Food security, Trade and Domestic Markets: Understanding the Linkages

1. Food security, Trade and Domestic Markets: Understanding the Linkages A. Ganesh-Kumar Presentation at Young Scholars Programme IGIDR, 22 June 2009 Indira Gandhi Institute of Development Research, Mumbai

2. Food security • “Food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life” – World Food Summit, 1996 • 3 implications of the definition • Adequate supply for all people • Adequate distribution channels for physical access • Adequate entitlement for economic access • Problem is multi-level – national / household / intra-household

3. Food security at the household level – The Linkages

4. Food security at the household level – The Linkages • Household level food insecurity • Low levels of household income • High and rising retail price of food • Problem mainly for poor households • Situation in India • 45% suffer stunting (height for age % of children under 5) • 47% underweight children (weight for age % of children under 5)

5. Issues affecting income and price • Income entitlement / distribution issues • Domestic supply issues • International trade issues • Domestic trade issues

6. Distributional issues • 3 broad types of households • A) Poor asset-less households • B) Poor households with low asset base (including land) • C) Non-poor (rich) households / large land owners • (A) and (B) are usually food insecure – low income, fully or partially dependent on markets for food • (C) is usually food secure – sufficiently high income and/or food self-sufficient • Taxation / re-distribution policies often ineffective • Income transfer programmes (cash transfer / employment programmes), • Consumption subsidies (public distribution, food stamps)

7. Retail price of food • Retail price = Producer price + Transport cost + Trader margin + Taxes - Subsidies • High prices due to inadequate supply (= domestic production + imports + stocks) in relation to demand • National level food security problem • Inadequate supply is a major problem in developing countries • Often governments focus only at this level • Increasing production often preferred • Imports only if production growth not feasible / up to desired levels • Export bans (net-exporting countries)

8. International trade and food security • Food exporting and food importing countries • Food exporter (potential exporter) • Distortions in world trade regime • Foreign barriers to export: high import duties, non-tariff barriers (standards) • Unfair competition from developed countries: production and export subsidies • Low prices for farmers – disincentive to increase supply • Agricultural growth less than potential • Low farm incomes, agricultural wages • Food importer • Subsidized food imports / food aid  depresses domestic prices  benefits consumers but disincentive for domestic farmers • Restrictive domestic trade policies  foreign exchange constraint  low import capacity  inadequate food supply  high food prices

9. Domestic supply and food security • 3 main features of under-developed countries • Restrictive government policies on investment, labour, etc. • Low asset base of the country / farmers in particular • Weak institutional structures (legal, property rights, security, social and economic barriers to competition in markets) • 3 main manifestations of these features • Low investment levels • Weak infrastructure • Low productivity • Mutually reinforcing – vicious trap • Outcome on food security – 3 channels • Low economic growth in general  widespread poverty • Low growth in food production  Insufficient food availability  High food prices • Weak infrastructure  high transport cost  high retail price

10. Domestic trade and food security • 2 underlying factors • Weak institutional structures • Restrictive domestic policies • 4 manifestations • A) Uncompetitive domestic trading services  High trade margins • B) Inadequate marketing infrastructure • C) Barriers to intra-country commodity movement • D) State intervention in commodity markets • (B), (C) and (D)  underdeveloped markets (spatially and across commodities)  Price distortions • Outcome on food security – 2 channels • Low farm-gate prices  Disincentive for farmers  Inadequate food production • High retail prices

11. Thank you

12. Calorie Intake Per Capita Per Day • Calorie intake less than the official Indian norms: 2400 (Rural) and 2100 (Urban) • Declining over years - sharply in rural areas Source: National Sample Survey Organisation

13. Protein and Fat Intake Per Capita Per Day (grams) • Protein intake – slight decline in rural; very little change in urban • Fat intake – rise up to 2000, stable since then Source: National Sample Survey Organisation

14. Nutrition status • Levels are below norm for bottom 70% of rural population • Rise in calorie intake for Bottom 30% • Decline in calorie intake for rest of rural population since mid-1970s

15. Nutrition status (contd.) • Bottom 30%: Levels below norm; rose in early 1970s, stable subsequently; • Middle 40%: More or less stagnant around the norm • Top 30%: Fluctuating above norm

16. Annual Compound Growth Rate in Per Capita Real Expenditure, Rural (%)

17. Annual Compound Growth Rate in Per Capita Real Expenditure, Urban (%)

18. Changingconsumption pattern • Substantial diversification in consumption pattern • From food to non-food items • Within food, from cereals to non-cereal food • Within cereals from coarse to fine cereals • Per capita cereals consumption in India has been on a declining trend during the last three decades • Reflects larger availability of non-cereal food items, growing income levels and changing consumer preferences