Indira Gandhi Institute of Development Research, Mumbai

Food security, Trade and Domestic Markets: Understanding the Linkages

A. Ganesh-Kumar

Presentation at Young Scholars ProgrammeIGIDR, 22 June 2009

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Food security

“Food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life”– World Food Summit, 1996

3 implications of the definition Adequate supply for all people Adequate distribution channels for physical access Adequate entitlement for economic access

Problem is multi-level – national / household / intra-household

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Food security at the household level – The Linkages

Income / entitlement

distribution issues

Domestic supply issues

International trade issues

Low levels of income

High / rising food prices at retail level

Domestic trade issues

Low purchasing power

Low food consumption

Food insecurity / malnourishment and poor health

status

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Food security at the household level – The Linkages Household level food insecurity

Low levels of household income High and rising retail price of food Problem mainly for poor households

Situation in India 45% suffer stunting (height for age % of children under 5) 47% underweight children (weight for age % of children

under 5)

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Issues affecting income and price

Income entitlement / distribution issues

Domestic supply issues

International trade issues

Domestic trade issues

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Distributional issues

3 broad types of households A) Poor asset-less households B) Poor households with low asset base (including land) C) Non-poor (rich) households / large land owners

(A) and (B) are usually food insecure – low income, fully or partially dependent on markets for food

(C) is usually food secure – sufficiently high income and/or food self-sufficient

Taxation / re-distribution policies often ineffective Income transfer programmes (cash transfer / employment

programmes), Consumption subsidies (public distribution, food stamps)

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Retail price of food

Retail price = Producer price + Transport cost

+ Trader margin + Taxes - Subsidies

High prices due to inadequate supply (= domestic production + imports + stocks) in relation to demand National level food security problem

Inadequate supply is a major problem in developing countries

Often governments focus only at this level Increasing production often preferred Imports only if production growth not feasible / up to desired levels Export bans (net-exporting countries)

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International trade and food security

Food exporting and food importing countries Food exporter (potential exporter)

Distortions in world trade regime Foreign barriers to export: high import duties, non-tariff barriers

(standards) Unfair competition from developed countries: production and export

subsidies Low prices for farmers – disincentive to increase supply

Agricultural growth less than potential Low farm incomes, agricultural wages

Food importer Subsidized food imports / food aid depresses domestic prices

benefits consumers but disincentive for domestic farmers Restrictive domestic trade policies foreign exchange constraint

low import capacity inadequate food supply high food prices

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Domestic supply and food security

3 main features of under-developed countries Restrictive government policies on investment, labour, etc. Low asset base of the country / farmers in particular Weak institutional structures (legal, property rights, security, social and

economic barriers to competition in markets)

3 main manifestations of these features Low investment levels Weak infrastructure Low productivity

Mutually reinforcing – vicious trap

Outcome on food security – 3 channels Low economic growth in general widespread poverty Low growth in food production Insufficient food availability High food

prices Weak infrastructure high transport cost high retail price

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Domestic trade and food security

2 underlying factors Weak institutional structures Restrictive domestic policies

4 manifestations A) Uncompetitive domestic trading services High trade margins B) Inadequate marketing infrastructure C) Barriers to intra-country commodity movement D) State intervention in commodity markets (B), (C) and (D) underdeveloped markets (spatially and across

commodities) Price distortions

Outcome on food security – 2 channels Low farm-gate prices Disincentive for farmers Inadequate food

production High retail prices

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Thank you

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Calorie Intake Per Capita Per Day

1950

2000

2050

2100

2150

2200

2250

2300

1972-73 1983 1993-94 1999-00 2004-05

Kca

l

Rural

Urban

Calorie intake less than the official Indian norms: 2400 (Rural) and 2100 (Urban)

Declining over years - sharply in rural areas

Source: National Sample Survey Organisation

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Protein and Fat Intake Per Capita Per Day (grams)

0

10

20

30

40

50

60

70

1972-73 1983 1993-94 1999-00 2004-05

Gra

ms

Protein-Rural Protein-Urban Fat-Rural Fat-Urban

Protein intake – slight decline in rural; very little change in urban

Fat intake – rise up to 2000, stable since then

Source: National Sample Survey Organisation

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Nutrition status

Levels are below norm for bottom 70% of rural population Rise in calorie intake for Bottom 30% Decline in calorie intake for rest of rural population since mid-

1970s

Average per capita calorie intake - Rural

0

500

1000

1500

2000

2500

3000

3500

Bottom 30% Middle 40% Top 30% All groups

Source: Radhakrishna (2005)

kca

l /

da

y

1972-73

1977-78

1993-94

1999-2000

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Nutrition status (contd.)

Bottom 30%: Levels below norm; rose in early 1970s, stable subsequently;

Middle 40%: More or less stagnant around the norm Top 30%: Fluctuating above norm

Average per capita calorie intake - Urban

0

500

1000

1500

2000

2500

3000

3500

Bottom 30% Middle 40% Top 30% All groups

Source: Radhakrishna (2005)

kca

l /

da

y

1972-73

1977-78

1993-94

1999-2000

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Annual Compound Growth Rate in Per Capita Real Expenditure, Rural (%)

-3

-2

-1

0

1

2

3

I II I II I II I II

Cereals Non-cereals Total food Total expenditure

Bottom 30% Middle 40% Top 30% All classes

Source: Radhakrishna et al (2005). Note: Period I - 1970-1989; Period II - 1990-2001.

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Annual Compound Growth Rate in Per Capita Real Expenditure, Urban (%)

-2

-1

0

1

2

3

4

I II I II I II I II

Cereals Non-cereals Total food Total expenditure

Bottom 30% Middle 40% Top 30% All classes

Source: Radhakrishna et al (2005). Note: Period I - 1970-1989; Period II - 1990-2001.

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Changing consumption pattern

Substantial diversification in consumption pattern From food to non-food items

Within food, from cereals to non-cereal food

Within cereals from coarse to fine cereals

Per capita cereals consumption in India has been on a declining trend during the last three decades

Reflects larger availability of non-cereal food items, growing income levels and changing consumer preferences