Jean Drèze and Christian Oldiges write: India’s great grain mystery

What about consumption? The latest estimates of per capita cereal consumption (PCCC) pertain to 2011-12: 11.6 kg per month according to the second India Human Development Survey (IHDS-2), and just 10.7 kg per month according to the National Sample Survey (NSS). We also have IHDS-1 and NSS figures for 2004-5: 11.8 kg and 11.6 kg per month respectively. If the 2011-12 estimates are still valid today, and if India’s population is now around 140 crore, then aggregate household consumption of cereals is less than 200 million tonnes, and possibly even below 180 million tonnes.

It is possible that PCCC is, in fact, lower today than in 2011-12. Indeed, PCCC has been declining steadily from the late 1970s onwards. In rural areas, for instance, monthly PCCC declined from 15.3 kg in 1977-78 to 11.3 kg in 2011-12 according to NSS data. Due to the suppression of the 75th NSS Round (2017-18) by the Indian government, survey data on cereal consumption are not available beyond 2011-12 at the national level. A state-level report for Maharashtra based on the 75th Round, however, suggests that PCCC continued to decline there between 2011-12 and 2017-18. This may or may not be true at the national level, but it is unlikely that the declining trend has been substantially reversed.

The downward PCCC trend is sometimes attributed to rising poverty, but this is a misunderstanding. For one thing, there is clear evidence of slow but steady poverty decline in India from the 1970s until 2011-12 (after that, the jury is still out). For another, the bulk of the PCCC decline is taking place among better-off sections of the population, who are certainly not getting poorer. Instead, the decline seems to be driven by urbanisation, rising education levels, diversification of food intake, and perhaps some reduction of activity levels. That is why there is no reason to assume that the declining PCCC trend has been reversed, with one minor qualification mentioned below.

In short, the figures cited in our opening paragraph are credible. How does one account for the difference of about 100 million tonnes between production and consumption?

Cereals, of course, have other uses than household consumption. The Government of India’s annual Economic Survey traditionally deducts 12.5 per cent for seed, feed and wastage (SFW) to infer “net production” from gross production. Then it calculates “net availability” by adding net imports and deducting changes in public stocks. In both 2004-5 and 2011-12, net availability per capita more or less matched the IHDS and NSS consumption estimates. In recent years, however, a large gap has emerged between net availability and household consumption.

To see this, let us take 12 kg as a plausible upper bound for monthly PCCC from 2011-12 onwards. If we combine this with the Economic Survey’s population estimates, we find a growing gap between net availability and household consumption during the last 12 years. The gap reached 36 million tonnes in 2020-21 and 33 million tonnes in 2021-22, despite record exports in both years: 23 million tonnes in 2020-21 and a whopping 32 million tonnes in 2021-22. The trend is illustrated in the accompanying chart. If we replace the 12 kg norm for monthly PCCC with the NSS estimate of 10.7 kg for 2011-12, then the cereal gap was more than 50 million tonnes from 2019-20 onwards.

Quite likely, the Economic Survey’s “net availability” estimates are inflated by an insufficient SFW allowance. The traditional allowance of 12.5 per cent consists of 5 per cent for seed, 5 per cent for feed and 2.5 per cent for wastage. Independent experts have argued for some time that the 5 per cent norm for feed is too low. If we double the feed allowance, from 5 per cent to 10 per cent of gross production, that would reduce the cereal gap by 15 million tonnes or so. A large gap would still remain.

The cereal gap is quite a mystery. Is cereal consumption actually increasing, possibly due to the expansion of the public distribution system? Does animal feed absorb much larger quantities than previously thought? Have industrial uses of cereals, to make beer and biscuits, for instance, shot up in recent years? It is hard to tell, for lack of data.

The central government, for one, seems to be in the dark. Indeed, the Economic Survey oddly reduced the SFW allowance from 12.5 per cent to 10 per cent or so in the last few years, when an opposite adjustment was called for. This is yet another symptom of the confusion that seems to pervade Indian statistics today. The disarray of the statistical system is rapidly turning the Indian economy into a ship without a rudder.

The cereal gap, however, is not just a statistical puzzle. It also raises important policy issues related to the rapid growth of cereal production — nearly 3 per cent per year in the last 10 years. Is it time to plan for a major diversification of agricultural production, away from rice and wheat? If so, what are the possibilities, and how are they to be promoted? If not, what are the proposed outlets for enhanced cereal production in the near future? For instance, would it be feasible and desirable for India to expand cereal exports?

The need to address these questions arises from the fact that cereals are not traded in a competitive market that clears through price adjustment. For cereals, there is a well-defined policy of ensuring remunerative prices for Indian farmers. This commitment makes it necessary to ensure that there is adequate demand at the said prices. It is not at all clear where we are in this respect.

Drèze is Visiting Professor at the Department of Economics, Ranchi University. Oldiges is Senior Economic Affairs Officer at the UN Economic and Social Commission for Western Asia