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Demand for Foodgrains

Despite the declining trend in per capita direct consumption of foodgrains, total demand is projected to increase at 2 per cent per annum in the medium term on account of an increase in the population, and the need for grain as feed and in related purposes. This implies that the growth rate in domestic foodgrain production needs to accelerate three to four times to guard against an adverse impact on food security.

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between staple foods and other foods.

Demand for Foodgrains

Two, due to the inadequate level of intake of almost all foods, increased consumption of other foods, in most cases, fills dietary Ramesh Chand deficiency. Three, foodgrains are the cheap-

Despite the declining trend in per capita direct consumption of foodgrains, total demand is projected to increase at 2 per cent per annum in the medium term on account of an increase in the population, and the need for grain as feed and in related purposes. This implies that the growth rate in domestic foodgrain production needs to accelerate three to four times to guard against an adverse impact on food security.

Ramesh Chand (rc@ncap.res.in) is at the National Centre for Agricultural Economics and Policy Research, New Delhi.

I
ndia achieved impressive growth in food production after the adoption of green revolution technology, which made the country self-sufficient in basic foods. Per capita production of foodgrains increased from 183 kg during the early 1970s to 207 kg by the mid-1990s, even as the country’s population increased by more than 50 per cent. After the mid1990s, foodgrain production failed to keep pace with population growth. Per capita production of cereals has declined by 17 kg and pulses production by 3 kg during the last decade (Table 1, p 11). This could pose a serious threat to food security as the country identifies its food security with foodgrain security.

Some scholars feel that the decline in per capita production of cereals and foodgrains is consistent with dietary diversification as with the increase in income, consumers shift their preference from cereals to livestock products like milk, eggs, meat and fish and horticultural products [Pingali and Khwaja 2004]. This debate has created a lot of confusion in the minds of policymakers when planning medium- and long-term food production strategies. It is therefore highly desirable to provide credible estimates of the future demand for basic food. This articles provides demand projections for foodgrains towards the end of the Eleventh Five-Year Plan and by the year 2020-21.

Are Foodgrains Less Important?

The long-term trend in the consumption pattern at the household level shows that per capita direct consumption of foodgrains has been declining and that of livestock products and fruits and vegetables has been increasing for a fairly long time. Despite this shift in the dietary pattern, foodgrains are considered to be of paramount importance for household food and nutrition security. This is because of four reasons. One, cereals and pulses are staple foods and there is no perfect substitution est source of energy and protein compared to other foods [Chand and Kumar 2006] and are thus vital for food and nutrition security of the low income classes. Four, increased production and consumption of livestock products resulting from rising per capita income require high growth in the use of grain as feed for livestock. Because of these reasons, foodgrains continue to be the main pillars of food security in the country and any slack in their production translates into a price shock and has an adverse impact on common people.

The dietary pattern in the country is changing because of several reasons. Prominent among them are (i) increases in per capita income; (ii) changes in preferences due to changes in taste, lifestyle and occupation structure; and (iii) increase in urbanisation. Prices are another important factor affecting demand.

Basis for Demand Projections

The total demand for foodgrains can be divided into two categories. One, foodgrains consumed by the household at home in various forms, also referred to as “direct demand” or “demand as food”. Two, foodgrains used as feed, seed and in industry and the quantity that goes as waste. This is referred to as “other demand” or “indirect demand”. Estimates of foodgrains consumed at home by households are provided by the National Sample Survey Organisation (NSSO), which prepares these estimates based on nationwide surveys consisting of large samples every five or sometimes six years, and thin samples for the other years. However, no estimates are available of foodgrains going into feed, seed, industrial use and wastage. Similarly, foodgrains consumed as food outside homes and in various types of bakery products, except bread, are not included in the NSSO estimates.

Official estimates of net availability of foodgrains for human consumption are derived from total production, adjusted for trade and change in stocks, after setting

december 29, 2007 Economic & Political Weekly

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aside a fixed percentage of production for seed, feed, wastage and industrial use. These estimates presume that 12.1 per cent of wheat, 7.6 per cent of rice and 22.1 per cent of gram (pulses) go into other uses and as waste [Government of India 2002]. This ratio for total foodgrains is taken as

12.5 per cent. Official estimates have been using the same ratios since 1951 even though foodgrain usage in different forms has undergone several changes over the last 56 years. An indication of this is the growing gap between per capita direct demand for foodgrains and domestic supply (see the figure), which shows an annual growth rate of 4.08 per cent.

After considering all these aspects, estimates of foodgrain demand for other uses were prepared based on long time series representing per capita food supply and direct demand. The difference in the two series has been treated as demand in elasticity of demand; Yis growth rate in

g

per capita income; and Δ PR is rate of change in demand due to shift in preferences and taste.

Past Trends and Projections

As mentioned before, the demand for foodgrains was projected by taking into account population growth, composition of the rural and urban population, growth in per capita incomes in rural and urban areas and changes in taste and preferences. According to the estimates of the National Commission on Population published by the census office, India’s rural population is projected to increase from a base level of 774 million during 2004-05 to 838.7 million by 2011-12 and to 904 million by 2020-21, while urban population is projected to grow from 310.6 million to

Table 1: Per Capita Production of Foodgrains 1971 to 2007 (in kg)

Figure: Trend in Per Capita Supply and Consumption of Foodgrains as Household Food

200

190 180 Supply
160 150 140 Kg per person Consumed as food ı ı ı ı ı ı

170

1985-86 1989-90 1993-94 1997-98 2001-02 2003-04 Triennium ending

Source: Computed by using data from (a) ‘Level and Pattern of Consumer Expenditure’, NSSO Household Consumer Expenditure Surveys, various rounds. (b) ‘Agricultural Statistics at a Glance’, Ministry of Agriculture, Government of India, New Delhi.

361.6 million and 428.9 million in the same period (Table 2). These increases in population involve a slowdown in the growth rate of population.

During the last 10 years, per capita income in the country increased at the trend rate of 4.97 per cent. It is assumed that in the next five to 15 years the Indian economy would grow at an average rate of 9 per cent, which implies 7.57 per cent

Period Cereals Pulses Foodgrains

other uses and its growth rate was used growth in per capita income during the

1971-75 164 19 183

to project the demand for foodgrains in Eleventh Plan and a 7.81 per cent growth

1976-80 172 18 190 other uses. The year 2004-05, which is the 1981-85 179 17 196 rate beyond that. Growth rate of urban

1986-90 182 16 198

most recent quinquennium survey year of income would be more than three times

1991-95 192 15 207

NSSO on consumer expenditure, has been the growth rate of the per capita income of

1996-2000 191 14 205 used as the base period for making 2001-05 177 12 189 rural people (Table 3).

demand projections.

Per capita demand projections for year 2011-12 and 2020-21 were prepared separately for the rural and urban populations and for rice, wheat and coarse cereals based on the changes observed between 1993-94 and 2004-05, and by using the income

2004-07# 175 12 186

# Figures for the year 2006-07 are based on fourth advance estimates which place foodgrain production at 216 mt. Source: Economic Survey, GoI, New Delhi.

Table 2: Base Year and Projected Population (in millions)

Number of Persons 2004-05 2011-12# 2020-21#

Rural 774.4 838.7 904.0
Urban 310.6 361.6 428.9
Total 1085.0 1200.3 1332.9

There is lot of disagreement on the income elasticity of demand. Recent studies are veering round to the conclusion that income elasticity of demand for cereals is either close to zero or negative. This is also consistent with long-term changes in the demand for cereals, which

Annual Growth Rates 1993-94 to 2004-05 to 2011-12 to

elasticity of demand for various foodgrains. show a decline over time even among the

2004-05 2011-12 2020-21

The total change in per capita foodgrain Rural 1.60 1.12 0.85 poor income groups. Elasticities based on

consumption between 1993-94 and 2004-05 was considered to be the sum of two components: (a) changes due to growth in per capita income; and (b) changes in demand due to shifts in tastes and preferences. The latter was computed by taking the difference between the total change in demand and change in demand due to

Urban 2.65 2.21 1.93

Total 1.88 1.43 1.19

# Indicates projection. Source: ‘Population Projections for India and the States 2001-06’, report of the technical group on population projections, National Commission on Population.

Table 3: Recent and Projected Growth Rates in Income

1993-94 to 2004-05 to 2011-12 to 2004-05 2011-12 2020-21

Net national product at factor cost 6.85 9.00 9.00

the food characteristic demand system estimated by Kumar (1998) fall in this category and are used to estimate and incorporate income effect (Table 4).

Direct Demand for Food: Trend in per capita consumption of cereals and pulses during 1973-74 to 2004-05 is presented

Per capita income

increase in incomes. The increase in in Table 5 (p 12) separately for the rural

Rural 2.27 3.46 3.58

demand due to the increase in incomes was and urban population. Per capita consump

Urban 7.75 11.81 12.19 estimated by multiplying growth in per Total 4.97 7.57 7.81 tion of cereals in rural areas followed a

capita income during 1993-94 to 2004-05 by the income elasticity of demand.

Per capita demand in future period (t)

n

was estimated from per capita demand in

)**(n)

base year (t), as: Dt= Dt0[(1+ η*Y

onyg

+ Δ PR]; where Dtis the per capita de

n

mand in future year (t); Dt0 is per capita

n

demand in the base year; η is income

y

Economic & Political Weekly december 29, 2007

Indicates projection. Sources: (1) National Accounts Statistics, CSO. (2) ‘Population Projections for India and the States 2001-06’, report of the technical group on population projections, National Commission on Population.

Table 4: Expenditure Elasticities of Cereals
Food Item Rural Urban
Rice 0.064 0.016
Wheat -0.056 -0.080
Coarse cereals -0.151 -0.165
Pulses 0.309 0.214

Source: Kumar (1998).

moderate decline between 1973-74 and 1983. After this, cereal intake shows a very sharp decline in rural as well as urban areas. Table 5 also shows that the per capita consumption of cereals is much lower in urban areas than in rural areas. At the all-India level, per capita consumption of cereals declined from 154.24 kg per person per year in 1973-74 to 132.58 kg in 2004-05. Disaggregated data shows that the per cent decline was much larger for coarse cereals as compared to rice and wheat. Further, the gap between wheat and rice consumption was narrowing down.

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Per capita direct demand for rice in rural areas, which declined from 85.41 kg in 1993-94, to 79.68 kg in 2004-05, is projected to further decline to 76.7 kg by 2011-12 and

73.37 kg by 2020-21. Per capita demand for wheat is projected to follow a very small decrease compared to rice and coarse cereals. For the country as a whole, per capita consumption of cereals is projected to decline from 139.86 kg in the base year to

132.6 kg and 125 kg by 2011-12 and 2020-21, respectively. Demand for pulses is projected to remain at 9 kg during the Eleventh Plan but is then expected to increase slightly.

Based on these projections, and population projections, the demand for foodgrains is expected to rise to 84.7 million tonnes for rice and 62.7 million tonnes for wheat towards the end of Eleventh Plan (Table 6). Food demand for coarse cereals is projected to decline from 13.7 million tonnes in the base year to 11.8 million tonnes by 2011-12 and 10.1 million tonnes by 2020-21. Direct demand for all cereals for food is projected to be 159.1 million tonnes by the year 2011-12 and 166.6 million tonnes by 2020-21. The demand for foodgrains is projected to be 179 million tonnes by 2020

21. These projections involve around 0.95 per cent annual growth in foodgrains used as food at household level.

Demand for Other Uses: There are large year to year fluctuations in the production and total supply of foodgrains, which also have an impact on foodgrains used as food. To overcome this problem, we have taken a five-yearly average, ending with quienquennium (QE) rounds of the NSSO, beginning with the year 1987-88, to arrive at estimates of foodgrains used in various forms, other than food, and including wastage.

The per capita domestic supply of cereals (arrived at from production adjusted for change in stocks and export and import) during 1983-84 to 1987-88 was 181.6 kg, out of which, 165.9 kg was consumed as food and the rest went into other uses. During 1995-96 to 1999-2000, direct food consumption declined by 15 kg, over QE 1987-88, but demand in other uses increased by almost 20 kg. Thus, between QE 1987-88 and QE 1999-2000, the share of other uses in domestic supply increased from 9 per cent to 19 per cent (Table 7). The average of the recent five years shows that

21.3 per cent of foodgrain production was going into other uses. This was used as a base scenario and the future demand for foodgrains into other uses was estimated using the long-term growth rate, which was estimated to be 4.08 per cent per year.

According to these estimates, indirect food demand and demand for other uses for cereals would be around 60 million tonnes by the end of the Eleventh Plan and 101 million tonnes by 2020-21. The demand for pulses for other uses is projected to remain at the level of the base year during

Table 5: Trend in Per Capita Direct Consumption of Cereals and Pulses as Food (in kg/year)

the Eleventh Plan but it would increase to

6.7 million tonnes by 2020-21. These projections involve around 5 per cent growth in demand for foodgrain in other uses.

Total Demand: The total demand for cereals is projected to grow to 218.9 million tonnes by the end of the Eleventh Plan and it would reach 261.5 million tonnes by the year 2020-21 (Table 8). Demand for pulses in the same period would grow to

16.1 and 19.1 million tonnes. Domestic demand for foodgrains is projected to reach 235.4 million tonnes by the end of Eleventh Five-Year Plan and 280.6 million tonnes by the year 2020-21. It is important to mention that these projections do not include export demand.

Meeting the projected demand for foodgrains would require 1.86 per cent

Table 6: Total Demand for Foodgrains as Household Food (in million tonnes)

Commodity 1993-94 2004-05 2011-12 2020-21
Rice 71.3 80.0 84.7 89.1
Wheat 48.7 58.0 62.7 67.5
Coarse cereals 17.6 13.7 11.8 10.1
Total cereals 137.6 151.7 159.1 166.6
Pulses 8.5 9.8 11.8 12.5
Foodgrain 146.1 161.5 169.9 179.1

Source: Table 2 and population projections for India and states 2001-26, Office of the Registrar General and Census Commissioner, India.

Table 7: Per Capita Supply and Demand for Cereals since 1983-84 (in kg/year)

Five-Year Ending Domestic Direct Food Other Uses Share of Quinquennium Supply Consumption Other Uses Survey in Domestic

Supply

1983-84 to 1987-88 181.6 165.3 16.2 9.0

1989-90 to 1993-94 187.8 158.6 29.2 15.5

1995-96 to 1999-2000 185.7 150.4 35.3 19.0

2000-01 to 2004-05 178.1 140.2 37.9 21.3

Source: Computed using data from (a) ‘Level and Pattern of Consumer Expenditure’, NSSO Household Consumer Expenditure Surveys, various rounds. (b) ‘Agricultural Statistics at a Glance’, Ministry of Agriculture, Government of India, New Delhi.

CommodityRural: Rice Wheat 1973-74 83.95 42.83 1983 80.67 54.26 1993-94 85.41 53.53 2004-05 79.68 52.23 2011-12 76.70 51.18 2020-21 73.3749.81 Table 8: Demand for Foodgrains as Household Food and Other Uses (in million tonnes) Food Item/Type Base Year End of By 2020-21 of Demand 2004-05 Eleventh Plan
Coarse cereals Total cereals Pulses Foodgrains Urban: Rice 56.82 183.60 65.46 45.14 180.07 64.73 24.09 163.03 9.25 172.28 64.36 15.52 147.44 8.58 156.01 59.04 12.15 140.04 8.41 148.45 56.21 9.50132.688.36141.04 53.04 Cereals Direct demand as household food Indirect food demand and other uses 151.7 41.1 159.1 59.8 166.6 94.9
Wheat 52.56 58.64 57.43 56.53 54.71 52.34 Total demand 192.8 218.9 261.5
Coarse cereals 19.71 14.11 7.55 5.39 4.35 3.49 Pulses
Total cereals 137.73 137.48 129.33 120.96 115.27 108.87 Direct demand as
Pulses 10.46 10.03 10.40 11.50 household food 9.8 11.8 12.5
Foodgrains Rural +Urban: 139.80 130.99 125.68 120.37 Indirect food demand and other uses 4.4 4.3 6.6
Rice 79.98 76.87 79.92 73.77 70.53 66.83 Total demand 14.2 16.1 19.1
Wheat 44.91 55.30 54.55 53.46 52.24 50.62 Foodgrain
Coarse cereals 48.86 37.76 19.77 12.62 9.80 7.57 Direct demand as
Total cereals 173.76 169.94 154.24 139.86 132.58 125.01 household food 161.5 172.5 187.4
Pulses 9.56 8.99 9.01 9.37 Indirect food demand
Foodgrains 163.80 148.85 141.59 Rice includes rice products like chira, khoi, lawa, muri, rice powder, etc. Wheat includes maida, suji, rawa, sewai, noodle and bread. 134.39 and other uses Total demand 45.5 207.0 64.1 235.0 101.5280.6
Source: NSSO, Household Consumption of Various Goods and Services In India and related reports for different rounds. Source: Earlier tables.
12 december 29, 2007 Economic & Political Weekly
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annual growth in foodgrain production during the Eleventh Plan. Beyond that, the growth rate in foodgrain demand would increase to 2 per cent despite a slowdown in population growth. As compared to these growth rates, India’s foodgrain production during last 10 years (1997-98 to 2006-07) increased annually by a meagre 0.48 per cent.

Conclusions

Despite dietary diversification involving a sharp decline in per capita direct consumption of foodgrains, the demand for cereals and pulses is projected to grow at about 2 per cent per year on account of the increase in population and growth in indirect demand. This growth rate is almost four times the growth rate experienced in the domestic production of foodgrains during the last decade. This has created serious imbalances between domestic production and demand, which for some time was met by liquidating stocks and cutting down on exports. If the growth rate in the domestic production of foodgrain fails to rise to the required level, it would result in a decline in the export of rice and eventually lead to increased dependence on the import of wheat and rice and pulses to meet the domestic demand for foodgrains.

References

Chand, Ramesh and P Kumar (2006): ‘Country Case Study: India’ in Harmon Thomas (ed), Trade Reforms and Food Security, Food and Agriculture Organisation of the United Nations, Rome.

Government of India (2002): Bulletin on Food Statistics, Directorate of Economics and Statistics, Ministry of Agriculture, p 104.

Kumar, Praduman (1998): ‘Food Demand and Supply Projections for India’, Agricultural Economics Policy Paper 98-01, Division of Agricultural Economics, IARI, New Delhi.

Pingali, Prabhu and Yasmeen Khwaja (2004): ‘Globalisation of Indian Diets and the Transformation of Food Supply Sysem’, ESA working paper no 04-05, Agricultural and Development Economics Division, The Food and Agriculture Organisation of the United Nations, Rome, February.

Economic & Political Weekly december 29, 2007

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