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The food crisis hit the global economy in 2008 and made the world sit up and take notice.
With price levels having subsided thereafter, the debate is evidently over. However,
despite its recent visibility, the crisis has been in the making for a long time and is far
from having disappeared unless efforts are made to address this issue in a significant
manner. A new database on 55 developing economies from the FAO shows that
developing country prices have not yet subsided as much as global prices. In addition,
volatility in global food prices poses a significant and persistent problem to both
producers and consumers of food worldwide. After the food crisis became obvious to the
world, about 923 million people were estimated to be hungry by the FAO, out of which
907 million are in developing economies.
Centad organized a half day seminar to refocus on the issue of the food crisis in
developing countries, which is a translation of the broader agricultural crisis. A lecture on
'What lies behind the Food Crisis in India and the Global South?’ by Prof. Utsa Patnaik,
Jawaharlal Nehru University, delineated the linkages between food crisis and broader
macroeconomic policies at the global and domestic level, as well as reinterpret the eternal
conflicts between food and feed, between food and exports and between food and energy.
The chair, Prof. D N Reddy and the other panellists, Prof. G S Bhalla, Prof. M S Bhatt
and Dr. Atul Sood provided their critical inputs on the various issues connected to the
food question in developing economies and in India in particular. The objective was to
add to the growing debate and discussion in these economies, both in academic circles as
well as in civil society, in order to revisit the policy context.
Event Proceedings
Linu Mathew Philip, Acting Executive Director, Centad, started off the seminar by
welcoming the panel of experts. He thanked them for agreeing to share their expertise at
the seminar organised in support of the cause of food. He quoted the UN Secretary
General Ban Ki-moon in emphasising that food is not just a commodity, and agriculture
is not just a business and both are central to the survival of the human race. Climate
change and IPR are also issues that have a critical impact on access to food and the
position of vulnerable groups is set to worsen. He highlighted that Centad has been
striving to provide critical insights on this issue and to provide a platform for discussions
on key policy issues.
Ranja Sengupta, Research Fellow, Centad, placed the seminar in context. The food crisis
which became visible in 2008 was relegated to the back because of the financial crisis.
Yet food price stickiness in developing countries as well as price volatility continues to
be a problem. According to IFPRI’s Global Hunger Index, South Asia, despite
improvements, continues to have a high level of hunger. Apart from calorie under
consumption, this index includes anthropometric measures like proportion of
underweight children and child mortality rates. South Asia fares very badly, just ahead of
Sub Saharan Africa and the proportion South Asia’a underweight children emerges as the
largest in the world. Therefore this index highlights the role of improving not only food
access but adequate nutrition levels as well. It points to the role of existing human
development including gender inequalities in determining the access to food and nutrition of different groups of people. India’s index is low even within South Asia, and is just ahead of Bangladesh. Interestingly, IFPRI’s State Hunger Index for India also shows that
many high growing states are food insecure. Recent NSS reports have cited decline in poverty, yet per capital calorie consumption is also on the decline, and has fallen by 10% since 1987-88.
She also pointed out that equity and access are critical issues in the context of food. For
example, more than 50 per cent of the population in states (except for Karnataka and
Andhra Pradesh ) do not have access to the public distribution system. The Eleventh Plan
Outlay allocates just 3.7 per cent of total outlay to agriculture and allied activities, and
only 2.9 per cent of GDP is to be spent on agriculture and allied activities in the current
annual budget.
On some of the policy issues placed on the table for discussion, she pointed out the need
to discuss the role of poverty and incomes with respect to food access; equity in food
access; the role of economic inequality and economic growth in ensuring fair food
access; and the policy neglect of agriculture. She also drew attention to newer global
issues in the form of increasing meat consumption; bio-fuel production and diversion of
land; the issue of intellectual property rights and control of knowledge, seeds, and
therefore food supply; and finally, of climate change and production pattern shifts, all of
which are posing threats to all developing country populations but disproportionately
more to vulnerable groups.
Prof. D N Reddy, Visiting Professor, Institute of Human Development, New Delhi, said
he was privileged to chair the seminar. He said that Prof. Patnaik’s recent works have
continuously talked about the crisis in terms of the decline of per capita availability of
food. In the last 15 to 16 years, there has been a debate on the crisis in the agriculture
sector. Agrarian crisis as well as agricultural production crisis has been there. This has
been marked by both decline in rate of growth of production of food grain and distress of
farmers. There is a need to take into account both of these aspects. He also argued that we
can begin to appreciate farmer suicide etc., only if we look at the food crisis in the
context of the larger global crisis.
The evidence of the food crisis can be found in the steep decline in the per capita calorie
consumption observed in the last 24 years. About 75 per cent of the rural population
consume less than 2400 calories a day, while 75 per cent of the urban population
consume less than 2100 calories a day. This has serious implications on the health of the
general population. Is there as link between the changes in the level of income and
changes in the level of calorie consumption? Prof. Reddy also referred to the puzzles that
Jean Dreze finds in the Indian context: India’s rapid economic growth has been
accompanied by a sustained decline in per capita calorie consumption during the last
twenty-five years.
Prof. Utsa Patnaik, Professor, Centre for Economic Studies and Planning, JNU, New
Delhi, in her lecture “What lies behind the Food Crisis in India and the Global South?”
made the case that the food crisis is not a function of food price rise alone. The food crisis has been there for more than a decade. The acuteness of the present agrarian and
food crisis is located in the coming together of three distinct sets of contradictions: food
versus feed; food versus export; and food versus energy. Although her discussion draws
much from the Indian experience for illustrating the argument, it nevertheless is relevant
for the entire global south.
Prof. Patnaik argued that the demand deflation that has been there in developing countries
since the 1980s has been a major reason behind the lowering food intake in these
countries. People easily understand food price inflation but have not woken up to the
reality of deflation of mass demand. Adjustment to the food crisis can be done through
not only prices but also through quantitative adjustment.
The Food-feed Contradiction: Rising per capita income does not decrease cereal demand
because there is a positive elasticity of demand for it. In fact there is a fast increase in
demand for cereal that comes through both indirect demand for feed for livestock as meat
consumption increases, as well as the direct demand. As per capita income increases so
should cereal demand. In India this puzzle of a decline in cereal demand along with rising
per capita incomes is explained by demand deflation. Up to 2005, there was no unusual
food grain inflation because demand was falling faster than decline in output. This
deflation has taken place through the policy neglect of agriculture and rural development,
which has led to a situation of agrarian crisis.
The agrarian crisis has led to the selling of livestock and land. This also explains the drop
in the intake of protein along with overall calorie consumption. Inequality as well as
poverty continues to increase and complete immiserisation of farmers results. Sharp
macroeconomic contraction has meant absolute decline in expenditure including
stagnation of income. Food consumption, especially for urban areas has fallen as a result.
The central total real expenditures growth saw a sharp deceleration in the 1990s decade
compared to over 6 per cent annual growth earlier. In fact, in the 1990s the development
expenditure part was actually negative.
In the case of rural areas, the government followed expenditure deflating policies. Rural
development spending kept falling. Income kept declining while unemployment rates
kept rising. With the global recession now there is contraction in both internal and
external demand.
Analysis of underemployment is impossible as the data in inadequate. Employment and
unemployment data do not capture the falling number of days of work. A study by Bhalla
et al (1999) had projected total cereal demand of 375 million tonnes for India in 2020 on
the assumption of per capita income growth of 6 per cent annually. The growth rate of
cereal demand for 2004-05 were 199 million tonnes and 219 million tonnes on the
assumption of per capita income growth of 3.7 per cent and 6 per cent respectively.
However, the actual demand was lower by 42 million tonnes and 63 million tonnes for
the lower and higher growth rate projections respectively. This is because income
distribution was assumed to have remained unchanged. But in reality, income inequality
has increased sharply and immiserisation of 75 per cent of the population has taken place. Moreover the supply side effect has been that output growth has decelerated. During the
1980s food grain growth was greater than population growth rate. In the post 1990s
period, food grain growth has been overtaken by population growth rate.
The Food-Export Contradiction: Supply deceleration can also be explained by export
diversion. The thrust for liberalisation of trade comes from developed countries. Tropical
lands are suited for the production a variety of crops as well as for all-year round
cropping. Advanced countries want to provide food grains in exchange for crops of their
interest from the developing countries. Thus developing countries are forced to alter their
cropping patter to suit the demand of rich consumers from developed countries. The end
result has been the displacement and diversion of land from food crops to export crops.
Land is not a product of human labour and remains quantitatively fixed. What can be
done is to raise productivity. But then under neo-liberalism the state has withdrawn from
investment in research and infrastructure, leading to decline in per capita food output.
China is a clear example of a market-oriented nation whose per capita income decline is
even greater than that of India’s. The agrarian sector is in turmoil. But it has not been
given due attention.
The Food-fuel Contradiction: Subsidised diversion of land for bio-fuel, pushed by the
developed countries, has meant that the per capita food output has declined. The high use
of corn for producing bio-fuel has contributed to the price rise of food items. Developed
countries thus have less food grains for export. Therefore, food riots in as many as thirty
seven developing countries during 2007 were not surprising.
Referring to the Indian official sources asserting that poverty has declined, Patnaik said it
was incorrect. Official poverty estimation holds nutrition levels constant. The official
poverty line is much too low; the direct poverty line is much higher. Actual poverty
according to Patnaik’s calculation is 87 per cent. Even for China, Prof. Patnaik argued,
the actual poverty rates are much higher than official estimates, a problem emerging from
the use of inaccurate poverty line.
Prof. D N Reddy, while summarising the highlights of Prof. Patnaik’s lecture, said that
the set of puzzles relating to food crisis gets resolved only in the larger context of
macroeconomic contraction. At the policy level not much change has taken place during
the last 7-8 years. According to the FAO’s long-term projections for 2017-18 there will
be decline in food stocks. Studies by Indian agricultural institutes show that the country
will face a 10 per cent deficit of food stocks by 2020. Hence Centad has done the right
thing by bringing together experts for deliberations on the food crisis.
Prof. G S Bhalla, Professor Emeritus, Centre for the Study of Regional Development,
JNU, New Delhi, said Patnaik’s paper relates food and agrarian crises to issues of
economic development. During the industrial revolution it was realised that people could
not be fed unless colonization was actively pursued.
He reiterated the contradictions that Utsa Patnaik had discussed. On the issue of foodfeed
contradiction what has emerged prominently is the rapid increase in the demand for
feed. As far as the food-export contradiction is concerned funding agencies like the
World Bank deliberately follow policies that makes developing countries specialise in
growing fruits, vegetables etc. Advanced countries would produce food grains needed by
developing countries. Now even this comparative advantage is eroding due to diversion
to bio-fuels. For example about 30 per cent of the maize is going to bio-fuel production.
Brazil has for long being using her sugarcane for bio-fuel production. Many of the small
Asian countries like South Korea are food importers. They had become integrated with
the global food chain. According to an ILO paper one of the reasons for the high prices in
2008 was that speculative money went into commodity markets.
Prof. Bhalla also raised issues of his own. He said 2008 saw a real crisis in food. On the
supply side, this was fuelled by high food prices and high input costs of oil, fertilizers etc.
On the demand side India and China together generated further pressure. In 2008 many
went below the poverty line. High prices meant the poor suffered even more. And then in
December 2008, prices collapsed which in effect was a second type of crisis. From a
period of high prices, where MSP was even higher than international prices, prices fell.
The consequence was that FCI had to purchase the entire surplus coming into the market.
Increase in surplus stocks meant India faced storage problems similar to what happened
in 1999-2000. Fluctuation in prices is a major issue and the government really needed to
step in a big way to stabilise prices.
He went on to talk about the impact of the slowdown of economic depression on food
security. With loss of jobs, access to food is going down as purchasing power diminishes.
Rising prices contribute to increasing production but the poor suffer in real terms. The lot of the poor are better in times of falling prices. But then incentive to increase production
goes down when prices fall. So what the government needs to do is intervene in a big
way to stabilize prices. The government also must create more jobs by extending the
NREGS to urban areas.
Prof. M S Bhatt, Professor and Head, Department of Economics, Jamia Millia Islamia,
New Delhi, agreed with the arguments put forward by Patnaik in her paper. He said the
academic community has failed to explain the reasons for the agrarian crisis. According
to him, two sets of informed debates are needed on the agrarian crisis. One is the mode of
production debate and the other is the scale productivity debate. The UNEP’s
“Environmental Food Crisis” report discusses the factors and determinants of the crisis.
Yet the report ignores ownership patterns not by default but by design. Hence we need an
alternative explanation in a macro framework. There is a need to put food, agriculture and
rural development at the core of the debate on the mode of production.
According to the census reports, small and marginal farmers make up for the more than
80 per cent of the farmers. Yet, they own less than 20-30 per cent of land, and most of
that is rented. Concentration of land as well as of other important resources has taken
place. The constraint on resources due to rampant privatisation (e.g., water) needs to be
seriously debated, Prof. Bhatt pointed out.
Prof. Bhatt also raised the question whether there is a limit to agricultural growth and
economic growth given constraints of land? It was argued that technology and knowledge
overcame this constraint. But natural resources remain important. In a neo-classical
framework, land is not treated as a constraint to economic growth. Even now, focus is on
broader issues; the constraints on natural resources are not discussed. Water, for example,
is a major constraint to economic development in rural areas. There is unmitigated
diversion of water from agriculture and livestock to industries. There is no doubt that
privatisation of water will exacerbate the agrarian crisis.
In the mid-60s high yielding varieties were introduced in Punjab. But there have been
serious health consequences as a result. We can overcome shortage of land by increasing
productivity, but with an opportunity cost. Massive environmental degradation will
aggravate the food crisis. We can ignore this fact only at a huge opportunity cost. The
ecological foundation of this civilisation is eroded beyond repair, he emphasised, and
forest cover is fast decreasing.
Another issue pertains to the tragedy of the commons in the rural areas as common
property resources are been increasingly eroded. They threaten the livelihoods of the
rural poor and results in a loss of ecological services. There is no official data on
common property resources. Yet their importance for livestock cannot be stressed
enough.
Prof. Bhatt also pointed towards a need for informed data generation. The database of the
rural economy, at the moment, is in disarray. Data needs total revival, and restructuring
for it to be able to form the basis of comprehensive understanding of the rural economy.
He also argued that the role of the state needs to be questioned. Most of those in the
present government are willing partners to the crisis. The most vociferous critics of the
state taking on a big role are today occupying important positions.
Dr. Atul Sood, Associate Professor, Centre for the Study of Regional Development, JNU,
New Delhi, was the last speaker of the session. He pointed to the need to look at the
macroeconomic linkages for the source of the crisis in agriculture. Policy discourse must
necessarily examine the role of larger neo-liberal thinking. This thinking has had its most
destructive impact on agriculture. The bulk of the discourse remains constrained to the
role of western institutions, and the interplay between developing vis-à-vis developed
countries. Hence much of the policies implemented by the domestic governments have
gone uncontested. Clearly the present paradigm is one driven by finance capital and
consumption. Between 1990 and 2005, about 50 per cent of the growth has been the
result of consumption led growth. Out of this, about 20 per cent of the growth is
explained by China’s growth alone.
He referred to three instances of regulatory changes in the context of agriculture:
Marketing Reforms Bill in the form of the new APMC Model Act 2003; the Food Safety
Bill; and the Forward Contracts Bill. All these regulatory changes are clearly in the
interest of big retail houses and exporters. The Model Agricultural Produce Marketing
Committee (APMC) Act 2003 encourages contract farming and private markets. Retail
giants like Reliance, Bharti Wal-Mart, Subhiksha etc., have big plans for the future as
huge scope has been provided for them.
The Food Safety Bill did not get the deserved opposition. It was designed by the Ministry
of Food Processing and even the Ministry of Health and Family Welfare made no
changes to it. The bill follows science-based standards and not health-based standards.
The bill says that no food is unsafe; some just may not meet the prescribed standards and
these can always be upgraded. No specific penalty has been set for contamination. Fine
imposed is also the same for everyone—hawkers, industrialists and giant agri-businesses.
Under the Agricultural Marketing Act, the Mandi tax was 2 per cent which could be used
to finance many market development activities. Now big MNCs have direct access to
farmers. Soyabean is the one of the major crops to be affected. This system gives rise to
new tiers of middlemen. Small and marginal farmers cannot hold on to the crop to get the
Chicago board price and are forced to sell at lower rates. Speculative forces have thus
entered the agricultural markets and make gain of this price difference. This system also
raises environmental concerns. The ITC demands particular varieties and dismisses the
rest which has adverse implications for food and bio diversity. ITC retail, for example,
appears very attractive to farmers as it offers many sops to farmers and thereby attracts
farmers to sell at their dictated price and crops of their interest.
Dr. Sood also pointed out that on the forward contracts, the government of India is
clearly puzzled. It does not know what to do. The Committee it had instituted to probe
into the issue came out with a non committal position. At the moment the government has withdrawn it because the issue has been mired in controversy. The bill has serious implications for food security and safety.
A lively interaction session followed the panelists’ speeches during which several
clarifications were sought. A participant asked whether developed countries telling
developing countries to grow certain kinds of food were itself part of a bigger problem of
power imbalance in the international system. Patnaik said it was a question of wrong
theory. Ricardo’s assumption of mutual benefits is logically incorrect. She emphasised
that though it is convenient for advanced countries but promoting international trade is
simply harmful for agriculture.
To a question about poverty line figures, Patnaik said it was better to take relative figures
rather than absolute figures. The Arjun Sengupta report released in 2007 had pointed out
that 80 per cent of rural population lived on Rs. 20 a day. While this figure is correct, one
also has to question the relevance of the Rs. 20 per day baseline as in the current
situation, it is very difficult to meet basic costs in Rs. 20 a day. Prof. Patnaik questioned
the validity of the planning commission poverty estimates and suggested that its
measurements are subject to serious conceptual inadequacies. As to the initiative of the
NREGA, Prof. Patnaik said that the initiative to make it legally mandatory came from
other sources and while the scheme has made a difference but the current government’s
contribution to this effort was marginal.
To a question about what the government should do about rising food prices at a time of
falling inflation, Patnaik said the problem arose out of a wrong analysis of
overproduction. The government froze the procurement price because purchasing power
was going down. It was deliberately done to boost demand. But this discouraged
production which remains a critical problem. The lower consumption, she argued, is
intrinsically related to the issue of lower production at farmer household level. The per
capita income per annum has been abysmally low for this century. Three years ago, food
grains had to be imported and stocks have dwindled continuously. Procurement has been
going down and the procurement price was raised only after the global food crisis. The
solution to rising food prices is therefore growing more food. PDS must be strengthened
and universalised and procurement must be revived. The poorest must be enabled to
access food.
A participant pointed out that as 70-80 per cent of rural farmers are small, diversification
could increase output. Patnaik said land is a non-renewable resource and export oriented
diversion to meet developed country demand poses a threat to domestic consumption.
Exports should not be privileged over domestic consumption. According to her view,
quantitative restrictions in fact are not wrong to protect domestic consumers. The
problem with diversification is that farmers of many other developing countries are doing
the same thing. Hence price is bound to fall. Thus diversification for export has to be
limited.
A participant had raised concern that the food crisis could have implications for health
because of emphasis on technical solutions. Patnaik agreed that it had medical implications. The FAO had, for example, urged for growing of more potatoes as a cheap solution to the food crisis. But they do not take into account the possibility of potato
blight destroying whole crops. Just producing potatoes is clearly not a solution to food
problem in our economies.
On a question on whether wage rates should be indexed to inflation rates and controlled
as suggested by the government recently, and therefore would it not further exacerbate
the situation of demand deflation as suggested by her, Patnaik replied that even if wage
rates go up, the fact is that given lower labour employment days, the wage bill and
therefore demand would still be coming down. If wage rates are to be controlled, total
labour days must be increased to generate wage demand.
Kumar Gautam, Associate Fellow, Centad, proposed the vote of thanks. He thanked the
panel of experts and all the participants. He sought their continued support and guidance.
Concept note
Programme
Presentation by Prof. Utsa Patnaik
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