Changing Demand for Cereals in India

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Source-This post on Changing Demand for Cereals in India has been created based on the article “How demand for cereals in India is changing” published in “The Indian Express” on 22 June 2024.

UPSC SyllabusGS Paper-3- Issues related to Direct and Indirect Farm Subsidies and Minimum Support Prices; Public Distribution System – Objectives, Functioning, Limitations, Revamping; Issues of Buffer Stocks and Food Security; Technology Missions; Economics of Animal-Rearing.

Context– The article points out that in India, demand for cereals for direct household consumption is decreasing, while there’s a growing demand for processed foods, animal feed, and fuel. Even though official data indicates that cereal production is higher than total consumption, there are unexplained factors that need clarification.

How has India’s cereal production and consumption changed in the last two decades?

1) India’s cereal production has increased significantly, rising from 196.4 million tonnes (mt) in 1999-2000 to 303.6 mt in 2022-23.

2) As per the National Sample Survey Office’s latest HCES report, the amount of cereals consumed per person has decreased steadily. In rural areas, it dropped from 12.72 kg to 9.61 kg per month, and in urban areas, from 10.42 kg to 8.05 kg per month between 1999-2000 and 2022-23.

3) Shift in cereal usage: Increasing use in processed form (bread, biscuits, cakes, noodles, etc.Growing application in animal feed, starch production, and ethanol fuel.

4) Coarse grains consumption: – Production of “other cereals” such as maize, barley, and millets amounted to 57.3 million tonnes. Direct household consumption of these grains was less than 5 million tonnes. These cereals were mainly consumed indirectly through animal products.

Gap between production and consumption: -The difference widened from 48 mt in 1999-2000 to nearly 151 mt in 2022-23.

Read more- Challenges Facing Indian Agriculture

Where is the surplus production of cereals going?

1) Cereal exports:

A) Record exports of 32.3 mt in 2021-22 (21.2 mt rice, 7.2 mt wheat, 3.9 mt other grains).

B) Exports totaled 30.7 mt in 2022-23 (22.3 mt rice, 4.7 mt wheat, 3.6 mt other grains).

2) Industrial usage:

A) Estimated 38 mt used in processed food forms (bread, biscuits, noodles, etc.).

B) Approximately 50-55 mt used for feed, starch making, and fermentation.

3)  Food Processing and Industrial Applications

A) Maize utilization: 90% or more of the 38.1 mt produced are used in poultry, livestock, and aqua feed or for wet-milling and starch production.

B) Ethanol production: -Increasing use of cereals in multi-feed distilleries for ethanol production. The government program aims for 20% ethanol blending in petrol.

4)  Public Distribution System and Food Security

A) Government procurement: 56.9 mt of rice and 26.2 mt of wheat procured in 2022-23. Procurement exceeds the annual cereal requirement of 59-60 mt for the public distribution system (PDS).

B) National Food Security Act: 813.5 million persons receive 5 kg of wheat or rice per month through PDS.PDS entitlement covers more than half of the monthly per capita cereal consumption.

What are the issues with surplus production?

1) Impact of this surplus on government stocks-Despite surplus production, government agencies like the Food Corporation of India are accumulating large stocks by procuring more than the total annual requirement for public distribution under the National Food Security Act.

2) Conflicting indicators: There is high cereal inflation (8.69% year-on-year in May) despite export restrictions. Further, the government warehouse stocks have depleted (16-year low for wheat on June 1). All this raise questions about the accuracy of official production estimates.

Question for practice

How has India’s production and consumption of cereals evolved over the past twenty years? Where is the excess cereal production being directed?

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