in 2013 November.)

Perhaps. We will not know for another few months. If a change was needed that made sense to consuming households, then FAO should have ensured the index reflected what households pay for the food the buy in the markets near their homes. If the FAO must serve multiple audiences, then it must devise food price indexes for these audiences separately (but the IGC already serves the food traders, and FAO’s own Agricultural Market Information System already serves the policymakers and the major international blocs).

The planetary case for a meat-free society

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There is no case at all for humans to continue eating the amount of meat they do. In what are commonly called ‘industrialised’ countries (a category that includes most of the OECD countries) the share of meat in total food consumption is around 48% and has been so for several decades (has in fact been so once the overhang of the food shortages of the Second World War wore off, and particularly after the emergence of Europe’s common agricultural policy, which ushered in a change in that part of the world which was as far-reaching in its consequences as was the Green Revolution in South Asia).

Per capita consumption of major food items in developing countries, 1961-2005. Source: FAO

Now we see more clearly that as per capita food consumption has increased it has been accompanied by (those ‘market forces’ at work, the industrialisation of agriculture and the disinheritance from local choices for the average consumer, both by connected design) a change in dietary patterns that can only be described as catastrophic. Those who look at this change from an economic standpoint call it ‘structural’, for we have seen the diets of people in ‘developing’ (forgive the use of this term, so misleading it is, especially when the ‘developed’ world’s ravenous greed for resources turns these very concepts grotesquely on their heads) being altered.

In the South, for these peoples (some of them newly urbanised and whose activities contribute to the growing inequality of incomes – one has only to look at oddly swelling Gini curves to see this), there has been a rapid increases of livestock products (meat, milk, eggs), vegetable oils and, to a smaller extent, sugar, as sources of food energy. These three food groups together now provide 29% of total food consumption (also often called “dietary energy supply”) and this proportion has risen from 20% only three decades ago. Mind, these are not small increases over more than a generation – as a first look at this change will seem to imply. A single percentage point increase over a generation for a country’s population places a very large burden on land, water, crop growing patterns and of course health.

It is the prognosis that I find chilling. The FAO has rather unemotionally remarked that this share is projected to rise further to 35% in 2030 and to 37% in 2050. Can civilisation (let’s assume we can call this human imprint on the planet a single civilisation of a homogenous species although we all know it isn’t, not by any stretch of the fertile imaginations of our tens of thousands of indigenous peoples) tolerate such a shift in how people feed themselves. No, certainly not, the impact is catastrophic already.

Per capita GDP and meat consumption by country, 2005. Source: FAO

There are libraries of evidence to show that demand for livestock products has considerably increased since the early 1960s in the ‘developing’ countries. India, for example, so staunchly vegetarian through its struggle for freedom and through the leisurely years till economic ‘liberalisation’ strengthened its grip on minds and alimentary canals alike, is home to a very large and rapidly growing poultry industry (how quickly the vocabulary turns upon the rational, when did harmonious domestication and the organic circling of the nutrient cycle turn into an ‘industry’, banishing animals from their roles in our ecosystems?) and a fisheries ‘industry’ that has depleted the Arabian Sea (it is the Mer d’Oman from the other side) and the Bay of Bengal of their creatures both demersal and pelagic.

Thus we are confronted by the spectres of consumption of food which is attached, like a motor-car engine is to its crankshaft, to growth-by-magnitude. In the ‘developing’ South, the consumption of milk per capita has almost doubled (recall Operation Flood in India), meat consumption more than tripled and egg consumption increased by a factor of five (recall the National Egg Coordination Committee and its catchy jingle: “Meri jaan, meri jaan, murgi ke ande khana“). And yet, it is not yet South Asia – for the most substantial growth in per capita consumption of livestock products has occurred in East and Southeast Asia. China, in particular, has seen per capita consumption of meat quadruple, consumption of milk increase tenfold, and egg consumption increase eightfold between 1980 and 2005. And yet again, among the developing-country regions, only sub-Saharan Africa has seen a modest decline in per capita consumption of both meat and milk (according to FAO).

Where will this lead to? Into what zone of rolling disaster will the pursuit of the animal protein take our land-water-crop-habitat balance, already so precarious and already on a knife’s edge? The estimates (all bland, all unemotional, as if unable or unwilling to emote the reality to come) are that such demand is set to increase significantly towards 2050 because of population growth and continuing change of dietary patterns. The forecasts ought to be seen as terrifying: according to FAO’s estimates, an increase in the consumption of livestock products will cause a 553 million tons increase in the demand for feed, which represents half of the total demand increase for coarse grain between 2000 and 2050.

The FAO’s regiments of agro-economists and trend watchers have said that income growth in low-income countries and emerging economies will drive demand even higher (the Foresight 2011 report has said so too). They concur that there will be a shift to “high-status and non-seasonal foods, including more meat consumption, particularly in countries with rising income” (ah yes, the rising income, the fata morgana of a tide that lifts all boats, as the development banks have long wanted us to believe). No, comrades, it is not so – Nature does not recognise your balance-sheet.

How food took 57% of the rural Indian’s budget

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The National Sample Survey Office of India conducts country-wide household consumer expenditure surveys at regular intervals. These surveys are conducted through interviews of a representative sample of households selected randomly through a scientific design and cover almost the entire geographical area of India.

Monthly per capita expenditure in India's states for the rural population. Source: NSSO, Report No.538

The household consumer expenditure survey is generally conducted as one of the main subjects of the NSS survey at intervals of five years (called quinquennial intervals). This  provides a series of expenditure surveys. The 66th round survey (July 2009 to June 2010) was the eighth such survey of this quinquennial series, the seventh having been conducted during the 61st round (July 2004 to June 2005).

The NSS consumer expenditure survey aims at generating estimates of average household monthly per capita consumer expenditure (MPCE), its distribution over households and persons, and its break-up by commodity group, separately for the rural and urban sectors of the country, for India’s states and union territories (there are 35), and for different socio-economic groups.

The NSS Office calls these indicators “amongst the most important measures of the level of living of the respective domains of the population”. In fact, they are the most important by far, unmatched in size and scale and detail. The distribution of MPCE highlights the differences in level of living of the different segments of the population and is invaluable for the serious study of the prevalence of poverty and inequality. These numbers enable central and state planners and decision-making processes to allocate resources among sectors, regions, and socio-economic groups, and also helps assess the ‘inclusiveness’ of economic growth.

The NSSO has issued its report on the level and pattern of consumer expenditure in India, a voluminous report based on information collected during July 2009 to June 2010 from 7,428 villages and 5,263 urban blocks spread over the entire country. Two different schedules were used to collect information on consumer expenditure, the first being canvassed in 100,855 households and the second in 100,794 households. Key findings follow:

Level of consumption
* Using the MMRP (Modified Mixed Reference Period) method of measurement of MPCE (Monthly Per Capita Consumer Expenditure), average MPCE in 2009-10 was estimated as Rs 1,053.64 in rural India and Rs 1,984.46 in urban India.
* The poorest 10% of India’s rural population had an average MPCE of Rs 453. The poorest 10% of the urban population had an average MPCE of Rs 599.
* The top 10% of the rural  population, ranked by MPCE, had an average MPCE of Rs 2,517 – about 5.6 times that of the bottom 10%. The top 10% of the urban population had an average MPCE of Rs 5,863 – about 9.8 times that of the bottom 10%.
* Among the major states, Kerala (Rs 1,835) had the highest rural MPCE. It was followed by Punjab (Rs 1,649) and Haryana (Rs 1,510). In all other major states, average rural MPCE was between Rs 750 and Rs 1,250.
* Average rural MPCE was lowest in Bihar and Chhattisgarh (around Rs 780), and also low in Orissa and Jharkhand (around Rs 820), as well as in Uttar Pradesh and Madhya Pradesh (around Rs 900).
* Maharashtra (Rs 2,437) and Kerala (Rs 2,413) were the two major States with the highest MPCE in the urban sector, followed  by Haryana (Rs 2,321). Urban MPCE was lowest in Bihar (Rs 1,238).
* The median level of MPCE was Rs 895 in rural India and Rs 1,502 in urban India.
* In the 22-year period from 1987-88 to 2009-10, real MPCE measured by the Uniform Reference Period method was estimated to have grown by only 19% in rural India, but by as much as 42% in urban India. The growth in real urban MPCE over the 16-year period between 1993-94 and 2009-10 was about 34%.
* Measured by the Mixed Reference Period method, real MPCE grew by about 19% in rural India during the 16-year-period from 1993-94 to 2009-10, and by as much as 37½% in urban India over the same period.

Monthly per capita expenditure in India's states for the urban population. Source: NSSO, Report No.538

Pattern of consumption
* Using the MMRP (Modified Mixed Reference Period) method of MPCE measurement, food was estimated to account for about 57% of the value of the average rural Indian’s household consumption during 2009-10. This included 14% for cereals and cereal substitutes, a little less than 8% for milk and milk products, and 8% on vegetables. Among non-food item categories, fuel for cooking and lighting accounted for about 8%, clothing and footwear for 6%, medical expenses for a little over 5%, conveyance and education for about 3.5% each, other consumer services for 4%, and consumer durables for 3.5%.
* For the average urban Indian, over 44% of the value of household consumption was accounted for by food, including 8% by cereals and 7% by milk and its products.
* The share of most of the food item groups in total consumption expenditure was higher in rural India than in urban India, fruits and processed food being exceptions. For non-food item groups, the share was usually higher in urban India. The most noticeable differences were in case of cereals (urban share: 8%, rural share: 13.8%), rent (urban: 6%, rural share: 0.5%) and education (urban: 8%, rural: 3.6%).
* In the major states, the share of food in rural MPCE varied from 46% for Kerala and 48% for Punjab to 64% in Assam and 65% in Bihar. In the  urban sector it varied from 40-41% in Kerala and Maharashtra to 52% in Jharkhand and 53% in Bihar and Assam.
* The share of cereals in total expenditure in rural India varied across the major states from 7% in Punjab and Haryana to 21% in Assam and Bihar. In urban India, the share varied from 6% for Haryana, Punjab and Kerala to 13% in Assam and 15% in Bihar.
* The budget share of cereals was 23-24% for the bottom decile class of rural India but fell with rise in MPCE to about 7-8% for the top decile class. In urban India the share of cereals fell from 18-19% for the bottom decile class to 3-4% for the top decile class.
* The budget share of milk and milk products in rural household consumer expenditure was seen to rise with MPCE level from 3-4% in the bottom decile class to 9% in the ninth decile class. For urban India, however, the share was higher for the middle third of the population than for the highest decile classes.
* The share of fuel and light in household consumer expenditure was around 10-11% for the bottom decile class in both sectors. With rise in MPCE it was seen to fall to about 6% in the top decile class for rural India and 5% for urban India.

Quantity of cereal consumption
* Average cereal consumption per person per month was 11.3 kg in rural India and 9.4 kg in urban India.
* In rural India, average monthly per capita cereal consumption was around 10.2 kg for the poorest 10% of the population. With rise in MPCE it was seen to increase, quickly at first, to reach 11 kg in the third decile class, and then more slowly. It was above 12 kg for the top two decile classes. In urban India, per capita cereal consumption was seen to increase from under 9.5 kg to about 9.7 kg per month over the first five decile classes but then to fall, finally plunging to 8.6 kg for the top decile class of population.
* Over the 16-year period from 1993-94 to 2009-10, estimated monthly per capita cereal consumption (which does not include cereal content of purchased processed food) fell from 13.4 kg to 11.35 kg in rural India and from 10.6 kg to 9.39 kg in urban India. The fall was spread over all major states.

Food inflation crippled India’s households in 2010

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Vegetables, fruits and cereals market in in the city of Surat, Gujarat state, IndiaThe price of a basket of staple foods has become crippling in rural and urban India. The government’s response is to favour agri-commodity markets, greater retail investment and more technology inputs. For food grower and consumer alike, the need for genuine farm swaraj has never been greater.

The retail prices of staple foods rose steadily through 2010, far exceeding in real terms what the Government of India and the financial system call “headline inflation”, and exceeding also the rate of the rise in food inflation as calculated for the country. These calculations ignore the effective inflation and its increase as experienced by the rural and urban household, and they ignore also the considerable regional variations in India of a typical monthly food basket.

Vegetables, fruits and cereals market in in the city of Surat, Gujarat state, IndiaMoreover, from a household perspective an increase in the prices of food staples is not seen as an annual phenomenon, to be compared with some point 12 months in the past. It is intimately linked to employment (whether informal or seasonal), net income, and the pressures on the food budget from competing demands of medical treatment, education and expenses on fuel and energy.

When real net income remains unchanged for over a year or longer, the household suffers a contraction in the budget available for the food basket, and this contraction – often experienced by rural cultivator families and agricultural labour – is only very inadequately reflected by the national rate of increase in food inflation.

An indicator of the impact on households is provided by the price monitoring cell of the Department Of Consumer Affairs, Ministry Of Consumer Affairs, Food and Public Distribution. This cell records the retail and wholesale prices of essential commodities in 37 cities and towns in India. Data over a 36-month period (2008 January to 2010 December) for the prices of cereals, pulses, sugar, tea, milk and onions reveals the impact of the steady rise in the Indian household’s food basket.

In 33 cities and towns for which there are regular price entries, the price per kilo of the “fair average” quality of rice has risen by an average of 42% over the calendar period 2008 January to 2010 December. In 12 of these urban centres the increase has been over 50% (Vijayawada, Thiruvananthapuram, Hyderabad, Bengaluru, Patna, Cuttack, Bhubaneshwar, Indore, Bhopal, Shimla, Karnal and Hisar).

The average price rise over the same period for a kilo of tur dal, for 32 cities for which there is regular price data, is 46%. In 11 of these urban centres the increase in the price of tur dal has been over 50% (Puducherry, Bengaluru, Patna, Agartala, Nagpur, Mumbai, Indore, Ahmedabad, Shimla, Jammu and New Delhi). Where wheat is concerned, from among the 27 cities and towns for which there are regular price entries over three years, in 10 the per kilo price rise is 30% and more.

Vegetables, fruits and cereals market in in the city of Surat, Gujarat state, IndiaIf in search of a comforting cup of tea over which to rue the effect of the steady price rise, this too will cost a great deal more than it did three years ago. For 25 urban centres with regular price data, the average increase over the same period of 100 grams of loose tea leaf is 38% and in 11 of these cities and towns the increase is between 40% and 100%.

The sugar with which to sweeten that cup of tea has become prohibitively expensive over the January 2008 to December 2010 period. For the 32 cities and towns for which there is regular price data, the average price increase for a kilo of sugar is 102%, the range of increase being between 76% and 125%.

This increase for sugar – relatively homogenous for the price reporting centres – exhibits the countrywide nature of the price rise of the commodity. Nor is there a household economy case for substituting sugar for gur, or jaggery. For the 17 towns and cities reporting data for gur prices over the same 36-month period, the increase in price over the period has been an average 118% with 11 of these centres recording an increase of over 100%.

Vegetables, fruits and cereals market in in the city of Surat, Gujarat state, IndiaAdding a third element of higher cost to the humble cup of tea is the price of milk. For the 25 towns and cities which recorded increases in the per litre price of milk over the 36-month period (one city recorded a drop) the average rise is 37%. In seven cities a litre of milk costs at least 50% more in December 2010 than what it did in January 2008 – Ahmedabad, Bhopal, Indore, Jaipur, Jodhpur, Patna and Hyderabad.

In conspicuous contrast are the rates of increase in price of cooking media – groundnut oil, mustard oil and vanaspati. Over the January 2008 to December 2010 period the 37 urban centres recorded average price increases of 10%, 9% and 10% respectively for groundnut oil, mustard oil and vanaspati.

Finally, the volatile allium cepa, or common red onion. In 29 cities and towns reporting regularly the per kilo prices of onion, the increase in price of the vegetable has been astonishingly steep. The average increase for 29 cities is 197.5% and in 14 the increase has been 200% and above – New Delhi, Shimla, Ahmedabad, Indore, Mumbai, Rajkot, Agartala, Aizawl, Bhubaneshwar, Cuttack, Kolkata, Chennai, Hyderabad and Vijaywada. In pale comparison is the otherwise worrying average increase of 39.5% for a kilo of potatoes – this is the 36-month average increase recorded by 27 urban centres.

Food inflation in Asia and India, and a word about price indexes

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Vendors in Mapusa, Goa

Vendors in Mapusa, Goa. The middle basket contains 'nachne', local millet

 

The question in Asia again is food inflation. Entering the last quarter of 2010, news reports from South and South-East Asia cite continuing high food inflation as a persistent worry for consumers. The food weighting in Asia’s consumer price indexes is mostly high. China, India, Indonesia and Thailand have CPI weightings of 33%-46% for food.

Hence, persistently higher food prices pose a bigger risk of a rise in inflation expectations and wages in these countries as compared with higher per capita income economies on a relative basis, says the late September Global Economic Forum briefing from Morgan Stanley. “While job growth was affected by the latest global financial crisis, with GDP growth back to trend line and employment levels having recovered sharply, the risk of a rise in inflation expectations is significant. While employment statistics in the region are not very transparent, given the GDP growth trend, it appears that employment growth should have been strong.”

China, India and Indonesia together account for 40% of the global population. Any small increase in demand from these countries in the form of imports tends to push up global prices. The recent crop failure in India and its attempt to import sugar are a case in point. Moreover, there are some crops that are peculiar to local markets with very little global supply. For instance, in the case of India last year, the country fell short of pulses (lentils), and it was not really possible to import the crop even if the government had wanted to. Indeed, the top four (in terms of population) countries in the region (China, India, Indonesia and Thailand) are all net exporters of food items. All four countries tend to maintain inventories for staple items like rice and wheat, and have public distribution systems to ensure availability of these essential items at a reasonable price. Most countries in the region subsidise food for the poor.

Against this background, two recent speeches from senior figures in India’s central bank, the Reserve Bank of India, are worth examining closely. First, in ‘Managing the Growth-Inflation Balance in India: Current Considerations and Long-term Perspectives’ the deputy governor of the RBI Dr Subir Gokarn talks directly about food inflation (he gave the speech on 05 October 2010 at The Private Equity International India Forum).

“The inflation rate, which was briefly negative in the middle of 2009, began to accelerate rapidly later in the year. This upward momentum continued into the first half of 2010, with double-digit inflation persisting for a few months. The rapidity of the transition was surprising, given the fact that the recovery in growth was just getting under way and, importantly, the global situation was still very uncertain. However, the reason for the sharp increase was that all the possible drivers of inflation were simultaneously contributing. Each one by itself may not have resulted in the outcome that we saw, but all three working together resulted in a rather sharp acceleration. Food prices rose sharply because the monsoon of 2009 was deficient in most parts of the country, impacting agricultural production. However, there are, I believe, longer term forces at work on food prices, which are a matter of concern.”

 

UN Millennium Development Goals Report 2010 / UNICEF Photo

UN Millennium Development Goals Report 2010 / UNICEF Photo

 

Next, in a speech titled ‘Perspectives on Inflation in India’, executive director of the RBI, Deepak Mohanty (on 28 September 2010 at the Bankers Club, Chennai) said that the Reserve Bank is concerned over “the unacceptably high inflation rate”. Mohanty dwelt awhile on the Indian government’s new wholesale price index series.

“In the meanwhile, the Government has also released the new series on the Wholesale Price Index (WPI) changing the base year from 1993-94 to 2004-05. In terms of change in the relative weight of major commodity groups, the share of primary articles has gone down by 1.9 percentage points, which has been compensated by increase in the share of fuel group by about 0.7 percentage point and manufactured products by 1.2 percentage points. There has been a reduction in weightage of primary food articles and manufactured food products by 2.6 percentage points in the new series to 24.3 per cent from about 26.9 per cent in the old series.”

“Second, notwithstanding a significant reduction in weightage, the food inflation in the new series is higher than in the old series. This is because of change in the consumption basket in favour of protein-rich items such as egg, meat and fish where price rise has been high apart from milk and pulses. Third, the non-food manufactured products inflation is lower in the new series than in the old series. This is because of a substantial overhauling of the basket with the introduction of a number of new items. For example, the new series has 417 new commodities of which 406 are new manufactured products. Fourth, the new series has wider coverage. For example, the number of price quotations has increased from 1,918 in the old series to 5,482 in the new series. The new series, therefore, is better representative of overall commodity price inflation.”

What is curious is that these trends have taken place during a phase of rapid growth in India’s formal economy. Gokarn explained that what was most significant from the monetary policy perspective was the growing visibility of demand-side pressures. He examined the price dynamics of the manufacturing sector – overall and without the food processing component. The latter, he said, has been used by many analysts as a reasonable proxy of demand-side inflation, which is the phenomenon that monetary policy can and should influence. Both sectors he said, and particularly non-food manufacturing inflation, “show a tremendous acceleration from a significantly negative rate of inflation during 2009 to reach rather worrisome levels by the middle of 2010”.

Mohanty finds that the new series of WPI inflation marks a major change in terms of scope and coverage of commodities and is more representative of the underlying economic structure. As per the new series, the manufactured products inflation is lower than what was seen on the basis of the old series, he said. The food price inflation, on the other hand, is higher than what was seen on the basis of the old series. “The high level of food prices is The 100th postindeed a matter of concern as the prices of protein-based items, which have a higher share in the consumption basket, are showing larger increases”. Moreover, Mohanty said, there is continuing shortage of food items such as pulses and edible oils. “If the supply response doesn’t improve, there is a risk that food price inflation could acquire a structural character”.

What they spend their rupee on

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Volunteers at a rally, Mumbai, India

Volunteers at a rally, Mumbai, India

The data have just been released of the National Sample Survey Organisation’s 64th Round, on Household Consumer Expenditure in India, 2007-08 (survey period July 2007 – June 2008). The Ministry of Statistics and Programme Implementation, Government of India, has put out the findings in its report No 530. A sample of 31,673 rural households and 18,624 urban households spread over the entire country was surveyed in the Consumer Expenditure Survey of the 64th round. The highlights:

Level of consumption in 2007-08

1. Average Monthly Per Capita Consumer Expenditure (MPCE) in 2007-08 was Rs.772 in rural India and Rs.1472 in urban India at 2007-08 prices. About 65% of the rural population had MPCE lower than the national rural average. For urban India the corresponding proportion was 66%.

2. The survey estimated that in 2007-08, around one-half of the Indian rural population belonged to households with MPCE less than Rs.649 at 2007-08 prices. In 2006-07, the corresponding level of MPCE for the rural population had been estimated as Rs.580.

Rytu (farmer) of north Karnataka

Rytu (farmer) of north Karnataka

3. In urban India, one-half of the population belonged to households with monthly per capita consumer expenditure less than Rs.1130. In 2006-07, the corresponding level of MPCE for the urban population had been estimated as Rs.990.

4. About 10% of the rural population had MPCE under Rs.400. The corresponding figure for the urban population was Rs.567, that is, 42% higher. At the other extreme, about 10% of the rural population had MPCE above Rs.1229. The corresponding figure for the urban population was Rs.2654, that is, 116% higher.

5. Real MPCE (base 1987-88) was estimated to have grown by about 21% from 1993-94 to 2007-08 (that is, over a 14-year period) in rural India and by about 36% in urban India. The annual real terms increase from 2006-07 to 2007-08 in average rural MPCE was 2.2% and in average urban MPCE was 5.4%.

Pattern of consumption in 2007-08 and share of food

1. Out of every rupee of the value of the average rural Indian’s household consumption during 2007-08, the value of food consumed accounted for about 52 paise. Of this, cereals and cereal substitutes made up 16 paise, while milk and milk products accounted for 8 paise.

Crowds at a religious gathering in Mumbai, India

Crowds at a religious gathering in Mumbai, India

2. Out of every rupee of the value of the average urban Indian’s household consumption during 2007-08, the value of food consumed accounted for about 40 paise. Of this, cereals and cereal substitutes made up 9 paise, while milk and milk products accounted for 7 paise.

3. While the share of most of the food item groups in total consumption expenditure was higher in rural India than in urban India, fruits and processed food were exceptions. For non-food item groups, the share was usually higher in urban India. The noticeable differences were in case of rent (urban share: 6%, rural share: 0.4%), education (urban: 7%, rural: 3.7%), consumer services other than conveyance (urban: 7.8%, rural: 4.5%), and conveyance (urban: 6.4%, rural: 4%).

4. The share of milk and milk products in total consumption expenditure was found to rise steadily in rural India with MPCE level from under 3% in the bottom decile class to nearly 10% in the ninth decile class. The share of fuel and light was about 12% for the poorest decile class of the rural as well as of the urban population and fell steadily with rise in MPCE to 7% for the top decile class in rural India and to 6% in urban India.

5. The share of food in total consumption expenditure of rural households varied among the major states from 41% for Kerala and 44% for Punjab to 58-60% for Orissa, West Bengal, Jharkhand, Assam and Bihar. In the urban sector the share of food expenditure varied between 36% (Kerala and Chhattisgarh) and 47% (Assam and Bihar).

6. Tobacco was consumed in as many as 61% households in rural India compared to 36% households in urban India. About 62% of rural households and 59% of urban households were estimated to have consumed egg, fish or meat during the last 30 days. In non-food items, consumption on account of entertainment was reported by 28% of rural households and 63% of urban households. Consumer expenditure for rent was reported by only 7% of rural households and 38% of urban households.

India’s food price inflation in high gear

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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

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!