India is hoping to export 10-15 million tons of wheat this year to plug a shortage created by the Russian invasion of Ukraine. The government has stressed that, WTO willing, India can come to the aid of food importing nations hit badly by the supply and price shock the global wheat economy has received due to the ongoing geopolitical crisis. The agricultural prowess which India has been displaying in the case of wheat, is, however, in sharp contrast to the
Role of edible oil in driving food inflation
How big a factor has edible oil been in driving inflation in the recent past? A simple analysis of various sub-components of the Consumer Price Index (CPI) basket can answer this question. Oils and fats have a share of 3.56% in the CPI basket, or around 9% of the food basket in the CPI. The contribution of oils and fats category to growth in headline CPI as well as its food component has been significantly higher than its weight in these baskets in the recent past. For example, the oils and fats sub-category accounts for more than 10% of CPI growth every quarter since March 2021. This is something which has never happened in the current CPI series.
{{^htLoading}} {{/htLoading}} Can there be a one-nation one-oil formula for edible oils
While edible oil is an important part of household budgets and therefore retail inflation, there is a large diversity in the type of oils Indians consume. Numbers from the 2011-12 CES show this clearly. For example, more than 80% of the spending on edible oil in Kerala goes to coconut oil. Similarly, eastern states such as Bihar, West Bengal see a large spending on mustard oil, which is not the case in any other part of the country. These regional differences need to be kept in mind for any policy which seeks to decrease our dependence on imported edible oil.
{{^htLoading}} {{/htLoading}} How palm oil became ubiquitous?
There is good reason to believe that the numbers given in the CES do not capture the real edible oil economy in India. To be sure, this is not to say that the CES numbers are incorrect. However, what gets captured under the edible oil head in the CES numbers is direct consumption of edible oil. Edible oil also enters household baskets in indirect form when they consume food items and even non-food items which use oil in their manufacturing process. It is through this route that palm oil has become the most important player in India’s edible oil economy.
{{^htLoading}} {{/htLoading}} Numbers given on the website (https://bit.ly/3vgCvZe) of the Oil Division of Ministry of Consumer Affairs, Food and Public Distribution give an idea about this. “The share of raw oil, refined oil and vanaspati in the total edible oil market is estimated roughly at 35%, 60% and 5% respectively. About 56 % of domestic demand of edible oils is met through imports out of which palm oil/palmolein constitutes about 54%. The consumption of refined palmolein (RBD palmolein) as well as its blending with other oils has increased substantially over the years and is used extensively in hotels, restaurants and in preparation of wide varieties of food products”, the website says. This also means that India will continue to remain vulnerable to disruptions to the global palm oil economy, unless it increases domestic production of palm oil or moves away from its use in meeting direct and in direct edible oil requirements. The government policy seems to have chosen the former route. However, many believe that this could have a significant environmental cost.
{{^htLoading}} {{/htLoading}} Abhishek Jha contributed to the data work for this story.
