India’s Grain Policy and the World

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Presentation delivered by Dre. Ashok Gulati (Indian Council for Research on International Economic Relations, India) at Borlaug Summit on Wheat for Food Security. March 25 - 28, 2014, Ciudad Obregon, Mexico.
http://www.borlaug100.org

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India’s Grain Policy and the World

  1. 1. Ashok Gulati Chair Professor for Agriculture Indian Council for Research on International Economic Relations (ICRIER) (formerly Chairman of Commission for Agricultural Costs and Prices, (CACP)) Borlaug Summit on Wheat for Food Security, March 25-28, 2014, Mexico
  2. 2.  Who could imagine even 5 years back  That India could be exporting 22 million tonnes (mt) of cereals in 2012-13, and about 18-20 mt in 2013-14, a total of more than 40 mt in two years that it has never done in its history of more than 3000 years!  That India could be the largest exporter of rice in the world in 2012-13 as well as in 2013-14
  3. 3. 2.4 5.0 8.8 8.1 8.0 5.4 5.5 9.7 6.5 5.0 5.7 12.0 22.1 20.4 0.0 2.0 4.0 6.0 8.0 10.0 12.0 0 5 10 15 20 25 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14(Est) MillionTonnes Rice Wheat Maize Others Value of Exports (US$ Bn)
  4. 4. 0 10 20 30 40 50 60 70 80 90 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 MillionTonnes Rice Wheat Norm
  5. 5.  India imported more than 6 mt of wheat  And in October 2007 imposed ban on exports of wheat and common rice in the wake of rising global food prices  How did this turn around from panic and deficit of grain to surplus stocks and massive exports took place in just five years?
  6. 6.  India launched National Food Security Mission (NFSM) in 2007 to produce additional 20 mt of food grains (10mt rice, 8 mt wheat and 2 mt pulses) in five years…  Focused on delivery of better seeds, farm practices, and other technologies…largely in central, east, and southern India  Result: Foodgrain production increased by 42 mt in 2011-12 over 2006-07 level.
  7. 7.  Technology on its own could not have succeeded if the price environment was not favorable  Minimum support prices (MSPs) of wheat and paddy were raised in a big way (by more than 30% in 2008-09 over 2007-08 marketing years)  This led to a major change in the incentive structure for wheat and rice, and gave robust results…
  8. 8. 0 200 400 600 800 1000 1200 1400 1600 INRperquintal MSP(Common Paddy) MSP(wheat)
  9. 9. Convergence of FAO food price index (2002-04=100) and Indian Food price index (2004-05=100) 0 50 100 150 200 250 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 IndexValues WPI-Food FAO-Food
  10. 10. 691.2 593.7 495.9 446.3 411.1 317.3 298.0 390.1 284.8 223.8 100 200 300 400 500 600 700 Thailand Philippines China-Japonica China-Indica Indonesia India Vietnam China Pakistan India MSP(US$)/MT MSP of Rice and Wheat for Selected Countries (US$/MT)- 2013 Rice Price US$/MT Wheat Price US $/MT
  11. 11.  The key lesson from what has happened in India since 2007-08 is that price policy plays a critical role  Farmers can respond to price signals by adopting better technology (seeds and farming practices) raising overall production and productivity  This is the same strategy that was adopted at the time of Green revolution in late 1960s.
  12. 12. 4 6 8 10 12 14 16 18 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11 2012-13 MillionTonnes Wheat Production in Punjab and Madhya Pradesh since 2000/01 MP Punjab
  13. 13.  Focus shifting from production to distribution  Entitlement approach under Life Cycle  National Food Security Act (NFSA) passed in Sept 2013.  Envisages distributing 61.2 mt of cereals at highly subsidized price (roughly at one-tenth the economic cost (Rs 3/2/1 per kg of rice/wheat and coarse grains; 5 kgs per person per month to priority HHs; and 35 kgs/HH under AAY scheme…total covering 67% of total population)
  14. 14.  Direct fiscal cost roughly $18-20 billion p.a at current exchange rates (adding indirect costs will make it $30 billion)  Existing public delivery system high leaky (PDS leakage around 40%)  Massive government intervention in procurement, storage and distribution of cereals will drive away private sector…expensive  Cereal centric policies will slow down diversification towards high value crops
  15. 15.  Only time will tell whether it becomes a model for developing world or remains a muddle  Basic flaw is the design of policy: trying to achieve equity objectives through price policy rather than income policy…  International best practices suggest conditional cash transfers as they don’t muddle with grain markets
  16. 16.  High stocks in India (and China) could keep world prices of wheat and rice high;  Erratic entry and exit of India from global rice and wheat trade will bring in additional uncertainty in global prices  Better option will be greater integration with world markets with exports and imports open, and keeping duties at low levels
  17. 17.  Thanx for inviting me  And Best Compliments for organizing this great event!  Jai Kissan and Jai Vigyan! (Salutation to the farmers and Scientists around the World!)

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