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Monitoring Agricultural Outlook for India: The Supply Side Challenges of Food Security Presentation By Shashanka Bhide, NCAER, New Delhi At UN ESCAP South Asia Policy Dialogue on Regional Cooperation for Strengthening National Food Security Strategies August 13-14, 2013 New Delhi Acknowledgements • National Food Security Mission • Project Team at NCAER • Most data are from Official Statistics Outline of the Presentation (1) Backdrop (2) Drivers of Agricultural Outlook in the Medium Term (3) An assessment of the medium term prospects Backdrop • Ministry of Agriculture, Government of India, commissioned a project to NCAER to bring out short term and medium term Agricultural Outlook Reports focusing on food commodities. • This 3- year project began towards the end of 2011 with the objective of integrating wide range of information available on the food sector and provide insights into the future scenarios. • Starting from June 2012, five Quarterly Reports and one semiannual Medium Term Outlook Reports have been brought out so far. • FAO is supporting supplementary activity in terms of collection of additional data and modelling alternative policy scenarios A Framework for Assessing Agricultural Outlook • Global prospects for supply and demand conditions: availability and prices of imports and demand and competitiveness of exports • Policy support for agriculture: incentives for investment and productivity growth • Emerging supply- demand balances for food commodities emerging from economy, policies, monsoon and inputs • Regional variations within the country: need for spatial shifts; need for integrated markets Sources of Information on Global Perspectives • WB, IMF, UN: Overall economic growth, inflation, international prices, currencies, trade, population trends • FAO, FAO-OECD reports, databases – Agricultural Outlook 2013-2022 – Food price indices • USDA, ABARES, IGC, FAPRI • Pulses? The national food economy • Production prospects: • Monsoon, market environment for producers, investment, input supplies, technology • The market: • Income growth, market infrastructure, policies • Adjustment to imbalances: • Prices, stocks, consumption • Assessing sustainability of strategies: • Supply-demand imbalances, water scenarios, fiscal pressures, lack of incentives to producers and supply chain, high food inflation Monsoon Matters: Agricultural Production Index and Monsoon Rainfall as % of Normal 130 120 110 100 90 80 70 60 50 40 PROD INDEX RAIN RAIN PROD INDEX (Estimated) Drivers Of Outlook In The Medium Term What Will Drive Production? 1950-51 1955-56 1960-61 1965-66 1970-71 1975-76 1980-81 1985-86 1990-91 1995-96 2000-01 2005-06 2010-11 % of GDP (constant prices) Declining Share of Agriculture in the Economy 60 50 40 30 20 Agriculture & allied activities Agriculture 10 0 Challenge of Small Farms 120 2.5 100 2.0 80 1.5 60 1.0 40 20 0.5 0 0.0 No. of farm holdings with <= 1 ha (million) Avg holding size (ha) (Right) Productivity Growth Driving Production: All Crops Indices, Average % Change Per Year Item 1980-81 to 1989-90 1990-91 to 1999-00 2000-01 to 2011-12 Area 0.10 0.27 0.97 Yield 2.56 1.33 3.27 Production 3.19 2.29 2.76 RCE_A RCE_Q RCE_Y 2012-13 2011-12 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 1998-99 1997-98 1996-97 1995-96 1994-95 1993-94 1992-93 1991-92 1990-91 Productivity Growth Drives Production Growth: Rice Indices % Change YOY 150 140 130 120 110 100 90 80 What Drives Productivity? Productivity drivers • • • • • Investments (Irrigation, infrastructure, technology) Input use (Fertilisers, machinery, new seeds) Higher value addition Spatial shifts in production Better terms of trade Producer Prices Keep Up with Input Costs: Price Indices 448 398 348 298 248 198 148 98 Index of Prices Received Index of prices paid 448 398 348 298 248 198 148 98 104 103 102 101 100 99 98 Index of Prices Received Index of prices paid Index of Terms of Trade (Right) Trends in the Ratio of Output Price to Input prices (%) Commodity Input Food grain Diesel Electricity Fertiliser 2005-06 2006- 2007-08 2008-09 2009- 2010-11 201107 10 12 89.5 94.0 104.2 107.0 125.1 115.0 109.8 98.2 106.2 113.3 124.4 145.3 138.5 136.5 104.9 117.3 123.1 136.0 153.8 149.3 136.3 Note: Ratios are based on wholesale price indices. But Food Prices Rise: WPI, % Change YOY 12 11.1 10.1 10 9.0 8.5 9.8 9.5 8 6.1 6 5.7 5.4 4.5 4.7 3.6 4 2.2 1.8 2 1.9 0.0 0 Cereals Pulses Vegetables Fruits 2000-05 Milk 2005-12 Edible oils Sugar All commodities Accommodating Global Prices: FAO Price Indices 300.0 250.0 200.0 150.0 100.0 50.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Cereals Price Index Food Price Index What is supply responding to? • Rising income levels • Urbanisation • The Food Security Bill Net Availability of Food Items: Grams/ day Item 1990 2000 2011 (P) Rice 212 204 189 Wheat 133 160 165 Cereals 432 423 424 Pulses 41 32 39 Edible oil 18 26 41 Sugar 13 16 18 Milk 174 214 285 Net Availability= Production- (Seed, Feed, Wastage) + Imports – Exports + (Beginning Stocks – Closing stocks) P = Provisional THE MEDIUM TERM OUTLOOK Medium Term Projections and comparisons Commodity Rice Wheat Coarse cereals Cereals Pulses Foodgrain Oilseeds Potato Onion Banana Sugarcane Milk Estimates for 2016-17 2016-17 2012-13 Working Alternative Group scenarios Projections 104.2 98-106 119.6-121.6 93.6 93-104 93.3-100.6 39.5 42-49 46.5-50.2 237.3 240-251 263.1-268.7 18.0 18-21 18.8 255.3 258-272 277.8-284.3 30.7 33-41 42.2-43.7 42.5 57.0 16.8 20.3 30.3 38.8 336.2 375.4 132.1 152.7 The Supply Slide • Goal: • Sustaining food production capacity • • • • Concerns: Consumer subsidies and fiscal pressures Fiscal pressures and input subsidies Transition to more efficient markets Thank You www.agrioutlookindia.ncaer.org