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Increasing hunger amongst relative plenty

By Utsa Patnaik

In 2000-01, the average Indian family of four was absorbing 93 kg less foodgrain than just four years earlier. This massive drop has little to do with a shortfall in food supply. It is the result of an unprecedented decline in purchasing power in rural areas, thanks to deflationary policies and trade liberalisation

In the course of the last five years (1998 to 2003), the population of the Republic of India has been sliding down towards sharply lowered levels of per capita foodgrain absorption, levels so low in particular years that they have not been seen for the last half-century. Between the early-1990s when economic reforms began, and at present, taking three-year averages, the annual absorption of foodgrain per head has come down from 177 kg. to 155 kg. Such low absorption levels were last seen in the initial years of World War II -- from where they had fallen further still.

Over four-fifths of the total fall has taken place in the last five years alone, from 174 kg. in the three years ending in 1998 to 155 kg, taking the average of the two pre-drought years. This steep and unprecedented fall in foodgrain absorption in these five years has entailed a sharp increase in the numbers of people in hunger, particularly in rural areas, and for very many it has meant starvation. The average downward movement in turn is the outcome of divergent trends - foodgrain absorption is rising fast for the (mainly urban) well-to-do, and is either the same or falling faster than the average for the bulk of the (mainly rural) population.

We have not yet reached in India the nadir of average foodgrain absorption seen in Sub-Saharan Africa under economic reforms and trade liberalisation, where from 158 kg per head in 1980 there has been a decline to below 136 kg by the mid-1990s, and the masses are perpetually on the verge of being pushed into famine whenever there is drought. The six most populous countries of Sub-Saharan Africa, accounting for 60% of the entire region's population, have seen declining calorie intake per diem, because declining food aid is not compensating for lowered domestic food production.

A large segment of the rural masses in India with a much lower foodgrain absorption than the average, has already been reduced to the nutritional status of Sub-Saharan Africa (SSA). On the basis of NSS data on calorie intake for 1999-2000, I estimate that about 40% of the rural population was at the low absorption level of the SSA average. It is not for any lack of effort by the Indian government that the situation is not worse. If the present incorrect policies of official denial of the widening ambit of hunger, failure to undertake expansionary development policies, and the official promotion of export-oriented corporate agriculture continue to be followed, it may well be only a matter of another five years before we see the descent of the whole of rural India to the present average SSA nutritional status.

It is hardly possible to imagine a more drastic reversal of the goal of food security than has been seen in the five years of 1998-2003. The 50 years of a dying colonial rule before Independence had seen a decline of annual foodgrain availability per head by a quarter, from 199 kg to 148.5 kg, considering five-year averages and leaving aside the individual post-War year which was even lower. The War years included the terrible Bengal famine with a mortality of at least 3 million. Although the proximate cause of the famine was the inflationary burden of financing the war which was unjustly placed on India, the actual toll in the Bengal famine would not have been so large without the preceding three decades of declining nutrition in Bengal which had seen a much larger than average drop in per capita foodgrains availability, by nearly 40% between 1911 and 1947.

Many who had seen the Bengal famine before their eyes, and in particular P.Mahalanobis, had an important role in formulating post-Independence policy: the goal of attaining food security, at least in the limited sense of foodgrain self-sufficiency, was given priority, and we saw a rise, albeit a painfully slow one, in foodgrain availability per head from 152 kg during 1950-55 to 177 kg by 1989-91. While the new agricultural strategy and Green Revolution no doubt had many drawbacks as regards equity of distribution, the average rise in per head output and availability was a major achievement which should not be under-rated.

But 40 years of effort have been lost in the last decade of neo-liberal economic reforms, with over four-fifths of the loss taking place in 1998-2003 alone. There has been a slide-back to the low level of 151 kg per head food absorption in rural areas by 2001, a level not seen for 50 years.

Reports of starvation, farmer suicides and deepening hunger should cause little surprise when we consider recent trends in the official data on foodgrain output and availability. If we exclude the abnormal drought year 2002-03 and consider the average output of the preceding two years, we find that net foodgrain output per capita has fallen by about 5.5 kg compared to the early-'90s, owing to a slowing of output growth. This fall in per head output had been anticipated by this author: as agriculture was opened up to the pull of global demand, 8 million hectares of foodgrain-growing land was diverted to exportable crops between 1991 and 2001, and yield has not risen enough to compensate. This has led to a sharp decline of annual output growth which has fallen below population growth (even though the latter itself has been falling): hence we see the fall in per head output.

Even more striking than output decline, however, has been the decline in foodgrain availability, or absorption per capita over the same period. Availability (which is defined as net output plus net imports and minus net additions to public stocks) has fallen by four times as much as output, or by 22 kg. A large gap between per capita output and availability was last seen during the food crisis of the mid-1960s, but in the opposite direction -- at that time, since output fell, 19 million tonnes of foodgrain were imported over two years to ensure enough domestic availability, apart from existing stocks being drawn down for the same purpose. By contrast in recent years even though output per head has fallen, both very large additions to stocks as well as massive food exports have taken place, resulting in a large availability decline.

Availability is the same as the actual absorption of foodgrains, and the two terms will be used interchangeably. There was a slow decline in the absorption of foodgrains per head of the country's population between 1991-92 and 1997-98, after which it has fallen very sharply, from an average annual level of 174.3 kg in the three-year period ending in 1997-98, to only 151 kg by the individual pre-drought year 2000-01, an abysmally low level last seen during the early years of the Second World War, which included the years of the terrible Bengal famine.

Thus, in 2000-01 the average Indian family of four members was absorbing 93 kg less of foodgrains compared to a mere four years earlier - a massive and unprecedented drop, entailing a fall in average daily intake by 64 gm per head, or a fall in calorie intake by at least 225 calories from foodgrains, which account for 65-70% of the food budget of the poor. Adequate energy intake from cereals normally ensures adequate protein intake and the converse is also true, as NNMB Reports point out. Since the richest one-sixth to one-fifth of the population, mainly urban, has been improving and diversifying diets, the nutritional decline for the poorer three-fifths of the population, mainly rural, has been much greater than the average fall indicates.

The severe drought of 2003, despite very low output, galvanised efforts to implement food-for-work in the drought-hit areas, and therefore resulted in somewhat improved availability per head compared to 2000-01, though it remained lower than the 158 kg level of the previous year, 2001-02, which had registered the highest foodgrain output ever seen of 212 million tonnes. Nevertheless the average annual cereals absorption taking all three years ending in 2002-03 is only 146 kg., and the cereals plus pulses, or foodgrain absorption, is only 155 kg per head, an absolutely inadequate level given the large inequality in its distribution.

Often the argument is heard that since per capita income is rising it is to be expected that people should consume less cereals and pulses, which become inferior goods, and consume more high-value foods: in short, people would diversify their diets. A falling share of grain in the consumer budget as income rises is known as Engel's Law. So, it is argued, there is nothing wrong if we see falling availability/absorption of foodgrain per head. This is a total misconception regarding Engel's Law and it seems to have contributed to the incorrect official explanations of large stocks as arising from 'overproduction'. It is a misconception because Engel was referring to the fall in the share of food expenditure for the direct consumption of grains as income rises, and not to the total absorption of grains which includes both direct use as well as indirect use as feed for livestock (to produce milk, eggs, meat and so on), and as industrial raw material. The absorption of foodgrain per capita is always found to rise, not fall, as the consumer's average income rises. The figures of availability we have given, as indeed the official figures of availability, refer to absorption of grain for all purposes .

Availability of foodgrains thus includes not only direct consumption (as roti, boiled rice and so on) but also the part converted to animal products by being used as commercial feedgrain, and at present a part of these animal products are exported. (The conversion coefficients are quite high, for example a kilo of mutton can require 3-4 kilos of feedgrain to produce). Availability also includes the part of grain converted to industrial products like starch and alcohol, and into processed foods like cornflakes and noodles with an urban market. The availability, or absorption of foodgrains per head, because it is for all uses, always rises as a nation's per capita income rises . This is a very well-known fact and is supported by an extensive literature on the responsiveness of demand for cereals to rising incomes, and by the FAO food balance sheets which give data over time for output, trade and stocks by individual crops, and cover virtually every country.

China, with about double India's per capita income, absorbed 325 kg per capita of foodgrains (excluding tubers) in the mid-1990s compared to India's less than 200 kg at that time. Mexico absorbed 375 kg per capita, high-income Europe absorbed over 650 kg. per capita and USA absorbed the maximum, 850 kg per capita of which less than a quarter was directly consumed and the rest converted to animal products, processed or put to industrial use (calculated by author from FAO, Food Balance Sheets for 1992-94).

What lies behind the decline in absorption of foodgrains? The massive decline at present compared to 1998, is the result of an unprecedented decline in purchasing power in rural areas following directly from a number of deflationary policies at the macroeconomic level, combined with international price declines for the larger volumes of export crops produced in India following trade liberalisation. Both deflationary policies and opening up to trade are integral to neo-liberal economic reforms. This has resulted in a deflation of effective demand as far as the mass of the rural population is concerned.

The continuous decline in purchasing power, hence decline in foodgrain absorption for direct consumption purposes, resulted in a continuous decline in foodgrain sales from the PDS, which therefore got reflected in the continuous and increasing additions to public food stocks year after year starting from 1998, with the total stocks standing at 63.1 million tonnes by the end of July 2002. This was nearly 40 million tonnes in excess of buffer norms - and this in spite of declining per capita foodgrain output, and 2 to 4 million tonnes of grain exports every year up to June 2002, after which exports undertaken by the government have surged to unprecedented levels.

Between June 2002 and June 2003, the worst drought year for two decades, the NDA government exported a record 12 million tonnes of foodgrain out of stocks and continued to export a million tonnes a month, bringing the declared total exports to over 17 million tonnes by November 2003. Independent India has never before seen such huge exports, only made possible by more and more empty stomachs over the preceding years. It is an utter scandal and a disgrace, that at the same time that more millions of the rural poor were going hungry and those already hungry were being pushed into starvation, rather than undertaking widespread food-for-work programmes, the government preferred to feed foreigners and their cattle by exporting foodgrain, applying a heavy subsidy to beat low world price.

J Maynard Keynes had once remarked that the world moves on little else but ideas: and the socially irrational outcome we see before our eyes, of increasing hunger amidst relative plenty, illustrates starkly the effects that fallacious theories and wrong policies following from them, can have in lowering mass welfare. The fallacy involved in the official view is the fallacy of composition, where a statement which is correct for a part of the whole, is wrongly inferred to be correct for the whole. With income distribution shifting sharply in their favour, the top one-sixth of the population has certainly been voluntarily diversifying diets, but the poorer majority of the population cannot afford to do so, any more than the hungry poor of Paris crying for bread could heed Queen Marie Antoinette's advice to eat cake.

It seems that the question of effective demand, and of demand deflation, is simply not understood by most people. While everyone understands food shortage as in a drought, namely a physical output shortfall which curtails supply , it appears to baffle many that even more severe consequences can arise when the effective demand, the purchasing power of the masses falls, so that even though the physical supplies of foodgrain are there, people starve or move into hunger owing to their inability to purchase food or to access food.

The reasons for declining rural mass effective demand from the 1990s onwards are many, and are all connected with deflationary neo-liberal reforms combined with trade liberalisation. First, public rural development expenditures which averaged 14.5% of GDP during 1985-90, before reforms, were reduced to 8% of GDP by the early-'90s as part of the deflationary policies advised by the Bretton Woods Institutions (BWI). Since 1998 they have been reduced further, averaging less than 6% of GDP and in some years falling to less than 5%. In real terms there has been a reduction of about Rs 30,000 crore annually in development expenditure on average during the last five years, compared to the pre-reform period. If we assume a plausible value of between 4 and 5 for the Keynesian multiplier, this means a drop in incomes in agriculture annually to the tune of between Rs 120,000 crore to 150,000 crore - a massive contraction indeed. This order of income fall, combined with real income declines owing to other causes detailed below, is broadly consistent with the observed fall in the contribution of agriculture to GDP during the '90s, from around one-third to just over a fifth at present.

Let us remember that rural development expenditures include all employment-generation programmes, special areas programmes, village industry, irrigation and flood control, energy and transport, apart from agriculture and rural development. Further, public fixed capital formation in agriculture has also continued its decline even more sharply in the '90s. It is hardly surprising that the rate of agricultural growth has slowed drastically in the '90s and has fallen below population growth for the first time in 30 years, and that the NSS employment surveys show an alarming collapse of rural employment growth to below 0.6% annually during 1993-94 to 1999-00 compared to 2% annually during 1987-88 to 1993-94. Rural job losses are reflected in a lower participation rate, higher open unemployment, and an absolute decline in the numbers employed in agriculture.

The decline in rural purchasing power has also contributed substantially to industrial recession, through demand linkages for simple consumer goods and manufactured inputs. The economy has undergone de-industrialisation, with the contribution of industry to GDP, which had been rising in the '80s, falling from 28% to just over 25% in the course of the '90s, and large net job losses have taken place in the organised sector. The only sector which has grown fast is the services sector which has ballooned, at the expense of the material productive sectors. As income distribution has shifted to the urban elites, a modern version of the medieval Mughal economy is emerging with dozens of service providers to each individual-rich household. Only a small segment of the services sector is highly-paid IT-related services: the major expansion comes from lower-paid service activities.

Second, at the very same time that unemployment was growing and real earnings of the rural masses falling owing to deflationary policies, the government, years before it was required to do so under WTO, bending to the pressure of advanced countries, removed all quantitative restrictions on trade by April 2001 and exposed our farmers to unfair trade, global price volatility and recession-hit external markets. While global primary prices were rising up to 1996, they went into a prolonged decline thereafter, with between 40-50% (cereals, cotton, sugar, jute) to 85% (some edible oils) fall in the unit dollar price between 1995 and 2001. Some goods like tea and coffee continue to fall for growers, and others have seen only a 10 to 15% rise from the trough, in the last two years. It is one thing to open the economy to trade when markets are expanding and quite another to do so when the world capitalist economy is in recession.

Anyone with a rudimentary knowledge of the past behaviour of global commodity markets should have been able to predict the crashing prices after the sharp rise of the early-'90s, and also predict that advanced countries would immediately raise their subsidies as they have always done, but India's policymakers have been unequal to the task and have in effect sacrificed our farmers on the altar of the Bretton Woods Institutions (BWI) and World Trade Organisation (WTO) dogmas. These free trade dogmas ensure reduction of protection to their own producers by gullible developing country governments, at the same time that advanced countries increase their non-tariff barriers and massively raise their subsidies - the greater part of which they have, for their own convenience, already defined as non-trade distorting and placed outside reduction commitments in the Agreement on Agriculture. The promised bound tariff rates on agricultural products have not been actually implemented to provide protection to our farmers. On the contrary, even under the regime of sharply falling global prices, duties continued to be reduced by the finance minister in every budget, far below the bound rates and averaged only 35% by 2000, allowing imports of rice, fruit and dairy products, undermining local incomes.

Producers of all export crops in India including raw cotton have also been badly hit by falling global prices, especially as input prices also rose with reform policies, inducing a severe squeeze on their already low incomes. With the implementation of the Narasimhan Committee Report after 1994, bank credit became more expensive and reliance on private high-cost credit perforce rose. Reduction of input subsidies and higher power tariffs, all part of the reforms pushed by the BWI, were mindlessly implemented even as farmers were already in difficulty, plunging virtually all farmers including the normally viable ones, into a downward spiral of indebtedness and causing many to lose land as the latest data indicate. Sale of kidneys and suicides are stark indices of deepening agrarian distress.

Advanced countries, as they have always done in the past, have been increasing support to their farmers as global prices fell (the US has legislated subsidies into the future, which will give transfers to its farm sector of $180 billion by 2008 compared to $84 billion in 1998). The majority of our economists by contrast, are busy attacking the Indian farmer when he is already down, by saying that 'MSP is too high' and should be cut for these kulaks , and by shedding crocodile tears for the poorer farmers and labourers, on the grounds that they are net food purchasers and would benefit from lower prices. They are obsessed with the question of support price alone, not the issue price which is the relevant one, and which can be lowered in principle without affecting support price. Further, by focussing on price alone, they implicitly assume that the population is on the same demand curve as before, whereas in fact the demand curve itself has shifted down so drastically for the mass of the rural population that tinkering with the support price is now likely to deepen the crisis.

They seem not to realise that unemployment and income deflation have swamped this sector, that every price is also an income, and cutting MSP today when there is already an agrarian crisis, would further widen and deepen income deflation and lead to more indebtedness and more suicides. They forget that for years and decades India's surplus farmers, the much reviled 'kulaks', sold grain without complaining to the FCI at half the global price when global price was high, thus ensuring cheap food for urban areas. Now, when the global price has fallen below the local price, these farmers have a moral right not to be abandoned to unfair competition from heavily subsidised foreign grain and other products, and a right to be given enough price support to prevent their total ruin. If those misguided economists who put forward unethical arguments about lowering MSP, were seriously interested in the cause of the poorer farmers and labourers they should be demanding an expansionary fiscal stance, a large hike in public investment and in rural development expenditures to restore employment and purchasing power.

(Excerpted from Utsa Patnaik's public lecture on the occasion of the 50 th birthday of Safdar Hashmi organised by SAHMAT (Safdar Hashmi Memorial Trust) on April 10, 2004 , in New Delhi . Utsa Patnaik is an economist and Professor at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi . )

InfoChange News & Features, October 2006