IFPRI- Food Security and Trade- A Ganesh-Kumar, IGIDR

Workshop on
Food Security in
India
IFPRI, New Delhi
11 March, 2014
Food Security and Trade
A. Ganesh-Kumar

Well known definition (World Food Summit, 1996)
“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”
 Reconfirmed at the World Food Summit, 2009
 4-pillars of food security
o Availability, Access, Utilisation and Stability
Problem is multi-level
 National level
o Trade has an important role
 Household level
o Income and price are the primary determinants
o Trade can play a role here too
 Intra-household level
o Trade has no role here
Food security
Workshop on Food Security in India, IFPRI, New Delhi, 11 March, 2014 2

Trade affects availability & domestic price
 Imports add to availability – reduces price
 Exports reduce availability – raises price
Volatility in wold market affects domestic price
 Itself a reflection of world supply-demand balance
o Supply – influenced by long-run trends (technology, productivity,
cropping pattern), short-term shocks (weather, wars, …) and possible
structural change (climate change)
o Demand – influenced by long-run trends (growth, tastes, …)
 Other factors can also cause volatility
o Policy shocks – imposition / relaxation of trade barriers
o Volatility in related markets – energy, commodity markets in general
o Increasing financialisation of commodity markets
Where does trade fit in?
At the national level

International trade offers income earning
potential for traders and producers
Exploiting this potential requires several complementary
conditions
But is also a source of competition
Producers need to be equipped to face import
competition
oProductivity & technology are the keys
Where is India placed on these aspects?
Where does trade fit in?
At the household level

5Workshop on Food Security in India, IFPRI, New Delhi, 11 March, 2014
National level food security
and international trade

Answer to this question depends on what we mean by
FOOD?
Most assessments of food availability focus only on
cereals
 That too only rice and wheat
Government policies and interventions are also mainly
in rice & wheat
 Public procurement, price support, PDS
 National Food security Bill
 Interventions involving other food items are much smaller
o ICDS, Mid-day meals, etc.
But food is NOT just cereals, NOT just rice & wheat
alone
What is the food availability situation in
India?

Diets are diversifying
Cereals & sugar are losing shares

Dairy, egg, meat, fish, F&V, beverages
are gaining shares

Share of pulses, edible oils, salt & spices
are fluctuating

Price rise in recent years more in the high
value products than in cereals

Price rise in recent years more in these
high value products than cereals …

Amongst major food items
 Net-exporter – rice, other
cereals, spices
 Changing situation – wheat,
sugar
 Net-importer – pulses (&
edible oils)
o Very high import dependency
o Persistent deficit over several
decades
Amongst high value
products
 Net-exporter – vegetables,
meat, fishery
 Self-sufficient – dairy
products
Domestic supply-demand conditions

Past trends in supply-demand gap likely to persist in the
foreseeable future
Planning Commission 12th Plan Working Group (2011)
 Surplus – cereals, sugar
 Deficit – pulses, oilseeds / edible oils
 No assessment in case of F&V (no supply forecast)
Ganesh-Kumar et al. (2012)
 Surplus in 2025 – rice & wheat
Dastagiri (2004)
 Surplus in 2020 – milk, mutton & goat meat, beef & buffalo meat,
chicken meat, and eggs
Link between FS & trade likely to be more via exports
Pulses and edible oils are the exceptions
Few comprehensive long-run supply-
demand gap assessments

Exchange rate risk
 Recent times have seen high volatility in exchange rate
 Linked to global economic conditions and India’s macroeconomic
fundamentals
 Situation likely to persist in the foreseeable future
Commodity-level price risks
 Sharp downswings / sharp upswings
 Impacts would depend upon net-trade position
 Impacts on importers & exporters would vary
 Limited policy instruments to handle volatility
o Not comprehensive – not all situations can be handled
o Nor complete – cannot offset risk totally
o Inadequate market institutions to handle risk – futures markets &
agricultural insurance
But risks would persist

Net-exportables
 Exports turn unattractive
 Exporters would have to take a
price cut
 Un-exported surpluses likely
 Would dampen domestic price
 Farmers would suffer
 Domestic consumers would
benefit
No real instrument here
Net-importables
 Mainly pulses, edible oils
 Helps domestic consumers
 But domestic producers
could suffer
Tariff rate changes
have been used in past
to balance these
concerns
 Feasible due to significant
tariff binding overhang
Sharp downswings in world price

Net-exportables
 Exports more profitable
o Exporters would benefit
 Export surge would reduce
domestic availability
o Domestic price would rise
o Farmers would benefit
o Domestic consumers would be
hurt
Export bans have been
used in past
 Protection for consumers at
the cost of producers
 Exacerbates world market
imbalances
Net-importables
 Mainly pulses, edible oils
 Imports can shrink
o Domestic prices would rise
o Hurts domestic consumers
o Reduced import competition can
benefit domestic producers
Tariff rate cuts can help
 Limited depending upon
applied rates
Sharp upswings in world price

Household level food
security and international
trade

Planning Commission poverty estimates for
2011-12
Rural poverty – 217 million persons (25.7%)
Urban poverty – 53 million persons (13.7%)
Total poverty – 270 million persons (21.9%)
All the urban poor and a good chunk of rural
poor are net-buyers of food
A majority of the rural poor are agricultural
labourers and farmers themselves
Which household?

Income level and food price level are the drivers of
their food security
Income level depends upon level and dynamism of
economic activity
 Includes agricultural performance, especially if the household is
dependent on agriculture
 Trade regime & global market conditions can affect the level of
economic activity
Food price depends upon national level availability
situation
 Here trade plays an important role
 But so too domestic supply chain issues
 Safety nets are important
Poor net-buyers of food

Their dependence on market for food consumption
could be limited
But their income levels are low and that makes
them vulnerable to shocks to their farm output
 Especially so for small & marginal farmers
Expanding their markets and strengthening their
income earning potential is the key
 Exports play a role here
 Productivity improvements to strengthen their capacity to
face import competition
 Complementary role of domestic supply chains
Poor farm households

Complementary conditions
to reap the benefits of
international trade for food
security

Efficient domestic supply chains are essential
To maintain price stability – critical for net-food buyers
To ensure farmers reap benefit of expanding markets
including exports
Enormous scope for domestic reforms
Laws, inter-state movement barriers, tax structure,
transport & storage infrastructure, trading structures and
marketing linkages, agro-processing industry, …
Domestic supply chains

Ensuring open and stable trade policy
Export support measures (not subsidies)
 Meeting SPS requirements
Infrastructure development
Technological support to boost productivity &
enable farmers face import competition
Market deepening including futures market and
insurance for handling risks
Safety nets for consumers and producers
Government role

Significant distortions persist in international trade
regime w.r.t agriculture
Legacy issues from the Uruguay Round
Slow progress in multilateral trade negotiations
RTAs an increasing challenge to multilateral rule
based trade in agriculture
 377 of 583 RTAs as of 31-Jan-2014 are in force
 16 RTAs involving India in force
Political issues stalling / slowing cooperation in
South Asia
Conducive global trade regime

WTO Bali deal is indication that there is still
some will amongst nations to take forward
multilateral trade talks
But the deal itself appears more like buying
time to set the house in order
India’s huge public procurement will not be challenged
for 4 years – what later?
Legacy issues from the Uruguay Round such as Base
support calculation, export / domestic subsidies, etc.,
remain unresolved
Eventual outcome of the Doha Round remains unclear
Conducive global trade regime …

Approach to food security has to be broad based in
terms of food items
Trade can help improve food security at the national
and household levels
This requires several complementary conditions to be
in place
The bigger challenge, however, is to set right the
complementary conditions that can help reap the
benefits

Bottom-line

IFPRI- Food Security and Trade- A Ganesh-Kumar, IGIDR

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