Price spikes in pulses this year may have been spurred by dented production prospects amid an uneven monsoon, but India’s output shortfalls vis-a-vis demand for the key protein source as well as edible oils and fruits are expected to persist or even widen over the next seven years, as per a new research report by agricultural economists.
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Food deficits compel reliance on imports and raise the food import bill in the long run, cautioned the research report on ‘Prospects of India’s Demand and Supply for Agricultural Commodities towards 2030’, published by the National Bank for Agriculture and Rural Development (NABARD) and the Indian Council for Research on International Economic Relations (ICRIER).
“Commodities like oilseed, pulses and fruits are expected to experience a supply and demand gap in the coming years. Therefore, there is a need to increase the level of production and productivity of oilseeds, pulses, and fruits since their demand in the future shows an increasing trend,” the report’s authors Ashok Gulati and Shyma Jose said.
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As per capita incomes rise, the consumption basket of people tends to diversify towards nutritious and high-valued commodities, including fruits and vegetables and dairy products and away from staples such as rice and cereals, the report noted. So demand growth for non-cereals and high-valued commodities is expected to exceed the population growth rate and cereal commodities’ growth in coming years, they argued.
The report assumes significance as recurrent high food inflation spells, like the ones seen this year, cramp the room for monetary and fiscal policies to promote economic growth.
Three-year low
Output of pulses, some coarse cereals and groundnut oil seeds could hit a three-year low this Kharif season, as per initial independent estimates for crop output. Retail inflation in pulses accelerated sharply to 18.8% last month, while inflation in fruits picked up to hit 9.34%. Edible oils have witnessed deflation through most of this year, as their prices had surged sharply last year after the Ukraine conflict erupted.
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Oil seeds production is expected to rise to around 35 to 40 million tonnes (MT) by 2030-31, with the gap between demand and supply likely to expand to 3 MT by 2025-26 and 6 MT by 2030-31, even if per capita incomes rise just 5.1%.
“Notably, the deficit of oilseeds in the food balance sheet in 2030 is worrisome for the country given the large edible oil imports as high as 13.4 MT during 2020-21. A technological breakthrough in oilseeds to increase productivity or area expansion are two possible solutions to improve oilseeds’ balance sheet in the long run,” the report reckoned.
The report reiterated the recommendation of a 2012 report from the Commission for Agricultural Costs and Prices (CACP) to raise the import duty whenever the import price of crude palm oil falls below $800 per tonne to protect Indian producers. However, it also added that attaining self-reliance in water-intensive and long gestation crops like oil palm may not be worth pursuing as a sustainable goal either.
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Three scenarios
Mr. Gulati, who headed the CACP and is now a distinguished professor at ICRIER, and Ms. Jose, a research fellow at the think tank, projected demand for different farm products up to 2030-31 based on three alternative growth scenarios that assumed per capita income (PCY) growth ranging from 4.1% to 6.1%. Supply side estimations were done by assuming that trends will persist in line with those in the last 10 years (prior to 2020-21) or over the previous 15 years.
“The demand for pulses will range between 37.99 to 42.21 MT depending upon various growth scenarios in 2030-31. We found that the demand for fruits and vegetables will increase from 289.32 MT in the base year (2019-20) to 431.1 MT under the assumption of 4.1% PCY growth and 501.8 MT under 6.1% PCY growth by the end of 2030-31,” the report concluded.
For context, demand for vegetables and fruits is expected to be 351.3 MT this year, and pulses at 32.42 MT, assuming a 6.1% PCY uptick. If the previous 10 years’ growth trends continue, pulses supplies are expected to be at 34.9 MT by 2030-31, and if the 15-year trends persist, they may rise to 39.2 MT by then.
“Evidently, the growth in the demand for non-cereals and high-valued commodities is expected to exceed the population growth rate and increase at a faster rate than cereal commodities under all the alternative scenarios,” Mr. Gulati and Ms. Jose emphasised.
The report has called for policy attention to ensure a balance between domestic production and the absorption of these commodities, diversification towards high-value commodities that require major investments in market infrastructure, processing, and cold storage and warehousing facilities to build an efficient and reliable value chain. Such measures can significantly reduce food wastages, they underlined.