Friday, November 28, 2014

India’s Homemade Food Crisis

SINGAPORE – According to current estimates, India’s total population will reach 1.45 billion by 2028, similar to China’s, and 1.7 billion by 2050, equivalent to nearly the combined population of China and the United States today. Given that India is already struggling to feed its population, its current food crisis could worsen significantly in the coming decades.

According to the 2013 Global Hunger Index (GHI), India ranks 63rd, out of the 78 hungriest countries, significantly worse than neighboring Sri Lanka (43rd), Nepal (49th), Pakistan (57th), and Bangladesh (58th). Despite India’s considerable improvement over the past quarter-century – its GHI rating has risen from 32.6 in 1990 to 21.3 in 2013 – the United Nations Food and Agricultural Organization believes that 17% of Indians are still too undernourished to lead a productive life. In fact, one-quarter of the world’s undernourished people live in India, more than in all of Sub-Saharan Africa.

More distressing, one-third of the world’s malnourished children live in India. According to UNICEF, 47% of Indian children are underweight and 46% of those under three years old are too small for their age. Indeed, almost half of all childhood deaths can be attributed to malnutrition – a state of affairs that former Prime Minister Manmohan Singh called a “national shame.”

What accounts for India’s chronic food insecurity? Farm output has been setting new records in recent years, having increased output from 208 million tons in 2005-2006 to an estimated 263 million tons in 2013-2014. India needs 225-230 million tons of food per year; so, even accounting for recent population growth, food production is clearly not the main issue.

The most significant factor – one that policymakers have long ignored – is that a high proportion of the food that India produces never reaches consumers. Sharad Pawar, a former agriculture minister, has noted that food worth $8.3 billion, or nearly 40% of the total value of annual production, is wasted.

This does not capture the full picture: for example, meat accounts for about 4% of food wastage but 20% of the costs, while 70% of fruit and vegetable output is wasted, accounting for 40% of the total cost. India may be the world’s largest milk producer and grow the second largest quantity of fruits and vegetables (after China), but it is also the world’s biggest waster of food. As a result, fruit and vegetable prices are twice what they would be otherwise, and milk costs 50% more than it should.

It is not only perishable food that is squandered. An estimated 21 million tons of wheat – equivalent to Australia’s entire annual crop – rots or is eaten by insects, owing to inadequate storage and poor management at the government-run Food Corporation of India (FCI). Food-price inflation since 2008-2009 has been consistently above 10%, (except for 2010-2011, when it was “only” 6.2%); the poor, whose grocery bills typically account for 31% of the household budget, have suffered the most.

There are several reasons why so much perishable food is lost, including the absence of modern food distribution chains, too few cold-storage centers and refrigerated trucks, poor transportation facilities, erratic electricity supply, and the lack of incentives to invest in the sector. The Indian Institute of Management in Kolkata estimates that cold-storage facilities are available for only 10% of perishable food products, leaving around 370 million tons of perishable products at risk.

The FCI was established in 1964 primarily to implement price-support systems, facilitate nationwide distribution, and maintain buffer stocks of staples like wheat and rice. But mismanagement, poor oversight, and rampant corruption means that the FCI, which gobbles up 1% of GDP, is now part of the problem. Former Food Minister K. V. Thomas called it a “white elephant” that needs to be revamped “from top to bottom.” But the government has instead tried to end shortages by increasing production, without considering that up to half of the food will be lost.

India will not have enough arable land, irrigation, or energy to provide enough nutritious food to India’s future 1.7 billion people if 35-40% of food output is left to rot. The new Modi government should therefore consider alternative ways to solve India’s food crisis.

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    1. CommentedM Patel

      It's actually Nehruvian Socialism made Food Crisis. India has hundreds of socialist era law/rules around food purchase. Anti-Hoarding laws will not allow private company to buy or store food. Modi govt might scrap nehruvian socialist laws but there will always be NGO risk . In such a scenario, If a private company fills it's storage with food then leftist activist, NGO and media would run a slur campaign accusing it of hoarding. We would even have columns in western media about crony capitalist hoarding food in india.

    2. CommentedAvishek Gupta

      The FAO study from which the food wastage numbers come from also throw some intriguing numbers on food wastage in terms of per capita wastage at the consumer level and supply chain losses. What is interesting to see there, is that the per capita wastage (especially consumer level) is much higher in North America and Europe compared to anywhere else. While it is true that India needs to do something about reducing spoilage in supply chain, it is also important to ensure that public opinion and visionary articles point towards the high per capita wastage in the developed countries.
      Aside from that, i think there are two key reasons why it is practically more difficult to get reduce wastage in India, compared to the other developed countries.
      a.) Structural Challenge : It is important to note that supply chain issues (for agricultural produce) in India is much more complicated and difficult to sort out compared to North America and Europe, primarily because of structural differences in production. Indian agriculture is primarily small holder agriculture and hence disaggerated by nature. However, it is also said that the milk supply chain has done comparatively better than vegetables when it comes to reducing wastage. One of the key reasons behind that is structural "innovations" at the farmer level for aggregation i.e. pockets of successful co-operative institutions. While investments in cold chain infrastructure is key, India has to find ways of improving aggregation at the farmer levels unless that is in place we will not find people making extensive investments in cold chain infrastructure even though the policy situation may improve.

      b.) Political Intent: A closely linked reality to the "private" sector not being able to do much in setting up efficient procurement backends, is that the farmers are a "constituency" of the politicians and the need to ensure that farmers continue to depend upon politicians or continue to have expectations from politicians is critical to ensure that the politicians continue to get votes. If the politicians enable the cold storage investment environment too much in favour of private entities, the private enterprises, which have historically show better effectiveness might make a dent on the dependence of farmers on politicians. This is not a happy state for the vote hungry political class.

      While reason a.) is being worked upon by many, reason b.) is something that nobody knows how to work upon.

    3. CommentedAnkit Bansal

      We as readers expected some solution and insights from you esteemed writers. Throwing some stats is not a intellectual article.