1. Workshop on Medium Term Outlook for India’s Food Sector Overview of the Issues by by Shashanka Bhide NCAER Project Supported by Food and Agriculture Organisation June 26, 2014

2. Outline of the presentation The context for our workshop An outline of emerging scenario Summary

3. The context Medium term outlook assessments are important for strategising policy priorities, for investments both within the sector and in the other sectors with backward and forward linkages In the food sector, the margin for error, especially when it is failure to meet the requirements is quite small. The general framework for the metrics for assessing the medium term outlook is the supply- demand balance. This approach does take into account input sectors, markets- both domestic and international- overall economic conditions and government policies affecting investment and consumption demand. However, additional factors such as environment are important, especially as the assessment horizon is longer

4. The context: demand side factors While the demand evolves as affected by demography, income levels and structure of the economy, government policies also influence demand. The extent of government policy interventions would be determined by the fiscal sustainability of the interventions. The factors that need to be taken into account in arriving at an assessment of a medium term outlook: –Population growth –How the income levels are changing –How the structure of the economy is changing –How policies are changing

5. The context: supply side factors The supply side of the outlook includes domestic production and the access to international markets. The export demand affects resources available for production for domestic use. Given the land constraint on agricultural production, the key issue on the supply side is productivity of land in the medium term. While increased productivity is critical, it is also necessary that productivity growth shifts supply curve to the right. Policies relating to input prices, output prices, infrastructure, and research will be major determinants of growth of supply of food and the price of food.

6. The context: the markets The need for efficient markets has become increasingly critical for balancing supply and demand pressures to meet the food requirements. The urgency of fair and efficient markets to ensure supplies of quality, timely and affordable food commodities has increased. An efficient distribution system linking producers and consumers globally is necessary for the food sector from a medium term perspective.

7. The context: summary This workshop is organised as a part of the activities that supplemented the main grant from NFSM, Ministry of Agriculture to bring out periodic reports on Agricultural Outlook. Today’s workshop will address these issues. There are presentations on the outlook for specific sectors, for some of the inputs, for markets and marketing channels. We hope that this forum for interaction will continue so that insights from an assessment of the changing dynamics of the food sector will be useful inputs to strategising Before closing, we look at some specific trends that are likely to have implications for the medium term outlook for the food sector.

8. THE MEDIUM TERM OUTLOOK: EMERGING SCENARIO

9. The Setting for the Medium Term Perspectives from the 12 th FYP Working Group Report: what led to better output growth in the XI FYP? –Improvement in terms of trade –Public and private investments –Quality seed, hybrids, technology –Institutional efforts Trends in the sector with implications to outlook: –Share of agriculture in GDP –Size of holdings –Cropping pattern trends –Subsidies/ input prices –Consumption demand

10. The 12 th Five Year Plan: projections for 2016-17 Crops Demand (Million Tonnes) Supply (Production) (Million Tonnes) Cereals235240 to 251 Pulses2218 to 21 Total food grains257258 to 272 Oilseeds5933 to 41 Edible oils26.5NA Sugarcane279365 to 411 Sugar26.5NA Source: Working Group on Agriculture for 12 th Plan, Planning Commission

11. Indicators of emerging scenario in the medium term ItemIncome elasticity of demand Annual growth in demand due to increase in national income by 6.5% per year; population @1.2% Annual growth in production during 2005-06 to 2011- 12 Cereals01.23.7 Pulses0.53.74.2 Edible oils0.85.2 5.7 (Nine Oilseeds) Sugar0.85.25.0 Milk1.06.23.8 Fruits & Vegetables 0.85.2 4.8 (4 years upto 2010-11) Eggs, Fish and Meat 1.06.24.6 4 years upto 2010-11)

12. Per capita consumption expenditure: Index of Rs, 2004-05 prices (1950-51=100)

13. Changing Pattern of Food Consumption: Urban India (per capita) Source: National Sample Surveys; all units are kg/year except milk (litres) and eggs (number)

14. Changing Pattern of Food Consumption: Rural India (per capita) Source: National Sample Surveys; all units are kg/year except milk (litres) and eggs (number)

15. Index of value of output: 2004-05 prices (2004-05=100)

16. Average Retail Prices in Delhi: Rs/kg

17. FAO Food Price Index

18. Is there a new global context?

19. Projected world prices: $/ tonne [FAO]

20. Projected growth of production of selected food commodities in India: % per year [FAO] Commodity2014-2021 Wheat2.69 Rice1.67 Maize2.68 Soybean2.04 Sugar2.68

21. Summary Assessment of medium term supply-demand conditions point to the need to push production of commodities such as fruits, vegetables, livestock products, sugar where growth in demand will be higher than in the staples such as rice cereals. The trends also point to the need for achieving higher production under more competitive price environment. Greater efficiency in the use of inputs would be necessary to keep production costs low. Improvements in infrastructure is needed to improve efficiency of the supply chain. Productivity improvement is needed to achieve higher production given the binding land constraint.

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23. The context: demand side factors Increase in population, is a steady factor increasing demand for food. Changes in the demographic composition of population has some impact on the level of consumption demand. The most important driver of change on the demand side has been the increase in income levels of the population. Life style changes resulting from urbanisation, nature of occupational distribution of population have also influenced changes in consumption pattern. The changing composition of food demand has also implications to overall demand for food commodities: increasing demand for livestock products implies increasing demand for grain as feed. However, there is also the policy impact which aims to raise level of consumption of food commodities, especially for the poor. Policies also influence use of food commodities for other uses: food commodities as bio fuels

24. Medium Term Projections and comparisons Commodity Estimates for 2012-13 2016-17 Scenario 1 2016-17 Scenario 2 2016-17 Working Group Projections Projections by FAO for 2017 Rice99.0119.6121.698-106112.31 Wheat93.593.3100.693-10485.6 Coarse cereals37.050.246.542-49 Cereals228.5263.1268.7240-251 Pulses17.018.818-21 Foodgrain245.5277.8284.3258-272 Oilseeds31.042.243.733-41 Potato43.5-44.557.0 Onion16.720.3 Banana31.938.8 Sugarcane333.5375.4 Milk131.8-132.1152.7