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How to check the pulse of rising food prices

columns Updated: Dec 20, 2015 07:51 IST
Sanjoy Narayan
Sanjoy Narayan
Hindustan Times
Wholesale Price Index (WPI)

Pulses displayed at a grains market in Vashi, Mumbai.(Agencies)

Nearly half of what the average Indian earns she spends on food. And when food prices rise, the average Indian’s budget feels the strain. In November, the consumer food price index, which tracks food prices at retail sales points, was up 6.07% as compared to 5.25% in October. Even data relating to the Wholesale Price Index (WPI), which tracks prices of commodities when they are traded in bulk, show that while the overall inflation rate declined last month, the component relating to food prices rose sharply to 5.20% compared to 2.44% in the previous month. A closer look at the inflation data shows that of all the items that make up the food basket, the sharpest rise has happened for pulses or the humble dal.

Why? For an answer, start with a short trip backward in history. The prices of pulses — commonly, lentils such as arhar or tur dal — have been rising at a higher rate than most other things for years. Historically, during the 30 years from 1983-84 to 2014-15, the inflation rate for pulses (on a wholesale basis) has averaged at 8.9%, while the overall WPI has increased 6.7%. But during 2004-05 to 2014-15, the contrast has been starker: through this decade, the average wholesale price inflation rate actually declined to 6.3% but the pulses inflation rate rose to 9.4%. One reason for that is the growing demand for pulses. As per capita incomes and rural wages grew, large swathes of Indians changed their dietary habits, consuming more pulses, which are the commonest source of protein. Some economists suggest that even a rural employment scheme such as the MGNREGA, which was enacted in 2006 and led to more purchasing power in the hands of the landless rural poor, may have contributed to the spike in demand for pulses.

That trend — of adding more protein in diets — is not uncommon as an economy develops and people have more to spend on food but the problem is that the rising demand for pulses has not been met by a corresponding rise in supply. The output of pulses has remained almost stagnant since 2004, when the demand for pulses started growing. Partly this is because acreage under pulses cultivation has not grown: in the last 20 years, it has inched up a mere 0.8% on average; and output growth has averaged 2%; not nearly enough to meet the rapidly increasing demand, which for pulses is such that even when prices rise people don’t cut back consumption easily.

One reason why Indian farmers are not keen to grow more pulses is because the government’s minimum support price system (which guarantees a floor price for farm produce) doesn’t work as well for pulses as it does for rice and wheat, which are preferred crops. Also, pulses are a more risky crop for farmers — much of pulses farming depends on rainfall (only 16% of pulses-growing areas are irrigated) so a poor monsoon can wreak havoc. Besides, the option of importing pulses to augment supply is limited because the kind of pulses Indians like to eat isn’t grown in abundance anywhere else; in fact, India is the largest producer and consumer of the dals that Indians eat.

The demand for pulses will keep growing. As millions of Indians are pulled out of poverty, and others earn more and aspire to higher standards of living, their diets will also change: from carbohydrate-heavy to protein-rich. How then do we change things on the supply side? A better minimum support price system for pulses would help for sure but that cannot be all. In 2011 and 2012, when global commodity prices rose sharply, Indian farmers who cultivated pulses chose to increase exports, which led to a further spike in domestic prices. According to the Indian Institute of Pulses Research, demand will grow to 39 million tonnes by 2050; to meet that, production will need to grow at a rate that is higher than the present rate and both yields and acreage will need to increase, as will the irrigation of the acreage under pulses crops; and farmers would have to be incentivised to grow more pulses instead of staple cereals.

Without such measures, Indians can expect the tadka in their dal to become more intemperate than what they would prefer.