The Economics of a Plate of Food in India – Economic and Political Weekly

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Thalinomics,” the 11th chapter in the Economic Survey 2020, has quantified what a commoner pays for a plate of food in India and therefore relates economics to their everyday lives. Thali prices are computed using average monthly price data, used for the Consumer Price Index for Industrial Workers (CPI-IW), from April 2006 to October 2019, and the nominal gains that a consumer has achieved in the last fi ve years are estimated as a difference between the inflation-based projected prices and the actual prices of food commodities forming a thali. The estimates reveal that after 2015–16, an average household gained ₹ 10,887 and ₹ 11,787 per year on average from the moderation in vegetarian and non-vegetarian thali prices respectively.

While the chapter talks about improving affordability of food, especially since 2015–16, the results must be taken with some caution. In measuring the affordability of a thali, the estimates have considered only about 3.3% of the total workforce of the country. This is just a subset of the workforce associated with the organised manufacturing sector. It must be noted here that households who depend on agriculture are both producers and consumers at the same time, and any decline in prices of food implies a decline in their income.

Again, while the chapter claims that the affordability in prices is because of a series of reforms that the central government has taken in the last five years, like the Pradhan Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA), Pradhan Mantri Krishi Sinchayee Yojana (PMKSY), Pradhan Mantri Fasal Bima Yojana (PMFBY), the Electronic-National Agricultural Market (e-NAM), etc, there is no mention of the impact of such schemes on Indian agriculture and the channels through which these might work. Take, for example, the case of PM-AASHA, which is an umbrella scheme of three sub-schemes, namely price support, price defi ciency, and private procurement and stockist schemes. Under price support, which happens to be the oldest of these sub-schemes, the procurement of pulses and oilseeds in the last three years through 2016–17 has been as meagre as 0.02 million metric tonne (MMT), 0.1 MMT and 2.7 MMT respectively. Less than 10% of total pulse production was procured in 2018–19, which happened to be the highest procurement year. To the best of my knowledge, the price defi ciency scheme was piloted in Madhya Pradesh as the Bhavantar Bhugtan Yojana only to yield mixed results and later be rolled back. Therefore, any claim of signifi cant impact of this particular scheme is questionable. The private procurement and stockist scheme is yet to be launched.

PMKSY is another scheme that they claim to be responsible for the decline in thali prices. The 2004 Task Force on Micro-rrigation had estimated a potential of 69.5 million hectare under micro-irrigation. A NITI Aayog report fi nds that only 10% of the total potential area has been brought under micro-irrigation till date. Once again, claiming its responsibility in lowering prices might be too premature.

With regards to PMFBY, during 2018–19, about 5.64 crore farmers were enrolled with PMFBY for an insured sum of ₹ 2,35,277 crore, and 30% of the gross cropped area was insured. The fact that the scheme underwent a massive revamp days after the publication of the Economic Survey raises questions about its effi ciency in the fi rst place. The central government has now made it voluntary and restricted its share in premium to 30%. However, when it was launched four years ago, there was no upper limit to the central government’s share in the premium amount. The rise in premium now might reduce the number of insured farmers and increase the rate of premium for some crops in certain areas. Also, now the scheme has been made voluntary, and the states and union territories can decide the number of additional risk covers, making it further less attractive for the farmers.

e-NAM was launched in 2016 with an objective of spatial integration of all markets across the country. However, there is hardly any evidence of intramandi or interstate trade. It is therefore premature to make a claim on its behalf.So, any contribution of these schemes in lowering prices is neither well-researched, nor backed by substantial evidence. One of the reasons why prices did not go up during this time period can be credited to the Reserve Bank of India’s infl ation targeting since 2016. However, the economic survey makes no mention of it. Further, there is absolute silence on the plausible impact of demonetisation on falling prices of the agri-commodities.

One thing that the chapter must be given due credit for is its acknowledgement off arm distress. With food prices not going up, farmer income is also not going up. The Organisation of Economic Cooperation and Development (2018) finds that despite all the schemes and subsidies given to the farming sector, we tax agriculture.The report fi nds that between 2000–01 and 2016–17, farmers lost `45 lakh crore (at 2017–18 prices), or around ₹ 2.6 lakh crore per year due to such taxation.By claiming that plummeting dal and vegetable prices are one of the reasons for cheap thalis, the Economic Survey indirectly brings out the ineffi ciencies in value chains of both these commodities. Low prices are because of ineffi cient marketing systems, abrupt and consumerbiased trade policies, and poor marketing infrastructure, among other things. These are the reasons why, despite bumper harvests, distress of pulse farmers has increased over the last few years.

In this context, if one goes with the leaked findings from the National Statistical Offi ce consumption survey report that rural consumption, including expenditure on staples, fell by 9% between 2011–12 and 2017–18, then the poor are evidently consuming less than they did a decade back. This raises questions such as, Why is consumption falling if food is cheaper? It also makes us think whether cheaper food is always the most efficient solution for the market.The chapter has, in a way, brought into public domain the bias that the agriculture sector as a whole has been facing in India. There is an inherent consumer bias in policymaking in India. A fall in prices is not considered as a fall in farm income, while a rise in agricultural commodity prices is turned into a crisis.What gets overlooked here is the welfare status of the farmer and their income.

Tirtha Chatterjee

Thiruvananthapuram

Source: Thanks https://www.epw.in/journal/2020/13/letters/economics-plate-food-india.html