Monday, October 23, 2006

India: Starving on a Mountain of Grains

pThis is an extension of Dilip's post on How the Other Half Lives - and the ensuing discussions....

According to the Global Hunger Report, India is ranked 96th out of the 119 countries surveyed (GHR does not include the North American, Western European countries, and Australia, since it assumes that there is no hunger in these countries, and evething is hunky dory!)... More importantly, in terms of child malnutrition, India ranks 117/119 (we beat Nepal and Bangladesh on this count)



In 50s and 60s, India did not produce enough grains to feed its population, and we were dependent on foreign food aid (Lal Bahadur Shastry, India’s 2nd Prime Minister, even made an appeal to people to keep fast for one meal a week as a solution - and bizzaire though it may appear to people now, but a large number of Indians actually followed that appeal).

Here is a Govt Ad of that time
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And a news headline
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Then, during the 60s and 70s, we had the ‘green revolution’, growth in fertilizer industry, etc… In any case, by 80s, India had become a food surplus nation - and has remained so. We are world’s 2nd largest exporter of rice, 5th largest exporter of wheat, 2nd largest producer of vegetables and largest producer of milk, etc. etc.

The Global Hunger Report also shows that between 1981 and 1992, the India score fell down from 41 to 32, and then to 25 by 1997. Since then, there has been no change (a low score shows less hunger)… So actually, it is during the last decade or so, that India has stopped making any progress in feeding its poor.

One of the reasons for this paradox that - despite being a food surplus nation, India figures among the most hungry nation - is the change in Govt policy around ‘92 or so. At that time, Govt of India (GOI) decided to increase the price (or decrease the ’subsidy’)of grains and commodities in the Public Distribution System (PDS - the ‘ration shops’).

This resulted in two things - good and bad:
  • it made making the food out of reach of the poor, and
  • it increased country food surplus, since those who need it can no longer afford it.

    One easy intellectual trap in trying to understand this paradox is to reduce it to a discussion about the relative virtues of ’socialism’ or ‘capitalism’. This black/white - socialism vs. capitalism - kind of world-view, in any case, is too opaque to bring forth the nuances of an issue into focus (There are a wide variety of socialist and capitalist systems across the world - some are good for people and some are a disaster).

    The Global Hunger Report rankings essentially implies that inspite of having all the ‘feel good’ statistics about India (GDP, Exports, BIC Report, etc.)... they don't add up to the building up of a sustainable society.

    Perhaps, it is more meaningful to focus on the specific Govt. policies, and the implications they have on people and sustainability of socio-economic growth.

    For instance:
    Ealier this year, the Govt (in this case following Capitalist policies) opened up the grain-procurement market to private sector traders/MNCs (e.g.,Cargill, HLL, Reliance, Continental, etc.), and the buying prices shot up beyond the limits that FCI (Food Corporation of India, which procures grains for the PDS) has... FCI did not procure much grains from famers.

    Since the prices of grains shot up, the Govt (in this case following Socialist policies) imported wheat to keep the prices down in the 'subsidised' open market

    By conventional logic, the farmers would have benefitted by the high prices they got from the private player... And some - the bigger ones - did, it is true.

    But the policy ignores a fact that 65% of consumers of food-grains are also its producers. These are the small and marginal farmers with less than a hectare or 2-4 hectare of land... Given the tiny quantity of their produce, they are not a part of the supply-chain of the big MNCs, and since the govt brought down the prices in the open market/mandis, they can't sell their produce at a higher price.

    So, if you happen to be a small/marginal farmer:

  • when you go to the local mandi to sell your produce, you find the prices low, since the GOI has imported grains to keep the prices low (socialist subsidy)

  • when you go to buy grains to supplement your subsistance produce, you find the prices beyond your budget, because the GOI has opened the market to private players (competitive capitalism)

    ...
    Not that it would matter to the small/marginal farmer... but perhaps - for some of us (the 15mn Indians who read/write blogs) - it provides an intellectually satisfying explanation about why in a food-surplus land, we have starvation deaths and farmer suicides...!!!!

  • 12 comments:

    Anoop Saha said...

    I always wondered why we have failed so miserably in food distribution, despite going a long way in improving our food production. Some parts of our country, especially the tribal belts are actually worse than sub-saharan Africa.
    Now that our "mountain of grains" is no more, it is important to address this issue with utmost urgency and sincerity. Seems like we have imported the worst of both worlds, socialism and capitalism.

    Anonymous said...

    This is a quite thorough and readable analysis of the situation. Thank you for reminding all of us to avoid the false dichotomy of socialism/capitalism.

    I think your example illustrates that there are some serious challenges to a country, like India, rushing headlong into the global economy when so many of its people are remain unintegrated with global economic processes. Until they become integrated (through what means I am not sure), they either stand to lose (or stay at the same level) while those with a foot on the global economy treadmill, so to speak, benefit.

    gaddeswarup said...

    I am trying to understand how prices of various grains ( and cotton) are deterined in different countries. Perhaps the price of cotton is affected by some exchange in Chicago, trade and local factors. About wheat and grain, Devinder Sharma says in a 2004 article ( and is referring to Bajpaye) http://www.zmag.org/content/showarticle.cfm?ItemID=4871

    "What the Prime Minister did not specify was that the World Trade Organisation (WTO) makes it imperative for countries like India to knock down the procurement machinery. Accordingly, grains for the food buffer have to be purchased at the market price and the releases from the buffer (read FCI) have also to be at the market prices, except for those living below the poverty line. In the past two years, the government has tried to "restructure" the public distribution system as per the WTO norms by removing the "above the poverty line" (APL) families from being a recipient of the subsidised rations."
    I do not the sequence of events. The above indicates the system of prices you quoted above might have been dictated by some trade agreements. I wonder whether this may be also behind the changes in defining 'poverty line'.

    gaddeswarup said...

    Sorry for another quick comment. Meanwhile, I browsed through some papers by Angus Deaton. There seem to be some genuine problems with calculations of the poor. Some of these are discussed in the paper "Data and dogma: the great Indian Poverty debate"

    Supratim said...

    So, what is YOUR solution to this dissonance (mild word for an ugly fact)?

    I have one - it is linked with increasing urbanisation of the land, so that we can move more people from rural/agri occupations to more urban occupations. In my view, we have just too many people "working" the land, and this is just not supportable - this was true in 1947, it will be true in 2007. The benefits of the green revolution has been wiped out by rural population growth, and there is a limit to land productivity (as far as agri goes). Personally, I also do not believe farming to be a more noble profession than taxi driver, if you get what I mean? And, if you ask the marginal farmer, I am sure he will be happy to shift to a profession that pays him Rs200-500/day.

    Interestingly, there is an opportunity with the SEZs to do some serious land reform and benefit the marginal farmers to boot. Read up on the Margapatta case, near Pune as a pointer. The idea is that all the farmers form a cooperative and transfer their land to this cooperative. They then become shareholders. The cooperative in turn invites bids for development/LEASING/sale of the property in turn, and turns over the income as dividend to the farmers. Meanwhile, they will also get education, jobs and healthcare. The key here is that the farmers disintermediate the state govt, which always gives them a bad deal (usually because they have been bought by the builders), but instead deal direct with the end user. I am sure someone like ICICI bank micro finance teams can provide advisory services?

    If you deal with NGOs in this area, why don't you bounce of this idea off them and see if they can implement it?

    Madhukar said...

    Sorry for not responding earlier... was travelling...

    Prof Swarup,

    thanks for the reference to Angus Deaton's paper. have downloaded and will be going through it.

    But on another note, I think the poverty count will always remain fuzzy. Mostly, the measures look at poverty as a function of income, nutrition and/or expenditure...

    ...my understanding is that poverty is a multi-dimensional phenomenon, and has more to do with lack of access - access to income-generating or productivity-increasing assets, access to social justice, access to basic social infrastuctural support (e.g., to healthcare, insurance, physical infrastructure, etc.), access to freedom of choices (or the compulsion to make either-or choices one wouldn't like to make, e.g., to use one's money for medicine for the ailing family member or for feeding one's children), access to one's self-esteem, to education and infomation, access to market, etc...

    Many of these are not measurable variable. My guess is that our perception of poverty - which tries to 'calculate' - would be very diferent than the poors' perception of poverty - who 'experience' and live through it.

    Re your observation about "trade agreements" influencing the policy, yes, perhaps that is how it has happened. WTO/WB/IMF do put certain conditions for loans/entrance, and many of those impinge on the local public policies... that is what I had refered to Kuffir in HTOHL blog.

    Madhukar said...

    Steve,
    Frankly, I am somewhat sceptical about the 'globalisation' as it is understood - and pacticed - now.
    The Global trade was higher at the beginning of 20th century than it is now... what has changed is that now 'globalisation' has become more "exclusive" - a club of the rich - than "inclusive"... and so, whether one likes it or not, it will widen the disparities... this is not just true about India (and other developing economies), where as you rightly mentioned "people remain unintegrated with global economic processes" but even of the more developed and 'globalised' economies (e.g., US)... in last 25-30 years, US - inspite of being the richest nation on the planet - has become more divided than earlier... on GINI index it ranks 59th, and added the largest number of poor among the OECD countries its numbers.

    I guess, this statement makes me automatically, a "socialist" by default ;)

    kuffir said...

    'But the policy ignores a fact that 65% of consumers of food-grains are also its producers. These are the small and marginal farmers with less than a hectare or 2-4 hectare of land...'

    a very valid observation..but i've been reading up on a fao report which says a great majority of marginal-submarginal farmers in india are not even participants in the market in the sense that they don't even produce any marketable surpluses..

    also, in the discussion you mentioned here in the markets..i had added later that it ultimately boils down to whether we need wb loans at all. frankly to fund social spending (on education and health etc.,) i don't think we need wb funds at all- because we have a choice. do we fund education or do we fund more government?

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    Druv said...

    The bio engineered food crops which were introduced after India was forced fed the worst that was produced in America in 1960 which they did not even feed their cattle is a long term technique to kill off the population of India.

    The Americans call it "franken food" which the general population is also fed.

    The bio engineered foods contain animal DNA so that they grow twice or thrice the amount of food grains compared to the normal ones.

    Augadha