Ashraf Engineer
March 23, 2024
EPISODE TRANSCRIPT
Hello and welcome to All Indians Matter. I am Ashraf Engineer.
India has more land under cultivation than any other country. It is among the leaders in the production of rice, milk and wheat. Yet, India’s food system is under immense pressure. One indicator of this is India’s poor ranking on food sustainability indices and the 2023 Global Hunger Index ranking India 111 out of 125 countries. It classified the level of hunger in India as ‘serious’. As India looks at 2030 and beyond, its food system faces many challenges ranging from depleting natural resources to climate change, fragmented land holdings and increasing urbanisation. Meanwhile, the biggest agricultural challenge is water. India’s farming practices and cropping patterns place immense pressure on the water system, leading to a severe depletion of groundwater and frequent crop failures. The small average holdings of farmers is a major issue too. Meanwhile, populations are expanding and diets are changing, which means that people are demanding more from the land.
SIGNATURE TUNE
Let’s try to understand some of the issues before India’s food system.
The agricultural system comprises mainly millions of small landholders who still employ outdated modes of farming. As rural distress widens, these plots are reducing further and climate change is wreaking havoc on farmers’ incomes. This, despite farm subsidies roughly doubling over the past decade.
Naturally, this is a threat to India’s food security – not something the world’s most populous country can take lightly. Don’t forget, India is also a major exporter of food like rice and sugar. It has also emerged as the largest producer of spices, cotton and pulses; the second largest producer of fruits and vegetables; the third largest producer of eggs; and the fifth largest producer of poultry meat.
Fearing a political fallout, every time there is a shortage or food prices rise, the government imposes export restrictions. This means that farmers earn less and the world gets a restricted supply of these foods. So, India’s problem is also the world’s problem.
Let’s take the example of rice. India accounts for 40% of global shipments, roughly equal to the next four exporters combined. When export curbs were imposed last year, poorer importing nations were hurt as global prices rose to a 15-year high. At one stage, it was feared that there would be unrest in some nations in Africa that depended on Indian rice.
The ban has created a 2 million ton shortfall in the global market. This means that global prices will likely be volatile. India’s withdrawal of supply was estimated at 4.67 million tons. Although other rice exporting nations stepped in, they could supply only 2 million tons, leaving a demand-supply gap of more than 2 million tons.
What’s not always understood is that such bans hurt Indian farmers the most. This is because the farmer now has to make do with a lower price for their crop than what they would get through export sales. No wonder a measurement of agricultural support developed by the Organisation for Economic Cooperation and Development shows that the negative impact of price-lowering rules outweighs that of input subsidies.
The Green Revolution transformed Indian agriculture about six decades ago but we haven’t reset our priorities since then. Subsidies are still targeted at staples like wheat and rice rather than crops needed for better nutrition. What about the harmful use of fertilisers and pesticides and the drop in groundwater levels?
This stress is visible in the fields. We all know that agriculture employs more than half the population but accounts for only 15% of the GDP and this share is likely to fall.
One of the major problems is that most farmers lack access to institutionalised credit. Most of them rely on local moneylenders that charge cut-throat rates of interest. They turn to moneylenders because they often don’t have the land deeds in their name, which means banks won’t lend to them. The unsecured loans must be repaid at interest rates of 10% to 25% above market rates. So, the farmer that grows our food is often the hungriest among us.
This debt trap results in farmer suicides that have continued unstemmed for years.
While farmers turn to moneylenders for credit to run operations, an unreliable monsoon means their profession is something of a gamble. This risk rises as the climate changes, the soil degrades and groundwater levels fall.
Successive governments have tried to solve the problem by forgiving loans, but that’s applicable only to formal credit. Banks have subsequently been encouraged to give farmers more credit and the Kisan Credit Card scheme has helped to some extent.
The government passed three farm laws, saying it would liberalise the agriculture market. However, they were widely seen as enabling big business to take over the sector. Farmers protested in large numbers and the government was forced to withdraw the laws.
Now, with general elections coming up and farmers once again protesting, mainly for a legal guarantee for the minimum support price, the government’s focus is on agriculture again.
But the Narendra Modi government has made little progress on unchaining the sector from state control, which discourages crop diversification. It launched a campaign not too long ago to promote millets but it hasn’t made much headway. The average Indian diet remains heavy on cereal and not enough protein.
Among the other notable disappointments has been the Pradhan Mantri Fasal Bima Yojana, a crop insurance scheme. Poor awareness and the lack of money to pay premiums has hobbled its impact. So, for the 2023 kharif season, the scheme covered 28 million hectares, or 14% of India’s cropland. However, women were somehow left out of the net despite three-quarters of rural women working in agriculture. Roughly 85% of the scheme’s beneficiaries were male. So, a large proportion of the target beneficiaries were excluded.
China, India’s great regional rival, too has struggled with agriculture but has fared better. Its yields in key crops such as corn and wheat are higher than India’s and the value of its overall production is four times as much.
The difference between India and China is that the latter has invested significantly in better seeds and optimising fertiliser use. In India, investment in R&D is less than 0.5% of agriculture’s gross domestic product. In China, meanwhile, annual research spending was more than the US, India and Brazil combined between 2019 and 2021.
India needs not just R&D investments but an enabling ecosystem. At least 1% of agriculture GDP must go to R&D. This could lead to great returns too as the marginal returns from investment in agricultural research are five to 10 times higher than through subsidies. It’s the best way to ensure food security for the country.
Yet another initiative that hasn’t taken off as it should have is Farmer Producer Organisations, or FPOs. They were created by aggregating small producers to boost earnings, prioritising high-value crops. As a collective, they can lower trade and transport costs for farmers.
FPOs were envisioned as something between a cooperative and a company but, in India, cooperatives haven’t always done well, often suffering from corruption and political interference. The problem with FPOs is that they lack capital and numbers.
I wanted to also look at the food marketing chain, which accounts for a wide gap in India’s agriculture ecosystem.
Value chain and marketing platforms that link farms to markets are vital to the determination of prices. However, the agri marketing structure is fragmented, involving a large number of intermediaries – which means that the costs pile up. These costs, it is estimated, account for 30% to 50% of retail prices. The situation is made worse by market charges, agents who charge commissions and control the purchase market, broken supply chains that include poor storage, and unavailability of information such as prices in various markets. These high intermediation costs make food costly for the consumer and affect global competitiveness.
Often, it’s restrictive policies to blame, such as the Essential Commodities Act of 1955, designed for an era of shortages. I’ve spoken already about export controls. Look at the other agricultural policies and you’ll see that they favour consumers over producers by suppressing farmers’ prices. However, correcting this is an uphill task politically. No party, however powerful, can risk undoing that.
Digital marketing platforms, such as the Electronic Unified Agricultural Markets or e-NAM, commodity futures and the Agriculture Infrastructure Fund may have their heart in the right place but are hobbled by poor implementation.
So far, it’s been private firms like ITC that have shown the way by building efficient value chains. ITC’s e-choupal, for example, sources more than 3 million tons of agri products from 225 districts. These chains feed in to ITC’s FMCG brands, thus benefiting consumers and generating better livelihoods for farmers. This farm-to-plate value chain is a sophisticated one, sourcing differentiated, identity-preserved, traceable raw materials, and empowering farmers with best practices and technology, thus leading to higher farm incomes.
One way of encouraging the use of e-NAM would be to finance sorting and grading at mandis. If quality variances reduce, processors would be encouraged to use the platform to buy goods.
The lack of cold storage is a major problem too. A stumbling block has been the high costs but solar power could be the answer. Take, for instance, onions. Due to the lack of a cold chain, losses have consistently clocked 30% to 35%. A cold chain would reduce these losses, thus increasing supply and lowering retail prices while raising farmer incomes.
On the value addition front, focusing on food processing will help build value chains. In many South Asian countries, about 25% of the total agriculture produce gets processed but that number in India is less than 10%.
Let’s look now at nutrition. Any discussion on the food system would be incomplete without it.
India’s agriculture system is founded on the National Food Security Act (2013) that ensures availability and affordability of supply for citizens. The Public Distribution System, the world’s largest, covers more than 800 million and is an important channel through which food is delivered to the poor.
For the government, it’s the Food Corporation of India that procures and stores grain that is eventually distributed. While the country produces more than enough food to feed itself, it’s access to nutritious diets that remains a challenge. One manifestation of this is the high rate of stunting among Indian children. According to the National Family Health Survey 4, 2015-16, 35.8% of children below five years of age are underweight, 38.4% are stunted and 21% are wasted. All of this underscores the need for putting nutrition first.
It is usually assumed that, as food production rises, so do nutrition levels but this is not necessarily true, as we’ve seen. Over the past five decades, production of foodgrain in India rose six-fold, from 51 million tons in 1950–51 to 296.67 million tons in 2019–20. Despite this, India has a high level of malnutrition.
Experts suggest that agricultural programmes be made more nutrition-sensitive. Working with schools to promote sustainable kitchen gardens and use them to provide nutritious mid-day meals to students could be one way of doing that.
Bio-fortification of staples is a cost-effective technological innovation for improving diets. In India, the HarvestPlus programme is working with the Indian Council of Agricultural Research to grow new varieties of nutrient-rich staples, such as zinc bio-fortified rice and wheat, and iron bio-fortified beans.
Another 17 bio-fortified varieties of eight crops and some nutri-cereals have had their production stepped up. These can be integrated with mid-day meals for elementary school children. Women of reproductive age need similar support.
To achieve all this, part of the food subsidy could be diverted from wheat and rice to nutritious crops.
But there are other factors leading to malnutrition. The government must effectively enable women’s education through scholarships, sanitation facilities for girls in schools, safe drinking water and nutritious food. The Swachh Bharat Abhiyan sought to eliminate open defecation and bring about behavioural changes in hygiene and sanitation practices. However, it too has suffered from poor implementation.
Thus, fundamental reforms in the food system are absolutely critical at this time if we are to achieve food security for our vast population, lower food costs through a better agricultural marketing system and offer quality nutrition at affordable prices. Without it, a healthy India, prosperous farmers and environmental sustainability will all remain a pipe dream.
Thank you all for listening. Please visit allindiansmatter.in for more columns and audio podcasts. You can follow me on Twitter at @AshrafEngineer and @AllIndiansCount. Search for the All Indians Matter page on Facebook. On Instagram, the handle is @AllIndiansMatter. Email me at editor@allindiansmatter.in. Catch you again soon.
