GS Paper III

News Excerpt: 

According to agricultural economists, India is expected to face continued output shortfalls in key protein sources, edible oils, and fruits in the next seven years.

About the Report:

• Demand and Supply projections are crucial for formulating farsighted agricultural and food policies to sustain food production, ensure food security, and for the efficient functioning of food systems while controlling for external factors such as changing consumption basket, taste, and preferences, changing population growth, and income growth.
• The report was published by the National Bank for Agriculture and Rural Development (NABARD) and the Indian Council for Research on International Economic Relations (ICRIER).

Key  findings of The Report:

• Commodities like oilseed, pulses, and fruits will experience a supply and demand gap in the coming years.
  • Therefore, there is a need to increase the level of production and productivity of oilseeds, pulses, and fruits since their demand in the future shows an increasing trend. "
• As per capita incomes rise, people's consumption baskets tend to diversify towards nutritious and high-valued commodities, including fruits, vegetables, and dairy products, and away from staples such as rice and cereals.
  • Demand growth for non-cereals and high-valued commodities is expected to exceed the population growth rate and cereal commodities’ growth in coming years.
• The report reiterated the recommendation of a 2012 report from the Commission for Agricultural Costs and Prices (CACP) to raise the import duty whenever the import price of crude palm oil falls below $800 per tonne to protect Indian producers.

Report on the commodities:

Demand Projections of Agricultural Commodities up to 2030–31: 

In this section, There is an exercise to project ex-ante demand for rice, wheat, coarse cereals, cereals, pulses, foodgrains, sugar, oilseeds, fruits, vegetables, milk, and meat till 2019-20 to ascertain the accuracy of the methodology used in generating the forecast in the future.

• The base year for ex-ante prediction of fruits and vegetables was revised as there has been a substantial increase in production of horticulture commodities after 2005-06, particularly after the implementation of the National Horticulture Mission (NHM) 2005-06.
• Similarly, the base year for meat and milk was revised due to a significant increase in the value of livestock output during the 11th FYP, which was largely driven by the demand for protein food.
  • In addition, the Government of India launched the National Livestock Mission during the 12th FYP to encourage the growth of the livestock sector (Department of Animal Husbandry, Dairying and Fisheries, Annual Report 2019-20).
• During the same period and using the identical elasticities, demand for rice, wheat and coarse cereals is expected to range between 113.5-114.1 MT, 110.9-112.8 MT and 47.7-46.4 MT, respectively.
• Cereal demand will increase by the end of 2030-31 from 253.97 MT in the base year (TE 2019-20) to 260.6 MT under 4.1% PCY growth and 254.7 MT under 6.1% PCY growth.
• The projections for pulses during 2030-31 range between 33.7-35.3 MT under the alternative PCY growth scenarios.
• The livestock product is estimated at 283-327.6 MT for milk and 11-12.9 MT for meat in 2030-31.
• Demand for fruits and vegetables will increase from 289.32 MT in the base year (2019-20) to 431.1 MT under the assumption of 4.1% Per Capita Income (PCY) growth and 501.8 MT under 6.1% PCY growth by the end of 2030-31.

Supply projections of Agricultural Commodities up to 2030–31:

Like demand forecasts, various studies have forecasted the supply of agricultural commodities to compute if the country’s food balance sheet will be in deficit/surplus in the near future, medium-term, and long term.

• For estimating the supply projection of agricultural commodities such as rice, wheat, coarse cereals, cereals, pulses, foodgrains, oilseeds, fruits, and vegetables for the period between 2020-21 and 2030-31, we use the base-level production and the past trend of average annual growth rates in actual production. 
• The cereals and foodgrain supply is estimated to increase to 356.8 MT and 396.0 MT by 2030-31.
• If supply growth follows the last 15 years' trend, the pulse production will grow to 39.2 million tonnes by 2030- 31.
• The milk production between 2020-21 and 2030-31 is expected to increase from 197.9 MT in 2020-21 to 340.5 MT in 2030-31 and from 197.3 to 328.8 MT during the same period.
• If we consider that the horticulture commodities will follow the last 15 years, fruit production will increase to 150.9 MT, and vegetables will increase to 282.5 MT by 2030-31.

Demand and Supply Gap: A Concern

The gap between projected demand and supply of agricultural commodities, or in other words, a deficit in the food balance sheet, would result in higher imports to meet the domestic demand, which, in turn, leads to a huge import bill in the long run.

• Therefore, there is a need to increase the level of production and productivity of oilseeds, pulses, and fruits since their demand in the future shows an increasing trend.

Further steps for Reducing the Demand and Supply Gap:

Way Forward:

The report has called for policy attention to ensure a balance between domestic production and the absorption of these commodities, diversification towards high-value commodities that require major investments in market infrastructure, processing, and cold storage and warehousing facilities to build an efficient and reliable value chain. Such measures can significantly reduce food wastage, they underlined.

• For instance, Bayer, a private sector global company, has introduced ‘Better Life Farming,’ an agri-entrepreneurship model in India, in partnership with other private players, including International Finance Corporation, Netafim, DeHaat, Agri Bazaar, Big Basket, and Yaar to provide knowledge of good agricultural practices and access to the latest technologies, thereby, providing opportunities for increasing agricultural productivity.

Prelims PYQ

Q. India has experienced persistent and high food inflation in the recent past. What could be the reasons? (UPSC 2011)

1. Due to a gradual switchover to the cultivation of commercial crops, the area under the cultivation of food grains has steadily decreased in the last five years by about 30. 
2. As a consequence of increasing incomes, the consumption patterns of the people have undergone a significant change. 
3. The food supply chain has structural constraints. 

Which of the statements given above are correct?

(a) 1 and 2 only 

(b) 2 and 3 only 

(c) 1 and 3 only 

(d) 1, 2 and 3