India may be the fastest growing large economy of the world, but it is also facing accelerating food-price inflation. The rise in the price of food first accelerated sharply in 2019, and has climbed in most years thereafter. In July this year, annual inflation exceeded 11%, the highest in a decade. An implication of continuing high food-price inflation is that a section of the population could be facing hardship in consuming food of adequate nutritional value.
We now have some evidence to this effect. The ‘State of Food Security and Nutrition in the World’ of the Food and Agriculture Organization (FAO) estimates the proportion of the population across countries unable to afford a healthy diet (reported in this newspaper on August 31, 2023, under a datapoint). The figure for India in 2021 is devastating to note — an estimated 74% of the population cannot afford a healthy diet. Given a population of 1,400 million, this makes for approximately one billion Indians. A shrinking ability of households to finance their food requirement is evident also in studies undertaken in India itself.
Why this finding is plausible
A study reported in this daily (August 30, 2023 under a datapoint), of the trend in the price of food in Mumbai city over 2018-2023 found that while the cost of preparing a thaali at home has risen by 65%, in this period, the average wage of a manual worker rose by 38% and that of a salaried worker by 28%. The implied reduction in purchasing power is considerable, and it would be reasonable to expect that food consumption has been impacted. This would be in line with the reported rise in the prevalence of anaemia, mostly induced by nutrient deficiency, in the latest National Family Health Survey undertaken over 2019-21. Over 50% of adult women were estimated to be anaemic. This suggests that the FAO’s finding, that over half of India cannot afford a healthy diet, is plausible. Even if we were to assume that the agency has overestimated numbers by 100% we would be left with 500 million people in this category. This is larger than the population of all the countries of the world other than China.
Ensuring that Indians have access to a healthy diet is the most important task of economic policy today. Macroeconomic policy, relied upon to control inflation, has proved to be useless in the context. The Reserve Bank of India has failed in this task, with the inflation rate mostly higher than the target for four years by now. Its approach of contracting output when the inflation rate rises — misleadingly termed “inflation targeting” — does nothing to manage food inflation stemming from the supply side. Central banks are incapable of solving this problem, it must be said within any time frame. It is necessary to intervene on the supply side to ensure that food is produced at a steady price by raising the yield on land.
The significance of the Green Revolution
India has rich experience in this area, having engineered a Green Revolution in the 1960s, but it is not being tapped. At the time, reeling under extreme food shortage following two successive droughts, the government orchestrated a supply-side response by providing farmers with high-yielding seeds, cheap credit, and assured prices through procurement. This succeeded spectacularly. Within a few years India was no longer dependent on food imports.
If there was a single event that aided India’s quest to be self-reliant in the highly polarised climate of the Cold War, it was this. Western economists have pointed to the success of the United States’ mission to land a human on the moon as an example of an entrepreneurial state. However, to have engineered the Green Revolution in India at a time when it was a desperately poor country challenged by having to ensure food security to a staggeringly large number is perhaps more significant.
With hindsight, we can see that mistakes were made, among them the rampant use of chemical fertilizer, fuelled by subsidy, which degraded the soil. There was also the reliance on procurement prices rather than productivity increase to ensure farm incomes, which fuelled inflation. We also see that the policy was almost exclusively focused on cereals rather than pulses, the main source of protein for most Indians. However, rather than carping about the errors made in an extraordinarily successful economic policy intervention, we should be correcting them now. At the same time, we should focus on the specific goal of lowering the cost of producing food. The first Green Revolution had a specific agenda — of making India self-sufficient in food. In this it succeeded eminently, and in a remarkably short time, but without paying any attention to the cost of producing food. For this, a second agricultural revolution is needed now. To contain the rising price of food would require action on many fronts; a mission mode is necessary. As for policy, it is clear that procurement prices, cash transfers, the Public Distribution System, and priority lending required of public sector banks are not sufficient. Yield increasing interventions on the farm are needed to at least contain the cost of production, if not to actually lower it. Agricultural yield is lower in India than in East Asia, pointing to the potential for an increase. Attention is needed to extend irrigation to 100% of the net sown area, an end to restrictions on leasing of land, a quickening of agricultural research and the re-institution of extension.
Initiatives to work on
Expanding on each of these proposals would be in order. It has been pointed out for some time that increased public expenditure on irrigation is not reflected in an increase in irrigated area — whether due to waste or the diversion of funds has not been established. The ongoing fragmentation of already small land holdings lowers the capacity for productivity-enhancing capital investment, for which leasing is a solution. India’s network of public agricultural research institutes needs to be energised to resume the sterling role they had played in the 1960s. Finally, extension has now more or less vanished from where once the gram sevak was a familiar figure in the village, playing a crucial role in the dissemination of best practices. It must be revived. These initiatives should be dovetailed into a programme for the manifold increase of protein production, which India is severely deficient in.
In all the areas identified above, the role of States is crucial. In the 1960s, the States that were chosen for the spread of the new technology worked closely with the central government. This would have to be replicated in order to make a difference to the country as a whole, with the central government taking the States along in a spirit of co-operative federalism. At the same time, it may be asked if the States are playing their part to enhance agricultural productivity rather than relying on food allocations to their Public Distribution System from the central pool.
But, a non-ideological approach would be needed, whether at the Centre or in the States, if a difference is to be made. A noticeable feature of the first Green Revolution was that by relying on private enterprise, the then Prime Minister, Indira Gandhi, chose a capitalist approach (with the objective of making India self-sufficient in food), unmindful of any damage that would be caused to her socialist image. It was the Green Revolution that made the first dent on poverty in India. So, the poor did benefit from this strategy. Similarly, now, in order to ensure that all Indians have permanent access to a healthy diet, no approach consistent with ecological security must be off the table.
Pulapre Balakrishnan is an economist
