Indian Foodgrain Sector Prospects and Challenges Ashok Gulati

Indian Foodgrain Sector: Prospects and Challenges Ashok Gulati and Shweta Saini (Chair Professor and Consultant, respectively) Indian Council for Research on International Economic Relations (ICRIER) NCAER Workshop on ‘Medium Term Outlook for India’s Food Sector’ , June 26, 2014. New Delhi

Looking back: Grain Production (up from 176. 4 mt in 1990 -91 to 264. 4 mt in 2013 -14)

20 20 09 20 -0 08 20 4 3 2 -1 13 20 -1 -1 12 20 0 1 -1 11 20 10 -1 Rice 20 7 9 -0 07 Wheat 20 6 5 8 -0 06 -0 05 3 2 1 4 -0 04 -0 -0 02 -0 01 -0 00 03 20 20 20 Production (million tonnes) Closer look: Wheat and rice both going strong since 2000 -01 110 100 90 80 70 60 50

Closer Look: Revolution in Maize; Pulses breaking new grounds 25 24, 19 20 19, 73 18, 96 Production (million tonnes) 22, 26 21, 73 16, 72 14, 98 15 13, 16 12, 04 15, 1 14, 71 14, 17 11, 15 10 4 13 -1 3 20 12 -1 2 20 Pulses 20 -1 11 1 10 20 20 20 -1 0 09 -1 9 -0 08 07 -0 8 7 -0 06 Other Coarse Cereals 20 20 Maize 20 05 -0 6 5 04 -0 4 20 20 03 -0 20 02 2 -0 01 20 20 00 -0 1 5

Grain Stocks: Overflowing!

Cereal Exports: Record breaking! 25 Rice Wheat Maize Others Value of Exports (US$ Bn) 12, 0 22. 1 20. 4 12. 0 8. 8 10 8. 1 5. 0 6, 0 9. 7 8. 0 5. 4 6. 5 5. 0 4, 0 5. 7 2. 4 2, 0 2013 -14 (Est) 2012 -13 2011 -12 2010 -11 2009 -10 2008 -09 2007 -08 2006 -07 2005 -06 2004 -05 2003 -04 2002 -03 0, 0 2001 -02 0 US $ Billion 15 5 10, 0 8, 0 2000 -01 Million Tonnes 20

What about domestic demand? Cereals losing out in the Consumption basket 35 35. 1 Percent Share in Total Food Expenditure (NSSO) 34. 6 30 27. 6 25 23. 3 20 15 10 5 Fruits, nuts and Vegetables cereals 0 Pulses and gram 1993 -94 edible oil 1999 -2000 Milk and MP sugar 2004 -05 Eggs, fish and meat 2009 -10 Others* 2011 -12

Futuristic Scenario Depends on Technology & delivery systems ◦ Our productivity levels in rice, wheat and maize still way below what current technology can provide ◦ Challenge of delivering good seeds and farming practices ◦ Investments in irrigation will have large pay offs Incentive Structures: ◦ Tilted towards wheat and rice through MSP regime ◦ Broadly following global prices with some time lag

Price Incentives: Domestic and Global Cereal Price Indices Global Transmission Indices: WPI (base 04/05) and FAO (02/04=100) 300 250 200 150 100 50 94 -9 95 5 -9 96 6 -9 97 7 -9 98 8 -9 99 9 -0 00 0 -0 01 1 -0 02 2 -0 03 3 -0 04 4 -0 05 5 -0 06 6 -0 07 7 -0 08 8 -0 09 9 -1 10 0 -1 11 1 -1 12 2 -1 12 3 -1 3 0 WPI- Calc. Cereals FAO-Cereals WPI- Cereals above is calculated for Rice, wheat and Maize only as the FAO Cereals’ Index comprises of these

Future Projections: Many studies in the past had forecast India to be a large importer of grains…will they prove right? Some notable ones are: • • • Bhalla, Hazell and Kerr (1999): India will import 64 -115 mt of grains by 2020 Planning Commission (Go. I, 2006): demandsupply deficit of 10 mt by 2011 -12 Binswanger, Parikh, et. al (2011): could be 70 mt of imports by 2039

Supply-demand gap in 2010/2011 -12 (mt) Commodities Studies Demand Supply Gap (supply less demand) Total Cereals Kumar (1998) 225 (4%) 248. 4 (cons TFP growth) 23. 4/ 24. 1/24. 7 4. 2/4. 9/5. 5 214. 3(4. 8%) 229. 2 (dec TFP growth) 207. 66 19. 9(4. 8%) 16. 06 -3. 85 234. 2 (4. 8%) 223. 72 -10. 48 224. 3 (5%) 223. 7 (7%) Total Cereals Pulses Total Food grains PC (2006 ) -6. 69

Supply-demand gap in 2020/2020 -21(million tonnes) Commodities Studies Demand Supply Total Cereals Rosegrant et al. (1995) 237. 3 (at 3 -4% PCY growth) 237 Total Cereals Kumar (1998) Total Cereals Bhalla et al. (1999) 267 (4%) 265. 8 (5%) Supply. Demand Gap -0. 3 309. 0 (cons 42/43. 3 TFP growth) 265. 7 (7%) 269. 9 (dec TFP growth) 2. 9/4. 1/4. 2 257. 25 (2%) 232. 2 -25. 1/ -63. 99/ -142. 53 259. 9 2. 65/-36. 3/ -114. 83 296. 19 (3. 7%) 374. 73(6%)

12 Five Year Plan Projections for DD-SS Demand Supply 2016 -17 2020 -21 Cereals (mt) 235 253 Pulses 22 25 Total grains 257 278 Cereals 240 -251 Pulses 18 -21 Total 258 -272

Grain demand for feed … • • A big unknown? Poultry-corn-soya showing trends How far will poultry and dairy go to demand grains as feed? Will structural transformation in dairy and poultry sector trigger this demand? 20? 30? 40? 50 mt? in the next 10 years Currently shortage of fodder (dry, green) about 40% Will today’s exports of oilmeals be feeding our cattle tomorrow?

So, how does the future look like? • • • Next 5 -10 years, ample scope to raise productivity and production of grains for food and feed… question of right incentives and investments… India will keep feeding itself in cereals, except for some occasional dips caused by bad weather Will remain dependent on imports for edible oils unless some major policy decisions are taken to turn around (oil palm on one million hectares)…

Feeding for Meat: Issues to ponder… India 2 nd largest exporter of beef (buffalo) Live to dressed, how many years/decades? From road side slaughterhouse/vendor to organized systems…when will food safety concerns drive it? Any lessons from dairy? Of legs and breasts! When will cut legs start pouring in? (import duty 100% in 2014)