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The wholesale fibs party and its propaganda

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(This article was first published by Vijayvaani and is available here.)

The Congress disinformation machine is up and running so hard that now it’s reinventing economics. An article in The Hindustan Times, dated Jan. 15, 2019 on the wholesale price index (WPI), with a wild headline, “Worst price slump in 18 years shows scale of farm crisis”, shows the Congress-plus-opposition agitprop firing on all cylinders. The trouble with this shoddy report and its very obvious promoters is that the wholesale price index (a) hasn’t behaved the way they claim it has (b) is not an indicator of the income health of the kisan household.

These minor inconveniences did not stop The Hindustan Times report from pronouncing that “This financial year, 2018-19 could end up being the worst year for farm incomes in almost two decades, government data indicates in a revelation that emphasises the gravity of the ongoing agrarian crisis”. The government data cited is the WPI which, as the name makes clear, is an index of the change in prices at the level of bulk sale, which for primary agricultural produce is at the mandi, or “farm gate”, as this reporter calls it fashionably. “The WPI sub-component for primary food articles has been negative for six consecutive months beginning July 2018. This means their prices are falling,” says the report.

This is false. Here are the WPI numbers for the category ‘primary articles – food articles’, for the months July to December (the latest month) 2018: July 144.8, August 144.8, September 144.5, October 145.9, November 146.1 and December 144.0 – where is the “negative for six consecutive months”?

Even the simple math the report claims to have done – based on a misreading of the WPI – is wrong. “The WPI sub-component for food components was -0.1% in December. It was -2.1%, -4%, -0.2%, -1.4% and -3.3% in the preceding five months,” says the report. Also false. The sequence of change, from December running backwards to July, is -2.1, 0.2, 1.4, -0.3, 0 and 3. And the change is a number, not a per cent, because the WPI and its components are indices.

But the HT report ploughs on unmindful: “The last time WPI for primary food articles showed negative annual growth for two consecutive quarters was in 1990. The disinflation in farm prices has also led to a collapse in nominal farm incomes, which was last seen in 2000-01.”

So many non-sequiturs in two sentences. A sequence of WPI numbers over several months is not an indicator of annual growth or contraction for what is being measured. As any Food Corporation of India warehouse manager could have told the reporter, what is indexed is the change.

Did the newspaper scrutinise WPI data back until 1990? If it did – and if the sponsors of this “data revelation” did – they would not have failed to notice that the current WPI series has the base year (from which index numbers of 697 different components are calculated) of 2011-12. The previous base year was 2004-05, before that it was 1993-94 and before even that it was 1981-82.

What happened instead is that The Hindustan Times was told to reference the Centre for Monitoring Indian Economy which maintains the WPI data back to the 1981-82 series, but has shown a chart with the news report that draws the 2004-05 series. The rider while comparing indices from different series – that they be recalculated with a specific linking factor that makes two series intelligible to each other – is not mentioned at all by the reporter nor by those interviewed by the paper, and they are, in order of appearance: Himanshu, an associate professor of economics at the Jawaharlal Nehru University; Niranjan Rajadyaksha, research director and senior fellow at IDFC Institute, Mumbai; Praveen Chakravarty, chairman of the Congress data analytics department. And last, BJP spokesperson Gopal Agarwal.

Their quotes, and the confused graphs thrown in, are meant to prop up the sagging storyline – that the Doubling Farmers’ Income programme of the BJP is not working, that there is ‘agrarian distress’ all over India (the reason given for the INC-Left-NGO morcha to Delhi in November 2018), that the boost to minimum support prices are not working.

“To be sure,” the report says, so that we get the point that the data certainly does not make, “the current crisis in farming is related more to a crash in farm prices rather than output growth.” And immediately adds that in July 2018, “the central government increased the minimum support prices (MSPs) of 14 crops to give farmers a 50% return over their cost of production”. In fact, the MSP was raised so that it is now no less than 50% above the cost of production. Several crops have their MSPs pegged at 60% and even 70%.

Not content with the bashing of the BJP government by those the reporter has interviewed, the newspaper then brings in still another angle, GDP (gross domestic product) data. “That disinflation in farm-gate prices has put a squeeze on farm incomes can be seen from a comparison of growth in agricultural GDP at current and constant prices,” blithely says the report.

“The first advance estimates of GDP figures for 2018-19, which were released by the Central Statistical Office (CSO) last week, show that the difference between current and constant price growth in Gross Value Added (GVA) in agriculture and allied activities was -0.1 percentage point. This differential is 4.8 percentage points for overall GVA.”

It is surprising that The Hindustan Times appears to have no access to any of the Indian Council of Agricultural Research’s agronomists, who could have been asked to clarify what the connection is, if any, between GDP growth rates, gross value added and the income of a kisan household in any of our 350 (and rising) districts that produce food for markets near and far. What matters to that household is the income realised for crop grown and sold, and this is where eNam, the electronic national agriculture market, is making a difference with, till date, 585 markets in 16 states and 2 union territories being integrated.

But the newspaper wants to press every available economics button in its frantic attempt to convince its readers that there is an agrarian crisis being engineered by the BJP government. And so it enlists the Reserve Bank of India, too, claiming that “The failure of MSP hikes to arrest the decline in farm-gate prices was taken note of by RBI as well”. What has been quoted from the RBI monetary policy committee meeting held during 3-5 December 2018 does not say so at all.

“The prices of several food items are at unusually low levels and there is a risk of sudden reversal, especially of volatile perishable items,” is how the RBI has been quoted. And what this means is that the consumer of food could find the weekly food bill rising; as with the other crutches this report leans on heavily, the RBI has not said what The Hindustan Times tells readers it has. The risk of the price of some food items rising is not a “decline in farm-gate prices”.

Likewise, the second quote from the RBI meeting – “available data suggest that the effect of revision in minimum support prices (MSPs) announced in July on prices has been subdued so far” – is an encouragement, far from the burden it is made out to be by the report.

Typically, a rise in the MSP would have been transferred, at least some if not most of it, by the layers of crop collection, retail and distribution, to the consumer. This transfer, said the RBI, has been subdued, which shows that the measures taken by the government to cut out profiteering middlemen are working.

Six months in 1990 are not six months in 2018. Gross value added whether at constant or current prices is in no way a measure of income for harvested crop a kisan earns at a mandi or through eNam. These and every other trick used in this report show why it is a shabby, confused, hodge-podge of opposition party innuendo that is meant to ride on data which the reading public scarcely notice. Except, when it is noticed, the whiz-bang falls flat.

Written by makanaka

January 26, 2019 at 08:38

Shrinking cereals, growing food parks

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Local grain in Mapusa market, North Goa

Local grain in Mapusa market, North Goa

This short comment has been written for India’s alternative economics group, Macroscan, and you’ll find it here.

The first release of summary data from the 64th round of the National Sample Survey Organisation, ‘Household Consumer Expenditure in India 2007-08‘ (NSSO report 530), captures the early impact of the rising trend in food prices for rural and urban India. This period is significant in the recent history of food price rise in India, for it signals the strengthening of the factors that led to the retail food price highs of 2008 which began to be recorded around two years earlier. Several of the most important factors have to do with the rapid pace of urbanisation (most visible in the non-metro tier 1 cities) and the steady growth in the food processing and food logistics industries, which has taken place alongside the deepening of the agricultural commodity markets.

“To judge from survey data of food intakes, the situation has been getting worse rather than improving, at least in terms of per capita calories consumed, and this phenomenon is fairly widespread affecting all classes, rural and urban and those below and above the poverty threshold,” the FAO report, ‘World agriculture: towards 2030/2050‘ had stated in 2006 in its comment on India’s growth-malnutrition paradox. The report’s authors had at the time commented that matters in India “are getting worse in the rural areas as people have to pay more than before for things like fuel and other basic necessities of life” and that rural incomes have not improved at anything near the rates implied by the high overall economic growth rates.

To illustrate the continuing impact of rising cereal prices on rural households in Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh and Orissa, district per capita incomes for 2004-05 to 2009-10 are estimated for five representative districts from these states. These are districts that record a median per capita income based on data for the 2004-05 year (the last NSSO household consumption survey year) available with the Planning Commission’s district domestic product tables: Bhabua in Bihar, Dhamtari in Chhattisgarh, Deoghar in Jharkhand, Khandwa in Madhya Pradesh and Jajpur in Orissa. The per capita income increases in these districts are recorded upto 2006-07, and taking the national GDP growth rate for the years following (9.7%, 9.2%, 6.7% and 7.2%) the overall finding is that statistical per capita income increases are between 36% (for Khandwa) and 47% (for Dhamtari) for the period 2005-06 to 2009-10.

Expenditure on food and non-food needs, Indian states

Expenditure on food and non-food needs, Indian states

In these five states, the cereals basket occupies a dominant share of monthly per capita expenditure (MPCE) on food, accounting for 42% of MPCE on food and 25% of total MPCE in Bihar, 41% and 21% in Chhattisgarh, 42% and 25% in Jharkhand, 33% and 17% in Madhya Pradesh, and 42% and 24% in Orissa. The impact of a steady upward trend in the prices of cereals in these states – whose rural households spend roughly the same on food as they do on non-food needs (see Chart 1) – can be gauged from retail price data on essential food items collected by the Department of Economics and Statistics, Ministry of Agriculture. This data, although the most reliable weekly series recorded in a number of centres in the country, is weakened by deficiencies (gaps in series, numerical mismatches and so on). Even so, the patterns they provide are valuable.

From 2005 January to 2010 January, the prices of atta in Sehore and Bhopal (MP), of desi wheat in Bhopal and of maize in Patna have risen by 200%. The prices of ‘kalyan’ wheat (a widespread HYV cultivar) in Bhopal, Sehore and Patna (Bihar) have risen by 173% to 177%; the prices of maize in Ranchi (Jharkhand) and common quality rice in Bhubaneshwar (Orissa) have risen by 171%; the prices of ‘desi’ wheat in Patna and atta in Ranchi have risen 170%; and the prices of common rice in Cuttack and in Dhanbad (Jharkhand) have risen by 169% and 164%. Over this period, the price of the available basket of cereals has risen 157% in Cuttack, 162% in Bhubaneshwar, 159% in Sehore, 174% in Bhopal, 176% in Patna, 166% in Ranchi and 152% in Dhanbad.

Erratic data posting (and possibly validation difficulties) have meant that a better understanding of the food baskets of North-East India is yet to be achieved. Even so, NSSO 530 shows the heavy reliance by the households of the North-Eastern states on cereals (rice) with the regional average consumption greater than that of the states of eastern and central India in which rice also play a major dietary role: West Bengal, Orissa, Chhattisgarh, Bihar and Jharkhand. What Chart 2 illustrates is that for those regional populations dependent on rice, the cost of this dependency is high.

Cereal consumption and prices, Indian states

Cereal consumption and prices, Indian states

This is not so for wheat in Punjab and Haryana, whose average per capita consumption quantity of the cereal is both relatively low (as a percentage of the cereal component of the food basket) and less expensive. For Gujarat, Maharashtra and Karnataka – all three states affected by rapid urbanisation and absorbed by the race to build urban and transport infrastructure – their rural households are far less dependent on a single cereal than their counterparts in North-East, Eastern or North India. Wheat is the preferred cereal in Gujarat but accounts for no more than 40% of the total cereals purchase; rice is the preferred cereal in Karnataka but accounts for no more than 53% of the total cereals purchase; wheat is the preferred cereal in Maharashtra but accounts for no more than 36% of the total cereals purchase.

Food inflation is now a concern for the Reserve Bank of India (RBI) which has begun to make direct causal links between per capita availability of foodgrains and high retail prices. Deepak Mohanty, executive director of RBI, in an address on ‘Inflation Dynamics in India: Issues and Concerns’ (March 2010) has also drawn a connection between food prices the minimum support price (MSP) announced by the Government of India for procurement of various commodities. “The high increase in MSP since 2007-08 has given an upward bias to agricultural prices. Reduced availability of foodgrains also tends to keep food prices high. As per the Economic Survey 2009-10, per capita net availability per day of cereals and pulses has been lower than that observed in the previous four decades. The per capita daily availability of foodgrains was 447 grams in the 1960s and 1970s, which successively increased to 459 grams in the 1980s and 478 grams in the 1990s but came down to 446 grams during 2000-08 and stood still lower at 436 grams in 2008.”

At the same time, the Government of India has approved proposals for joint ventures and foreign collaboration (including 100% FDI) in processed food businesses (including 100% export oriented units), and “mega food parks”. According to Indian Credit Rating Agency (ICRA), the processed food market accounts for 32% of the total food market with the “most promising” sub-sectors listed as soft-drink bottling, confectionery manufacture, fishing, aquaculture, grain-milling and grain-based products, meat and poultry processing, alcoholic beverages, milk processing, tomato paste, fast-food, ready-to-eat breakfast cereals, food processing, food additives and flavours. From the point of view of the major national industry associations (CII, FICCI, Assocham) the approximately 7,500 regulated mandis lack critical infrastructure, the provision of which will cost at least Rs 12,000 at 2009 prices. The potential of the public-private partnership model in the foods business is seen by industry as being embodied in ventures such as Safal market in Karnataka (considered an example of wholesale market modernisation), ITC’s e-Chaupal, Hariyali Kisan Bazaar, Mahindra Shubh Labh, Cargill Farmgate Business and Tata Kisan Sansar.

Removed from such a view are the recurrent protests since late 2009 in a number of urban centres over food inflation, urgent signals that the increasing corporatisation of food production, procurement, movement and distribution is contributing to household food insecurity, particularly amongst the rural and urban poor. The ‘Report on the State of Food Insecurity in Rural India‘ (M S Swaminathan Research Foundation) explicitly stated that “over the longer period of 1993-94 to 2004-05, the states of Karnataka, Orissa and Madhya Pradesh show significant increase in the percentage of population suffering acute calorie deprivation. On the whole, it is clear that, by our measure of food insecurity, the period of economic reforms and high GDP growth has not seen an improvement in food security but deterioration for the majority of Indian states.”