Academic journal article Indian Journal of Economics and Business

A Future Perspective on Indian Grain Self-Sufficiency and Its Implications for Trade

Academic journal article Indian Journal of Economics and Business

A Future Perspective on Indian Grain Self-Sufficiency and Its Implications for Trade

Article excerpt

Abstract

This study analyzes the food supply and demand situation in India using a partial equilibrium model. Specifically, this analysis provides a ten-year supply and demand projections of major grains after taking into account total land constraints, urbanization, income growth and other demographic factors not considered in the existing literature. Supply side is modeled using a system framework that allows incorporation of total land constraints whereas food demand is estimated separately for the urban and rural areas using household consumption survey data. In addition, feed demand is projected by converting various types of animal production by their respective feed conversion factors.

The simulation results suggest that strong income growth coupled with faster rate of urbanization is likely to result in higher growth in wheat and coarse grain consumption (in the form of milk, eggs and chicken consumption). Comparisons of supply and demand for each of the grains analyzed suggest that demand growth is likely to outstrip supply growth in the future. Overall, India is expected to transform itself from a current position of 11 million metric tons (mint) of cereal net worth of exports this year to more than 3 mmt of net imports by the end of projection period.

INTRODUCTION

India is a leading producer of wheat, rice and coarse grains in the world, and has been largely self-sufficient in the food production with occasional imports and exports in years of shortages or surpluses, respectively. This statement seems unbelievable considering the fact that four million people died in India due to starvation during the Bengal Famine in the 40s. This achievement is primarily due to the green revolution of the mid 60s which introduced high yielding wheat and rice varieties to Indian agriculture (Landes, 2004). Since then, Indian food production has been growing at an annual rate of 2.5 per cent (Mohanty and Peterson, 2001). In 2003/04, Indian staple cereal production was close to 200 million tons as compared to 42 million tons in 1950/51.

In addition to the successful implementation of the green revolution, a complex set of interventions both in the domestic and trade fronts helped India to achieve the impressive growth in food production. On the domestic front, the Government of India (GOI) has provided input subsidies along with support prices for most agricultural commodities. A significant portion of government funds has been allocated to subsidizing production inputs such as power, irrigation and fertilizers. In addition to input subsidies, the government also stands ready to buy agricultural products from farmers at the announced support prices. The government has maintained these domestic policies with a series of restrictive trade policies such as import licensing, tariffs, quotas and state trading. These policies have virtually banned private importing of most agricultural products. The level of trade distortions was so pervasive that about 11,000 food and consumer items were covered by non-tariff measures (USDA, 2001).

After years of isolation from the world market, India slowly began opening trade in the early 1990s. In addition to these unilateral reforms, India, as a member of Uruguay Round Agreement of the General Agreement on Tariffs and Trade (GATT), is committed to open its agriculture to the world markets. However, in the early years of GATT, India took advantage of Article XVIII-B, which permits a country to impose quantitative restrictions on imports if there is a problem in the Balance of Payments (BOP) account. Since 1997, India has been removing many import licensing and quota restrictions and replacing them with high tariffs under pressure from trading partners as part of its World Trade Organization (WTO) commitments. By 2001, the GOI has removed all quantitative restrictions on agricultural imports and voluntarily reduced tariffs below required level for a number of commodities, including edible oils, pulses and cotton (Landes, 2004). …

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