What does record food production mean for India?

Wed Mar 2, 2022

Food production in India is estimated to touch a record 316 million tonnes in 2021-22, 8% more than the five-year average. However, is a bumper harvest enough to keep retail food prices in check?

Is production expected to rise across crops?

According to the second advance estimates released by the Centre, the production of foodgrains, including rice, wheat, pulses, and coarse cereals, is estimated at 316 million tonnes in FY22, which is 8% more than the five-year average. In addition, oilseed production is estimated at over 37 million tonnes, 12% higher than the five-year average. Sugarcane production too is set to rise by 10% compared to the five-year average. The record production is attributable to normal monsoon rains during June-September 2021. However, excess rains in September-October delayed harvest and damaged crops in some regions.

What does this mean for retail food prices?

What consumers pay for food depends on several factors. While higher production of pulses and oilseeds is a relief, since India is also dependent on imports to meet domestic consumption, how global prices move will be a determining factor. This is particularly true for oilseeds where India is acutely dependent on imports to meet half of its domestic requirement. Last year, India’s edible oil import bill shot to ₹1.2 trillion. In addition, the upcoming Kharif crop season, planting for which begins in June, will be critical, as will be vegetable output, which varies due to seasonal factors.

What are the risks going ahead?

The foremost risk is rising crude oil prices, which crossed $95 a barrel recently, the highest since 2014, amid heightened tensions between Russia and Ukraine. Analysts say crude prices will cross $100 a barrel and may even surpass $125 by summer. High oil prices lead to higher fertilizer and input costs for farming, diversion of food crops to produce biofuels, and high shipping costs. India has not raised fuel prices for more than three months and a hike is expected in March after state elections are over. It will likely impact food prices.

What steps can the government take?

Except for oilseeds and pulses, India is largely self-sufficient in food production. The government is sitting on massive public stocks of rice and wheat which can be off-loaded via the public distribution system or through open market sales when prices rise. Rising crude and fertilizer prices may also force the Centre to foot a higher fertilizer subsidy bill to keep farming costs in check. The biggest problem, however, may emerge in edible oils where import duties have already been slashed with little room for further cuts.

What has been the retail inflation trend so far? 

The moderate food inflation in 2021 was a result of base effect as food prices grew by double digits in 2020 after the coronavirus outbreak. Retail food inflation fell to 0.7% in September 2021, but climbed to a 13-month high of 5.4% in January. Consumers are paying steep prices for staples like pulses and edible oils despite the Centre taking steps like reducing import duties.

Launch your GraphyLaunch your Graphy
100K+ creators trust Graphy to teach online
Sivakumar.G 2023 Privacy policy Terms of use Contact us Refund policy