Resources Research

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Posts Tagged ‘pulses

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.

What we know and don’t about the true price of dal

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If you look at only the official account (left), the price of dal has been comfortable, but the consumer experience (right) tells a quite different story.

If you look at only the official account (left), the price of dal has been comfortable, but the consumer experience (right) tells a quite different story.

How urgently our national food price measuring methods need a complete overhaul is best shown with the example of a staple everyone is familiar with: arhar or tur dal.

Price indexes or indices are useful because they help us view the change in the price of a particular food staple over time, not the price itself, but change in price when taken from a base year or month. Price records are useful because they log the price (per kilo for retail consumption) of a food staple in a week or month.

The three ministries concerned with food prices update their indices or actual price reports every month or week. These are: the Department of Consumer Affairs of the Ministry of Food and Consumer Affairs, the Directorate of Economics and Statistics of the Department of Agriculture and Cooperation of the Ministry of Agriculture, and the Labour Bureau of the Ministry of Labour. In addition, there is the wholesale price index prepared by the Office of the Economic Adviser, Ministry of Commerce.

arhar_true_price_chart_sm1Usually, movements and trends in these indices and price logs are examined by themselves, and conclusions are drawn about whether the price of a food staple has been held steady or is rising steadily or is rising seasonally and also annually (we never see prices and trends going downwards).

But this is not enough. We need also to examine whether these indices and price logs are describing what they are designed to in the same manner and – very much more important – whether their descriptions are reasonable or not.

In the two chart panels, I have plotted the descriptions for arhar/tur dal from several sources together. The left chart has solid coloured price lines from the Department of Consumer Affairs and from the Directorate of Economics and Statistics. Each has two lines, the higher at the 90th percentile and the lower at the 10th percentile of all monthly prices logged from 2009 January until 2014 June. The two dashed lines are indices – the wholesale price index for arhar/tur and the Labour Bureau’s retail price index for arhar/tur over the same period. The price logs are plotted against the left index and the price indices are plotted against the right index.

Between the two indices the WPI for arhar appears lower than the Labour Bureau index, but that has only to do with a difference base period. The overall pattern they describe is the same. The two sets of price logs shows the two different levels for the 90th and 10th percentiles – in both cases the prices recorded by the Directorate of Economics and Statistics are higher than those recorded by the Department of Consumer Affairs. However they all follow a similar pattern over the 66 months illustrated here.

arhar_true_price_chart_sm2And so to the question: how true is what these indices and price logs are describing?

The answer is in the right chart. Here, two more lines are seen. These are both ascending relatively evenly over the 66 months, one at a slightly steeper rate. These I have called the ‘real retail’ price lines, one low and the other high. They describe the prices paid by urban consumers for a kilogram of arhar/tur dal based on what has been charged by ordinary retail outlets in towns and cities, with the price readings collected informally. They have also been ‘straightened’ by applying a 12%-14% true inflation that has been experienced by urban food consumers over these 66 months.

The effect, as you can see, is startling. The ‘real retail’ price lines explain why the consumption of pulses has been dropping and continues to drop especially amongst urban households whose livelihoods depend on multiple informal jobs. At Rs 90 to Rs 110 per kilogram, this dal (like other pulses) is almost beyond reach. At Rs 120 to Rs 130 per kilogram – these are levels that began to be recorded by consumers, but not consistently by the government price monitoring agencies, even two years ago – the dal can be consumed only by the upper strata of the urban middle class.

The question that immediately arises is: why is the real food price inflation being experienced by consumers not reflected in the official food price logs and indices? I will take up this question in the next posting.

India’s crop quotas for a rain-troubled year

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In this graphic, the size of the crop squares are relative to each other. The numbers are in million tons. Rice, wheat, pulses, coarse cereals, sugarcane. oilseeds and the fibre crops are the major categories for the 2014-15 crop production targets. What is always left out from the 'foodgrain'-based projections are vegetables and fruit, and these I have included based on the 2013-14 advance estimates for horticultural crops.

In this graphic, the size of the crop squares are relative to each other. The numbers are in million tons. Rice, wheat, pulses, coarse cereals, sugarcane. oilseeds and the fibre crops are the major categories for the 2014-15 crop production targets. What is always left out from the ‘foodgrain’-based projections are vegetables and fruit, and these I have included based on the 2013-14 advance estimates for horticultural crops.

Your allocation for the year could be 136 kilograms of vegetables, provided the monsoon holds good, which at this point in its annual career does not look likely. We need the veggies (not just potato, onion, cabbage and tomato) as much as fruit. But the central government is more traditionally concerned with ‘foodgrain’, by which is meant rice, wheat, pulses and coarse cereals.

That is what is meant by the ‘foodgrain production targets’, which have been issued by the Ministry of Agriculture for 2014-15 – as usual with scant sign of whether the Ministries of Earth Sciences and Water Resources were invited to a little chat over tea and samosas. I would have expected at least a “what do you think dear colleagues, is 94 million tons of wheat wildly optimistic given the clear blue skies that o’ertop us from Lutyens’ Delhi to Indore?” and at least some assenting murmurings from those foregathered.

But no, such niceties are not practiced by our bureaucrats. So the Ministry of Agriculture gruffly rings up the state agriculture departments, bullies them to send in the projections that make the Big Picture add up nicely, sends the tea-stained sheaf to the senior day clerk (Grade IV), and the annual hocus-pocus is readied once more. What the departments in the states say they are confident about is represented in the chart panel below, which shows you for rice, wheat, coarse cereals and pulses the produce expected from the major states. The question is: will monsoon 2014 co-operate?

Rice, wheat, coarse cereals and pulses, and the states which grow them the most, targets for 2014-15, using data from the Ministry of Agriculture

Rice, wheat, coarse cereals and pulses, and the states which grow them the most, targets for 2014-15, using data from the Ministry of Agriculture

Written by makanaka

July 12, 2014 at 18:25

The fitful pulse of an Indian food staple

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RG_pulses_prices_201405

The history of consumer price indices for pulses in India’s ordinary shops and bazaars since 2006 January is one of five periods. The first, from 2006 January to 2008 June, is of a rise in some pulse foods, a decline in a few, and little movement in others. The second period is one of a rise in concert from 2008 June to 2010 January, some pulse foods rising very steeply and not others – whole moong did but not whole urad, masur dal did but peas did not, horse gram did but not rajmah.

The third period, from 2010 February to 2011 August, is an overall lowering of the price indices for almost all pulse foods. This happened when the general food price index rose quickly and stayed high – but pulses remained relatively unaffected. That insulation, the fourth period, didn’t last long, from 2011 September till around 2012 May (even shorter for some pulse foods).

The fifth period began around 2011 July for some pulses, and two months later for others, and is continuing. This is a period of volatility in the price indices of the pulses group to an extent not seen in the previous seven years – peas rises but not gram, horse gram and rajmah shot up but raungi and white gram dipped, whole masur and whole moong soared while besan fell and papad remained flat.

The data I have taken from the monthly itemised retail consumer price indices, weighed to be all-India, for industrial workers with their base of 100 being in 2001, and compiled by the Labour Bureau, Ministry of Labour and Employment, Government of India.

At the end of the second quarter of 2014, the spread of price index values for the pulses group of our staple foods is wider than at any time in the last eight years. It is this food group that provides the nutritional balance and is a culturally rich source of protein in everyday meals and popular home-made snacks. The overall price rise these charts graphically illustrate, and the uncertainty about their availability (which is what the recent volatility of the individual index lines show) are evidence of the threat to the nutritional security of many millions of rural and urban households in India.

Written by makanaka

May 23, 2014 at 20:39

The hunger that Bharat inherited from two lean decades

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What did the ‘liberalisation’ of the Indian economy bring? What has 20 years of the ‘India growth story’, which is sold around the world, brought its labour and workers? How have households rural and urban fared at balancing their budgets and meeting their needs? Poorly, for it has been a struggle that continues.

RG_nutrition_3An analysis in the journal of the National Sample Survey Office, Sarvekshana, has compiled estimates of average calorie intake for the country and the major states from six quinquennial (every five years) surveys of consumer expenditure. These surveys show a decline in average calorie intake between 1972-73 and 2009-10. The overall decline is substantially greater for rural than for urban India, and appears to have been sharper in the period since 1993-94 (as measured by the 50th round of NSSO surveys), especially in the urban sector.

The analysis on ‘Trends in Nutritional Intake in India’ has shown that the proportion of households with calorie intake below the level of 2700 kcal per consumer unit per day (this is a measure different from per capita) has grown steadily since 1993-94: from under 52% in rural India to nearly 62%, and from 57% in urban India to about 63%.

This is no surprise to the large proportion of our population who have borne the merciless brunt of food inflation for close to a generation. Between 2004 and 2013, food prices in general rose by 157%. Cereals, the staple diet of the poorest, were high on the scale, with rice at 137% and wheat at 117%. Pulses – the sole source of protein for most – had risen by 123%. Potato was even higher at 185%. As for vegetables, they have long priced themselves out of the diet of the poor, by rising up to 350%. This crippling rise continued while the government (UPA-I and UPA-II) loudly claimed every few months it would bring prices down.

RG_nutrition_1That is why the share of cereals in total calorie intake has declined since 1993-94 by nearly 7 percentage points for rural India and by about 3.5 percentage points for urban India: the share of oils and fats has on the other hand risen by 3 percentage points for both. The share of milk and milk products has grown by about 1.4 percentage points in urban India but by only 0.6 percentage points in rural India.

Moreover, at the all-India level protein intake has fallen from 60.2 grams to 55 grams per person per day in rural India and from 57.2 grams to 53.5 grams in urban India over the period 1993-94 to 2009-10. The decline has taken place in most major states but has been sharpest in rural areas of Rajasthan, Haryana, Uttar Pradesh and Punjab – where intake has fallen by 9-12 grams.

As the major trade unions have been raising an alarm about at least every quarter, the price of rice for BPL (below poverty line) card holders increased from Rs 350 per quintal in 1997-98 to Rs 415 per quintal in 2007-08. In the same period the APL (above poverty line) price was increased from Rs 550 per quintal to Rs 755. For wheat, the price for BPL card holders was increased from Rs 250 per quintal to Rs 415 and for APL card holders from Rs 450 to Rs 610 in a period of 10 years.

RG_nutrition_2In such a situation, fats ought not to be a contributor to calories more than it was 30 years ago. But the analysis tells us otherwise – for India has become the favoured importer of palm oil from Malaysia and Indonesia. Every major state shows an increase in its population’s fat intake. At the all-India level the increase has been from 31.4 grams per person per day in 1993-94 for the rural population to 38.3 grams in 2009-10 – a rise of 7 grams per day over the 16-year period, and from 42 grams to 47.9 grams per day for the urban population, a rise of 6 grams per day over the same period. Between 1993-94 and 2009-10, the contribution of cereals to protein intake has fallen by about 4.5 percentage points in rural India and by 3 percentage points in urban India, while the contribution of pulses has fallen slightly in both rural and urban India.

This analysis from the NSSO must be viewed against the growing trend in India of the corporatisation of agriculture and the industrialisation of the food system. New market monopolies whose reach is far greater than could be conceived in 1993-94 are now at work, aided by speculative financial predators. There is in response a need for strengthening social ownership of the cultivation of food staples, of the organic agriculture movement, of shortening the distances that food travels, of localisation of the Bharatiya food web.

India’s 259 million ton target

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Self-sufficiency or price volatility? There are choices to be made for food cultivators in India. Illustration: Ministry of Drinking Water and Sanitation

Self-sufficiency or price volatility? There are choices to be made for food cultivators in India. Illustration: Ministry of Drinking Water and Sanitation

Quietly, the Ministry of Agriculture has issued its first estimate for the crop year 2013-14. Food price inflation in every single state and union territory has been rising over the last four to five years, and with the furore over the WTO Ministerial Conference just over, and with promises to keep over the National Food Security Act, the big bottom-line should have been accompanied by a number of careful statements from ministries and departments concerned with cultivation and with the supply of food.

These would be the Ministry of Consumer Affairs, Food and Public Distribution, the Ministry of Agriculture itself, the Ministry of Food Processing Industries, the Ministry of Commerce (whose minister represented us at the WTO meeting), the Ministry of Rural Development (under which the gigantic rural employment guarantee programme now includes work on agriculture, and safeguards against leaching labour away from the fields when it is needed in those fields), and so on. But, we have a 259 million ton bottom-line number for the country for 2013-14 and there’s no elaboration of it whatsoever from any chamber of the government.

RG_2013-14_crop_targetsHere are the key numbers in million tons (with the first advance estimates, where given, in parentheses). Rice 105 (92.32), wheat 92.5, pulses (which is tur, gram, urad, moong, other rabi and kharif pulses) 19 (18.02), coarse cereals (which is jowar, bajra, maize, ragi, small millets, barley) 42.5 (43.99). To this I have added vegetables and fruit – these are for reasons I cannot fathom (but have suspicions about) still omitted from the targets and from the estimates; this happens four times a year, and they are released with a dullness and lethargy that belie the frantic scenes in the districts whenever a fair price shop is restocked. [You can get the xlsx file with the latest data here.]

Using averages of all-India production of vegetables and fruit for the last three years available (these are 2012-13, 2011-12 and 2010-11) I can supply what could serve as ‘targets’ for horticultural production as follows: vegetables 154.1 mt, fruit 76.3 mt. But, to hint at my suspicion, this is lucrative export produce and the government agency, the Agricultural and Processed Food Products Export Development Authority (APEDA), working in concert with the Ministry of Food Processing Industries, is responsible for converting our vegetables and fruit into produce shipped off in containers, or into raw material for India’s growing ‘food service’ industry (awful term, as if we needed yet another service to add to the inequitous burden of the info-tech and financial services) and the domestic organised retail trade (yes that means Walmart, Tesco, Auchan, Carrefour, Metro and who knows who else).

Written by makanaka

December 20, 2013 at 17:08

What rural India does and doesn’t eat

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How much cereals (rice, wheat, millet, sorghum) and pulses do rural Indians consume in a month? In general, not anywhere near how much they should.

How much cereals (rice, wheat, millet, sorghum) and pulses do rural Indians consume in a month? In general, not anywhere near how much they should.

The circles in this chart represent the rural population of 20 of India’s largest states by population. The National Sample Survey Office (NSSO) divides the rural (and also the urban) population of each state into tenths (they call them ‘deciles’), and the NSS surveys on consumption expenditure tell us how much each decile in each state spends, for example between Rs 800 and Rs 950 a month.

I made this chart using data from the NSS report, ‘Level and Pattern of Consumer Expenditure’ (the 66th Round, which surveyed the population between 2009 July and 2010 June). With 20 states and ten categories each, I had 200 readings to plot, examining the consumption in quantities for cereals and pulses.

Depending on the population of the state, some of those circles represent 3-5 million people! Now here is the grim finding. Of these, 72 do not meet even 75% of the minimum cereals requirement (about 10.4 kg) a month, and 106 do not meet even 50% of the minimum pulses requirement (about 0.6 kg) a month – these are the National Institute of Nutrition recommended dietary allowances. And 43 of these deciles are severely deficient in both.

How can the state explain the existence of these huge deficits in basic nutrition (see the coloured area of the chart, which includes tens of millions) while simultaneously chasing 'growth' as the means to remove those deficits?

How can the state explain the existence of these huge deficits in basic nutrition (see the coloured area of the chart, which includes tens of millions) while simultaneously chasing ‘growth’ as the means to remove those deficits?

For the last week, there has been a great deal of comment and discussion about how the increase in expenditure – especially in rural India – is ‘evidence’ of increasing incomes, of widening prosperity and a general ‘lifting out of poverty’. It is misleading because neither the central government nor its supporters (there are many supporting views to be found in the media) has pointed out that an increase in expenditure will of course take place given the rise in the price of food and fuel.

Comparing what the NSS has surveyed in 2009-10 with its 2004-05 survey, in some areas of expenditure the rupee rise is 300%-400% (such as for the eggs fish and meat, fresh fruit and beverages categories) and it will be useful to extract the quantities behind these increases in expenditure (I will get around to doing this as soon as possible).

In any case, the quantities consumed for cereals and pulses have actually declined for rural and urban citizens. While the proportion of expense, out of total food expense (all-India figures for rural populations), on pulses and on milk (and milk products) has remained roughly the same – 5.6% to 5.2% and 15.3% to 15.2% – the proportion spent on cereals has dropped from 32.7% to 20.2%.

I think this an extremely significant change that can be read together with the two big increases in proportion of spending – on egg fish and meat from 6% to 9% and on beverages from 8.2% to 15%. In the NSS definition, beverages also includes purchased meals and processed food, and it is this conversion of primary cereals (including coarse cereals) and pulses to processed foods that I see as an important factor behind the biggest change in the proportions spent on food in recent years.

India 2012 foodgrain estimate is 257 million tons

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What is still quaintly called an “advance estimate” (the fourth of four that are released by the brobdingnagian agricultural bureaucracy in India) has been made public.

This gives us estimates of the expected production of foodgrain and commercial crops for India in 2012. As usual, the new data release adds to the series I have been providing since the 2008-09 crop year – this now includes the sequential advance estimates for 2008-09, 2009-10, 2010-11 and 2011-12. [Get the spreadsheet here.]

Highlights from this data release:
1. Rice 104.32 million tons, wheat 93.90 mt and coarse cereals 42.01 mt for a combined cereals total of 240.23 million tons. Add 17.21 mt of pulses for a total foodgrains estimate of 257.44 million tons for 2011-12.
2. A total for nine oilseeds of 30.01 million tons (groundnut, castorseed, sesamum, nigerseed, rapeseed and mustard, linseed, safflower, sunflower and soyabean). Sugarcane is 357.66 million tons. For fibres, cotton 5.98 mt, jute 1.96 mt and mesta 0.12 mt.

What about the effect of the poor 2012 monsoon on sowing and harvests, and have the drought conditions and water scarcity in over 300 districts been factored into these numbers? I don’t know. The agri and crop and food babus in India (just like ‘mandarins’ and ‘eurocrats’ elsewhere) aren’t telling.

Written by makanaka

September 24, 2012 at 15:21

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.

The very odd macro-economics of food prices and food inflation in India

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Food inflation has hurt, but we have just the prescription for it. So says the Economic Advisory Council to the Prime Minister of India. This group of the country’s seniormost macroeconomic planners is considered to be as heavyweight as they come, and have considerable influence on policy in India. The major ministries listen to the pronouncements of the EAC very attentively – finance, commerce and industry, power, steel, agriculture, infrastructure. India’s industry associations and business interest groups do the same – they are the Confederation of Indian Industry (CII), the Associated Chambers of Commerce and Industry of India (Assocham) and the Federation of Indian Chambers of Commerce and Industry (Ficci).

But amongst the five members of the EAC (all ‘Drs’, naturally) there are no women. There is no trade union member, there is neither nurse nor teacher, there is no housewife and there is no bus driver, there is no municipal sweeper and no roadside food vendor, there is no-one from a ‘scheduled caste’ or a ‘scheduled tribe’, in fact there is no tribal at all, there is neither artist nor essayist, there is no-one to speak for the old folk of India and none to explain the dreams of India’s youth. Still they call it a council to which the country’s prime minister listens. What he and his ministerial colleagues learn from these five cosseted greybeards in their ivory tower I can hardly imagine.

The price of a kilo of rice, from 2006 to 2011, in 49 urban centres in India.

Let us see why it is so difficult to find utility (the word classical economists make much of) in the pronouncements of this cabal.

They said: “Very high rates of inflation have characterized the last two years. Much of the inflationary pressure came from primary foods, including cereals in the initial months.”

True.

They said: “While, open market intervention and large releases under the public distribution system (PDS) helped to stabilize the price of cereals, pressure continued to come from rising prices from other primary food items – especially pulses, milk, eggs, meat & fish.”

What does “open market intervention” mean? If it means the central government buying foodgrain to funnel into the public distribution system, this is a method riddled with corruption and crippled by speculation. There are no “large releases” different from the normal schedule of releases which in a country like India are large anyway. Cereal prices have not stabilised – not in 2011 and 2010 and not at any time in the last five years.

They said: “Greatly improved output of kharif pulses in 2010 combined with marketing of imported pulses at controlled prices, helped to curtail the inflation in pulses by July 2010. However, prices continued to rise for fruit, milk, eggs and meat & fish.”

Inflation in the prices of pulses has by no means been curtailed, controlled or even understood. Many kinds of pulses in India are consumed in many different ways, and there is demand not only from final household consumers but also from the dispersed and very varied small foods and snacks manufacturers for whom pulses are a necessary ingredient. Fruit, milk, eggs, meat and fish – all scarce items in the food basket of the poor but high-margin items for the food retail stores in urban India. The EAC has made no mention of why prices for these foods rose – homework not done.

They said: “The prices of vegetables took an unexpected turn in December 2010 and January 2011, resulting in an increase in the wholesale price index of vegetables by 34 and 67 per cent respectively in these two months. In consequence, primary food price inflation stayed in the double digits.”

Not only in December 2010 and January 2011. Several staple vegetables have been the actors in price volatility operas in all the 49 urban centres for which  India’s Food and Consumer Affairs Ministry monitors retail prices. To blame, in my view, is the steady ingress of the food logistics sector (itself part of the corporatisation of food and agriculture in India) into urban centres beyond the major metropolises. The “cold chain” and “value chain” evangelists work for the retail food and processed foods industry, and can exercise degrees of arbitrage which are wholly ignored by the EAC. Inside the market, there was no hint of the “unexpected”.

The price of a kilo of wheat, from 2006 to 2011, in 49 urban centres in India.

They said: “Such a lengthy period of sustained high food price inflation had its expected impact on money wage rates and other cash expenses, which in turn began to get passed into the price behaviour of manufactured goods. Year-on-year inflation for manufactured goods rose from around 5 per cent to 8 per cent in September and October 2011.”

Shouldn’t fossil fuel products and the prices we pay for them share the blame? I think a cursory study of the prices for OPEC and non-OPEC crude products will explain a lot. And besides, “wages” are wages to people who – being mostly in the informal sector and unorganised labour – cannot bargain collectively nor are represented in policy-making bodies (like the EAC), so their money wage rates have not risen in tandem with inflation. Quite the contrary, for rural labour (agricultural and non-farm both) the average household spends 65% of its income on food.

[You can get the EAC Review of the Indian Economy 2011-12 document (pdf) here] [You can get a plain text file of the paragraphs on food and agriculture, prices and inflation (txt) here]

They said: “The net effect was that the headline rate of inflation stayed close to 10 per cent for an extended period of twenty two months.”

True, even for whatever is meant by “headline rate”.

They said: “It should not be forgotten that throughout this period there has also been a suppression of the headline rate insofar as the prices of several refined petroleum products, especially diesel, continued to be restrained by policy – which has had an adverse impact on the subsidy bill and therefore on government finances and also on the finances of the public sector oil companies.”

Oh we are so distressed by the hurt caused to government finances, especially coming on top of the enormous tax write-offs (called “forgone tax revenue” in India’s quaint public accounts jargon) given to the esteemed members of CII, Assocham and Ficci, many of whom are direct beneficiaries of the measures that led to a high “headline rate” of inflation in the first place. Money for jam, I would call it.

They said: “The effort of public policy, especially monetary policy, seems to have had its desired effect. The headline rate dropped to 9.1 per cent in November and further to 7.5 per cent in December and has dropped further in January 2012.”

Now I know that the spreadsheet program supplied to the EAC for such calculations is provided by Messers Alice in Wonderland GmBH.

They said: “The welcome developments in the easing of inflationary pressures will enable the RBI to adjust its monetary stance over the next several months. However, the continued pressure from the fiscal side will continue to impose some limitations. Hopefully the extent of the fiscal burden may ease in 2012-13 and create conditions that are more conducive to investment and economic growth.”

Ah yes, in case we were momentarily misled, this is to remind us that the purpose of high-level panels of greybeards is to prove circuitously to the proletariat that conditions conducive to investment and economic growth matter (so very much) more than our shrinking wages and the spiralling prices we pay for our daily bowl of rice and scraps of vegetables. We stand educated.