Professional Documents
Culture Documents
1 Introduction
The authors are thankful for valuable comments and suggestions from
an anonymous referee of this journal and participants of seminars and
conferences held at Central University of Kerala, IIM Calcutta, IIM
Kozhikode, and the National Institute of Public Finance and Policy,
New Delhi. The usual disclaimer applies.
Sthanu R Nair (srn@iimk.ac.in) and Leena Mary Eapen (leenaeapen@
iimk.ac.in) are with the Indian Institute of Management, Kozhikode.
Economic & Political Weekly
EPW
august 1, 2015
vol l no 31
SPECIAL ARTICLE
195051 to
196465
Output
Yield
196768 to
197980
Output Yield
198081 to
199192
Output Yield
(%)
199293 to
201213
Output
Yield
Total foodgrains
3.54
2.12
2.16
1.73
2.74
3.01
1.58
1.57
Cereal
3.76
2.43
2.47
2.08
2.87
3.20
1.59
1.68
Rice
4.35
2.86
1.95
1.18
3.71
3.12
1.38
1.34
Wheat
4.27
1.53
5.48
2.30
3.63
3.24
1.93
1.12
Coarse cereals
2.75
1.68
0.72
1.81 0.01
1.73
1.45
2.58
0.91
Pulses
2.19
0.40
-0.54
-1.08
1.33
1.27
1.34
Nine oilseeds
3.54
0.89
1.83
0.67
6.06
2.73
2.03
1.75
Sugar cane
6.36
3.07
2.79
1.16
3.67
1.44
1.48
0.01
Tea
3.33*
2.76
1.87
1.99
0.03
Coffee
5.01*
2.67
1.17
2.33
-0.23
Milk
1.64
- 2.23
5.14
4.15
Egg
4.63
- 6.49
7.71
5.95
Fish
5.14
3.35
- Not available; * From 197071 to 197980; From 195051 to 196061 based on pointto-point data; - From 196061 to 197980 based on point-to-point data.
Source (Basic Data): (i) Department of Agriculture and Cooperation (DAC), Ministry of
Agriculture (MoA), Government of India (GoI) (For foodgrains, oilseeds); (ii) HSIE 201213
(for sugar cane, tea, coffee); (iii) Annual Report 201213, Department of Animal Husbandry,
Dairying and Fisheries, MoA, GoI (for milk, egg, fish).
august 1, 2015
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SPECIAL ARTICLE
Figure 1: Monthly Movements in Food Articles Inflation Rate (April 1954 to March 2013)
40
35
30
25
20
15
10
5
0
-5
-10
-15
April-54
May-55
Jun-56
Jul-57
Aug-58
Sep-59
Oct-60
Nov-61
Dec-62
Jan-64
Feb-65
Mar-66
Apr-67
May-68
Jun-69
Jul-70
Aug-71
Sep-72
Oct-73
Nov-74
Dec-75
Jan-77
Feb-78
Mar-79
Apr-80
May-81
Jun-82
July-83
Aug-84
Sep-85
Oct-86
Nov-87
Dec-88
Jan-90
Feb-91
Mar-92
Apr-93
May-94
Jun-95
July-96
Aug-97
Sep-98
Oct-99
Nov-2000
Dec-01
Jan-03
Feb-04
Mar-05
Apr-06
May-07
Jun-08
July-09
Aug-10
Sep-11
Oct-12
-20
-25
See Table 3.
Source (Basic Data): (i) HSIE (March 2006), RBI and Central Statistics Office (CSO) (http://eaindustry.nic.in/).
Figure 2: Monthly Movements in Food Products Inflation Rate (April 1972 to March 2013)
Initial stage of Green Revolution
Apr-72
Jan-73
Oct-73
Jul-74
Apr-75
Jan-76
Oct-76
Jul-77
Apr-78
Jan-79
Oct-79
Jul-80
Apr-81
Jan-82
Oct-82
Jul-83
Apr-84
Jan-85
Oct-85
Jul-86
Apr-87
Jan-88
Oct-88
Jul-89
Apr-90
Jan-91
Oct-91
Jul-92
Apr-93
Jan-94
Oct-94
Jul-95
Apr-96
Jan-97
Oct-97
Jul-98
Apr-99
Jan-2000
Oct-2000
Jul-01
Apr-02
Jan-03
Oct-03
Jul-04
Apr-05
Jan-06
Oct-06
Jul-07
Apr-08
Jan-09
Oct-09
Jul-10
Apr-11
Jan-12
Oct-12
80
75
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
-5
-10
-15
-20
-25
See Table 4.
Source: As in Figure 1.
episodes of high food articles inflation. The peak average inflation rate recorded during these episodes was 20.22% with the
lowest being 10.96%. During the maturing stage of the Green
Revolution that spanned 12 years, food articles price build-up
occurred on three occasions with average inflation rates ranging
from 9.88% to 15.11%. Notably, the duration of the inflationary
episodes witnessed during this stage was longer compared to
other stages. Since the introduction of economic reforms, India
experienced four episodes of high food articles price inflation.
The average inflation rate recorded during these episodes
ranged from 9.22% to 12.99%.
Since April 1972, the period from which data is available, high
inflation of the food products group struck India on 11 occasions,
the longest being the 72-month period from April 1989 to
March 1995 (Table 4). The period from April 1979 to June 1981
had the highest average inflation rate of 37.72%. Except for the
Economic & Political Weekly
EPW
august 1, 2015
vol l no 31
periods from December 1976 to June 1977 and from April 2011
to June 2012, on all other occasions, the impact of food products
price build-up was spread across a majority of food items.13
The initial and maturing stages of the Green Revolution had
three episodes of high food products inflation each (Table 4).
The average inflation recorded during the three episodes of
high inflation in the initial stage of the Green Revolution
ranged from 15% to 37.72%. The same figures for the maturing
stage were 8.68% to 10.86%. During the post-ERs period, India
experienced five episodes of high food products price inflation
with the average inflation rate ranging from 7.29% to 12.20%.
Our literature survey reveals that each episode of food
articles and food products inflation identified were triggered
by a host of factors (Table 5, p 53). In addition, our analysis of
yearly movements in growth of food output and WPI inflation
rates of food reveals that on most occasions the spike in food
51
SPECIAL ARTICLE
prices with respect to a particular food commodity was preceded by a supply shortfall.
A comparison of average food articles and food products inflation rates experienced during the various phases of agricultural growth reveal that despite the decline in agricultural GDP
and food output growth rates, the post-ERs period saw lower
food inflation compared to the maturing stage of the Green Revolution (in case of food articles), and the initial and maturing
stages of the Green Revolution (in case of food products). On an
average, the food articles inflation rate recorded during the maturing stage of was 10.20% against 7.86% recorded during the
post-ERs period (Table 3). In the case of food products, the postERs period saw an average inflation of only 5.94% as against
12.57% and 7.24 % recorded during the initial and maturing
stages, respectively (Table 4).14 The prices of the majority of individual food articles and food products turned out to be lower, on
average, in the post-ERs period compared with the maturing
stage of the Green Revolution (Table 6, p 54). Moreover, the peak
average inflation rate recorded in any given episode of high
food inflation was the lowest during the post-ERs period for food
articles (12.99%) and second lowest for food products (12.20%).
4 Understanding the Food Price Trends
Duration
(in Months)
Inflation
Rate (%)
18
11
7
22
-
15.02
9.91
8.50
13.70
4.48
36
12
21
-
20.22
13.15
10.96
5.98
41
35
35
-
11.67
9.88
15.11
10.20
35
12
24
61
-
11.47
12.99
9.22
11.16
7.86
The period up to March 1981 is included under initial stage of GR because the reason
for high food inflation recorded during April 1980 to March 1981 was the decline in food
production in 197980, which falls under initial stage of GR.
# The year 196768 is not included under initial stage of GR because the high food inflation
witnessed during this year was due to crop failure for two successive years in 196566 and
196667. The year 196768 was an excellent year for Indian agriculture.
@ The period up to February 1993 is included under maturing stage of GR because the root
cause of high food inflation experienced during April 1992 to February 1993 was the poor
growth of agriculture sector in 199192, which falls under maturing stage of GR.
Source (Basic Data): As in Figure 1.
52
4.1 More Stable Food Production: A striking feature of Indias agrarian performance during the post-ERs period was the
growth of agricultural output and GDP, though lower, was
more stable. This is evident from the low standard deviation of
the year-on-year growth rate of output of a majority of food
commodities, and of agricultural GDP in the post-ERs period
compared with earlier periods (Table 7, p 54). The implication
of this finding is that even if the rate of agricultural growth is
slow, low fluctuations in growth cause few disruptions in food
supply, thereby contributing to low food price inflation. On the
other hand, high agricultural growth may not guarantee low
food prices if it is accompanied by frequent fluctuations in
growth. This is evident from the experience of the maturing
stage of the Green Revolution. The high growth performance
of Indian agriculture during this period was made possible due
to the extraordinary growth achieved in just three years,
namely, 198081, 198384 and 198889. The year-on-year
growth of agricultural GDP during these three years was
14.44%, 10.75% and 16.85%, respectively. The same figure for
foodgrains output was 18.13%, 17.64% and 21.07%, respectively. In all the other years during the maturing phase, the
growth rates of agricultural GDP and foodgrain output were
either negative or quite low.
4.2 Shift in Food Consumption: An analysis of food expenditure patterns at current prices prior to the economic reforms
period (196768 to 199394), based on the household consumer expenditure survey conducted by the National Sample
Survey Office (NSSO) on a quinquennial basis, reveals that a
secular shift in food consumption pattern in favour of highvalue food items has occurred in India during the maturing
stage of the Green Revolution (1983 to 1994).15 This is evident
Table 4: Average Inflation Rate (Base: 200405) during Various Episodes
of Food Products Price Inflation
(%)
Period
Duration
(in Months)
Inflation
Rate (%)
39
7
27
-
15.00
18.31
37.72
12.57
17
33
48
-
10.57
8.68
10.86
7.24
24
28
23
31
24
-
12.20
9.46
7.29
10.20
7.64
5.94
The period up to June 1981 is included under initial stage of GR because the cause of
high food inflation recorded during April 1980 to June 1981 lies in negative growth of food
production in 197980, which comes under initial stage of GR.
@ The period up to March 1993 is included under maturing stage of GR because the root
cause of high food inflation experienced during April 1992 to March 1993 was the poor
growth of agriculture sector in 199192, which falls under maturing stage of GR.
Source (Basic Data): As in Figure 1.
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EPW
SPECIAL ARTICLE
Figure 3: Contribution
Overall Food Inflation
Figure 3:toContribution
to Overall Food Inflation (%) (%)
120
Other food products
100
Sugar,
khandsari
& gur
80
Edible oils
Condiments
and spices
60
Fruits and
vegetables
Per cent
from the following three trends that emerge from Tables 8 and 9
(p 57).16 First, the drop experienced in the expenditure share
of cereals both in rural and urban India during 198388 was
not only significantly more than in other periods, but were historic highs. Second, except sugar, all the high-value food commodities registered highest expenditure shares both in rural
and urban areas during 198394. Third, the highest percentage point increase recorded in the expenditure shares of
pulses, milk, sugar, edible oil, vegetables and fruits in rural
India was during 198394. These trends suggest that the
rising demand for high-value agriculture products was one of
the key factors contributing to the historically high average
food price inflation rate recorded during the maturing stage of
the Green Revolution. This is clearly reflected in Figure 3,
which shows that besides the important role of edible oils, the
contribution of high-value food commodities, namely protein
foods, fruits and vegetables to overall food inflation has increased
markedly in the maturing stage of the Green Revolution
compared with the initial stage.17
The shift in food consumption demand during the maturing
stage of the Green Revolution might be due to two reasons.
First, as documented in literature on Indias economic growth,
after experiencing low and stagnant growth during the first
three decades after independence, the Indian economy grew
at a noticeably high rate during the 1980s (De Long 2003;
Nagaraj 2000; Panagariya 2004; Rodrik and Subramanian
2008). This seems to have triggered, for the first time since
40
Protein
foods
20
Cereals
0
Initial State of GR
Maturing State of GR
Post-ERs Period
(a) Protein foods include pulses, milk, dairy products, egg, meat and fish; (b) Other food
products include grain mill products and oil cake.
Source (Basic Data): As in Table 3.
Notes:
independence,
the diversification of Indian diets. Second, the
Source (Basic Data):
significant increase in the real agricultural wages during
1980s might have pushed up rural demand for high-value food.
The growth of real agricultural wages was highest during the
maturing stage of the Green Revolution. For instance, real
wages for male agricultural labour grew 3.75% between 1983
June 1972 to May 1975 (food articles) and April 1972 to June 1975
(food products)
July 1979 to August 1984 (food articles) and April 1983 to August 1984
(food products)
March 2008 to March 2013 (Food articles), January 2008 to July 2010
and April 2011 to March 2013 (food products)
Crop loss in 1971 due to flood situation, in 1972 due to drought and in 1974; uncertainty
caused by the 1971 IndoPak war; additional demand for food due to influx of Bangladesh
refugees resulting from 1971 IndoPak war; successive increases in the procurement price;
higher central issue prices; absence of a robust system of government procurement,
buffer stocking and public distribution; delay in importing food; panic situation created
by the dwindling foreign exchange reserves; stoppage of concessional food imports using
soft loans; and speculative behaviour by traders
Excess liquidity in the agricultural and trading sectors leading to bullishness in the
grain market; short-fall in rice production due to scanty rain during 1976 kharif season;
severe drought situation in 197980 leading to sharp drop in foodgrains production and
cornering of large quantities of market arrivals by private traders.
Short-fall/unimpressive growth in foodgrains production during 197980, 198182 and
198283; drought during the kharif season of 198283; self-imposed limits on open
market purchases by government; inadequate spread of public distribution system;
limited food imports due to difficult foreign exchange situation; depletion of buffer stock;
and high support prices
Short-fall/unimpressive growth in foodgrains production during 198485, 198586,
198687 and 198788; higher support prices; drought situation in 198788; and low
foodgrains procurement in 198889 despite record production
Short-fall/unimpressive growth in foodgrains production during 198990, 199091,
199192, 199394, 199596, and 199798; large government procurement at high
support prices; large increases in the issue price of foodgrains; more export of wheat
and rice; and increase in speculative hoarding by private traders due to withdrawal of
monitoring of stock limits under Essential Commodities Act and RBI's decision to exempt
almost all commodities from selective credit controls effective from 21 October 1996
Short-fall/unimpressive growth in foodgrains production during 200405 and 200506;
higher aggregate demand; and government's failure to procure adequate quantities of
wheat
Supply-side bottlenecks; large increase in minimum support prices; inadequate sale of
rice under open market sales window of government; inflationary expectations due to
unfavourable climatic condition; increasing demand for food due to an increase in
income, increase in cost of production; and high cost of imports and higher food exports.
Source: Economic & Political Weekly (Analysis and Editorials published in various issues); Nair and Eapen (2011 and 2012); Nair (2013); Patnaik (2007) and the authors analysis of year-on-year
growth of production of various food commodities.
Economic & Political Weekly
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53
SPECIAL ARTICLE
Food articles
Foodgrains*
Cereals
Pulses
Fruits and vegetables
Milk
Eggs, meat and fish
Condiments and spices*
Fuel (diesel)
Food products
Dairy products
Grain mill products
Sugar, khandsari and gur
Edible oils
Oil cake
Tea and coffee proccessing**
Fuel (diesel)
Pre-Green
Revolution
Period
Initial Stage
of Green
Revolution
Period
3.69
8.34
6.62
4.09
7.42
5.10
5.40
7.54
6.87
5.07
8.64
4.34
10.57
9.89
9.94
9.00
9.81
10.28
9.59
18.89
8.39
7.32
7.36
8.44
7.68
8.04
9.64
6.14
9.82
8.96
6.17
11.39
11.14
10.49
15.81
10.21
9.43
2.32
9.64
8.32
6.66
7.87
6.58
5.21
7.16
4.43
8.84
5.69
9.79
(%)
* Prior to April 1963 foodgrains and condiments and spices classification are not available.
** Tea and coffee processing classification is available only from April 1982.
Source (Basic Data): As in Figure 1.
54
2.19 0.96
creases in MSP, inflation Milk
3.31 4.33
rates of both rice and Egg
5.65 2.69
wheat were ruling low Fish (total)
with a period average of Agricultural GDP 5.05 9.05 6.49 4.65
Source (Basic Data): As in Tables 1 and 2.
2.1% and 1.9%, respectively (circled portion in Figures 4 and 5). Incidentally, it is this
fairly long phase of significantly low rice and wheat inflation
rates which has pulled down the average cereal inflation rate
after the economic reforms.
Apart from the modest increases in MSP, which might have
reduced the expectation of an all pervasive increase in food
prices, the other reason for low rice and wheat price inflation
between 200102 and 200607 appears to be the reduction
followed by no revision in Central Issue Price (CIP) of rice and
wheat since July 2000 for below poverty line (BPL) families,
and since July 200102 for above poverty line (APL) families
(Tables 10 and 11, p 57). The combined effect of the marginal
increases in MSP, and reduction and no upward revision in the
CIP are the following: (a) starting from 200001, the governments food subsidy bill increased substantially both in
absolute terms and as a percentage of GDP (at market prices)
(Figure 7, p 56), (b) the offtake of rice and wheat both by BPL
and APL beneficiaries under targeted public distribution system
(TPDS) increased between 2001 and 2007 (Table 12, p 58).23
Thus, it is evident that the moderate hikes in procurement prices
during 200102 to 200607 coupled with reduction in and freeze
on PDS prices resulted in a fall in wholesale price of cereals and
increase in offtake of cereals from PDS and open market.
Although increased offtake led to steep falls in foodgrains
buffer stocks bet ween 200203 and 200607 (Figure 8, p 56),
consumers paid lower prices for cereals thanks to modest
increases in MSP and downward/no revision in CIP.24
In sharp contrast to the situation during 2001 to 2007, between
the period 199394 and 19992000 (200001 in case of wheat)
annual increases in MSP were substantial (Figures 4 and 5).
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SPECIAL ARTICLE
Figure 4: Movements in Year-on-Year Growth of MSP and Inflation Rate of Rice
45
197576
197677
197778
197879
197980
198081
198182
198283
198384
198485
198586
198687
198788
198889
198990
199091
199192
199293
199394
199495
199596
199697
199798
199899
19992000
200001
200102
200203
200304
200405
200506
200607
200708
200809
200910
201011
201112
201213
197677
197778
197879
197980
198081
198182
198283
198384
198485
198586
198687
198788
198889
198990
199091
199192
199293
199394
199495
199596
199697
199798
199899
19992000
200001
200102
200203
200304
200405
200506
200607
200708
200809
200910
201011
201112
201213
197677
197778
197879
197980
198081
198182
198283
198384
198485
198586
198687
198788
198889
198990
199091
199192
199293
199394
199495
199596
199697
199798
199899
19992000
200001
200102
200203
200304
200405
200506
200607
200708
200809
200910
201011
201112
201213
EPW
august 1, 2015
vol l no 31
55
SPECIAL ARTICLE
1.20
56
200607
200809
200910
200203
200405
200001
199697
199899
199293
199495
199091
198889
198687
198283
198485
197879
198081
197475
197677
197273
197071
196869
196667
196465
196263
196061
197273
197374
197475
197576
197677
197778
197879
197980
198081
198182
198283
198384
198485
198586
198687
198788
198889
198990
199091
199192
199293
199394
199495
199596
199697
199798
199899
19992000
200001
200102
200203
200304
200405
200506
200607
200708
200809
200910
201011
201112
201213
Percentage
Million tonne
197475
197576
197677
197778
197879
197980
198081
198182
198283
198384
198485
198586
198687
198788
198889
198990
199091
199192
199293
199394
199495
199596
199697
199798
199899
19992000
200001
200102
200203
200304
200405
200506
200607
200708
200809
200910
201011
201112
201213
Rupees crore
Percentage
90,000
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EPW
SPECIAL ARTICLE
1972
73
1977
78
1983
Cereal
1987
88
1993
94
1999
2000
2004 2011
05
12
Figures in the brackets are percentage points change over the years.
Percentage shares of individual food items do not add to 100 since salt and spices and
beverages etc are excluded. MPCE = Monthly per capita expenditure.
Source (Basic Data): NSSO (For 196768 to 1983); Household Consumer Expenditure in
India, 200708; NSS 64th Round (Report No 530) (For 198788 to 200405); and Key
Indicators of Household Consumer Expenditure in India, 201112; NSS 68th Round.
1972
73
1977
78
Cereal
1983
1987
88
1993
94
1999
2000
EPW
2004 2011
05
12
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SPECIAL ARTICLE
Figure 10: Yearly Movements in Cereal Imports (in Tonnes) and WPI Inflation Rate of Cereals
(Base: 200405) (196162 to 200910)
50
1,20,00,000
Inflation rate
1,00,00,000
Year
40
60,00,000
20
Import
40,00,000
10
20,00,000
200910
200708
200506
200102
200304
199798
19992000
199596
199192
199394
198788
198990
198586
198182
198384
197778
197980
197576
197172
197374
196970
196364
196768
-20
196566
-10
196162
0
-20,00,000
Percentage
30
80,00,000
Tonne
Source: Food and Agriculture Organization STAT (FAOSTAT) (for imports) and CSO (for inflation).
Figure 11: Yearly Movements in Pulses Imports (in Tonnes) and WPI Inflation Rate of Pulses
(Base: 200405) (196162 to 200910)
60
40,00,000
50
Import
Inflation rate
35,00,000
40
30,00,000
30
25,00,000
20
20,00,000
10
0
15,00,000
-10
10,00,000
-20
Figure 12: Yearly Movements in Edible Oils Imports (in Tonnes) and WPI
Inflation Rate of Edile Oils (Base: 200405) (196162 to 200910)
90,00,000
80,00,000
70,00,000
60,00,000
50,00,000
40,00,000
30,00,000
20,00,000
10,00,000
0
Import
Import
60
50
40
30
20
10
0
-10
-20
-30
196162
196364
196566
196768
196970
197172
197374
197576
197778
197980
198182
198384
198586
198788
198990
199192
199394
199596
199798
19992000
200102
200304
200506
200708
200910
200910
200708
200304
200506
200102
19992000
199798
199596
199192
199394
198990
198788
198586
198182
198384
197980
197778
197576
197374
197172
196970
196768
196566
-40
196162
-30
0
196364
5,00,000
Rice
199091
199192
199293
199394
199495
199596
199697
199798
7.87
10.17
9.55
8.87
8.03
9.75
11.14
9.9
Wheat
NA
NA
NA
NA
NA
NA
NA
NA
BPL+AAY APL
199899
19992000
200001
200102
200203
200304
200405
200506
200607
200708
200809
200910
201011
201112
201213
3.35
3.98
5.92
6.74
9.28
11.41
13.24
14.40
15.30
16.66
16.36
16.88
17.97
17.91
18.20
7.27
7.21
1.94
1.30
1.17
1.86
3.23
4.66
5.82
5.79
5.71
6.54
6.87
6.41
7.03
7.08
8.83
7.47
5.91
4.83
5.81
8.52
7.08
NA
NA
NA
NA
NA
NA
NA
NA
BPL+AAY APL
2.62
3.02
3.76
4.99
7.98
8.56
9.69
8.69
7.60
7.91
8.82
9.47
9.13
9.10
9.78
5.20
2.60
0.17
0.53
1.64
2.11
3.20
3.36
2.65
2.93
3.71
9.53
9.75
9.68
9.87
Wheat
Wheat
198182
198283
198384
198485
198586
198687
198788
198889
198990
199091
199192
199293
199495
199596
199697
199798
199899
19992000
200001
200102
200203
200304
200405
200506
200607
100
reveals that post-ERs period saw faster increases in CoP than the
maturing stage of the Green Revolution (Figure 13). A similar
trend was recorded in the growth rate of real CoP (Dev and Rao
58
vol l no 31
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SPECIAL ARTICLE
with both food articles and food products inflation rates ruling
high on average during this phase. In our view, the following
factors explain these results.
First, agricultural growth was more stable during the postERs period than the initial and maturing stages of the Green
Revolution. Second, there was a major shift in food consumption towards high-value food commodities during the maturing
stage of the Green Revolution. Third, the moderate increases
in MSP from 2001 to 2007 significantly reduced cereal prices
and inflationary expectations during this period thereby helping achieve lower average food inflation in the post-ERs period. Fourth, the downward revision in and freeze on CIP since
the early 2000s resulted in higher offtake of foodgrains from
PDS at highly subsidised prices. Fifth, the foodgrains buffer
stock situation improved significantly in the post-ERs period
thereby strengthening the governments capacity to release
grains in the open market to check price rise. Fifth, the coverage and performance of PDS has improved over the years. Sixth,
thanks to the opening up of foreign trade, and a comfortable
foreign exchange reserves position since 1992, India succeeded
in importing adequate food to meet domestic shortages and to
Notes
1 Post-economic reforms period refers to the
period after 1991.
2 Following literature, we exclude 196566 and
196667 as they experienced two unprecedented droughts and a war (IndiaPakistan).
3 As the economic reform programme was introduced from July 1991, its effect on the economy
could not have been felt prior to 199293
(Panagariya 2004).
4 For details of this strategy, see Bhalla (2007);
Swaminathan (2012).
5 It is be noted that output performance of a few
food commodities, namely, milk, egg, fish and
meat included in our analysis are not linked to
the Green Revolution strategy as it was guided
by sector-specific policy interventions such as
the Operation Flood programme launched in
1970 to boost milk production and Blue Revolution efforts to modernise Indian capture
fisheries from the mid-1950s onward.
6 During 198081 to 199091, the yield growth
accounted for 80.25% of growth of output,
against the figures of 58.45% and 38.41% recorded during 194950 to 196465 and 1967
68 to 198081 respectively (Bhalla 2007).
7 However, the changes introduced in Indias
macroeconomic, industrial and trade policies
as part of economic liberalisation have influenced the agrarian environment in varied
ways. For details see Landes and Gulati (2004).
8 For details about factors responsible for
agrarian slowdown, see Bhalla (2007); Chand,
Raju and Pandey (2007); Landes and Gulati
(2004).
9 The underperformance of growth rate of agricultural GDP after the economic reforms is more
evident from the robust overall GDP growth rate
experienced during the same period.
10 The WPI available in various bases is converted
into a common (200405) base using linking
factor.
11 The data on food articles inflation rate is available only from 195455.
12 The complete data sets are available from the
authors upon request.
13 See footnote 12.
Economic & Political Weekly
EPW
august 1, 2015
shocks.39
control price
In contrast, the periods before economic liberalisation were constrained by a restricted trade regime, perennial foreign exchange shortages, and an unfavourable international community, all of which made it difficult to
exercise the import option liberally.
The policy implications of our findings are as follows: (a) it
seems that, in the long run, a combination of a liberal foreign
trade regime and stable, but not necessarily high, agricultural
growth and food output can be helpful to keep food inflation
under control;40 (b) along with the level of agricultural growth,
attention must be paid to the stability of growth (Chand 2010);
(c) moderate hikes in MSP and lower PDS price can have a softening effect on food prices, but at the cost of an enlarged food
subsidy bill; (d) a better level of buffer stock and increase in accessibility of the PDS can help stabilise food prices; (e) from an
inflation angle, the concerns about the deceleration of agricultural growth during the post-ERs period are unfounded; and
(f) the notion that economic (trade) liberalisation and the consequent strengthening of the foreign exchange reserve position
have led the government to be less focused on agricultural selfsufficiency since 1992 (Landes and Gulati 2004) has substance.
23
24
25
26
27
28
29
30
31
32
33
59
SPECIAL ARTICLE
34 Only the figures for selected commodities are
presented here. The figures for other commodities are available from the authors upon
request.
35 Decanalisation involves reduction of state
agencies monopoly rights over imports.
36 CoP includes actual paid out costs on purchased inputs plus imputed value of family labour, rental value of owned land and interest
on value of owned fixed capital assets (Dev and
Rao 2010).
37 CoP of rice in constant prices has grown by
1.46% during 199495 to 200607, while the
rate was -0.13% between 198182 and 199293.
The growth figures for wheat respectively, are
1.41% and -1.96%.
38 It is another matter that, due to various reasons, real farm wages increased sharply from
200708 thereby pushing up the food prices
in the recent times. For details, see Gulati
and Saini (2013) and Gulati, Jain and Satija
(2013).
39 This finding supports the proposition that low
food output and low food prices can coexist in
a liberal import policy environment (Dev and
Rao 2010).
40 For similar conclusion, see Ganesh-Kumar
and Parikh (1998). They, using Monte Carlo
simulations, show that a trade liberalisation
along with a suitable level of buffer stocks
can ensure food price stability. However, too
much dependence on liberal trade for meeting
countrys food requirement can at any time invite the risks of stoppage of trade owing to
politics of trade (Basu 2011) and of short-supply in the international market due to climatic
reasons. Hence, the need for maintaining some
reasonable level of self-sufficiency in food cannot be ignored.
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