Reforms and social equity
Madhura Swaminathan
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Examines the impact of economic reforms on the rural economy comparing it with some Asian countries
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AGRICULTURE, FOOD SECURITY, POVERTY AND ENVIRONMENT — Essays On Post-Reform India: C. H. Hanumantha Rao; Oxford University Press, YMCA Library Building, Jai Sigh Road, New Delhi-110001. Rs. 625.
This is a collection of essays dealing with the impact of economic reforms on the rural economy of India, with some comparative information from other Asian countries.
The author, a senior economist with academic and policy experience, concludes that, in general, economic reforms have had an adverse effect on the rural economy, particularly the rural poor. For example, in the area of rural credit, he points to the "retrogression in the supply of commercial bank credit", a rise in regional inequalities in the distribution of credit as well as a rise in the inequality in distribution of credit across cultivators of different size holdings in the post-reform period.
Food security
His recommendations for further reform, however, such as promoting the large private sector in agriculture and foreign direct investment, are likely to result in greater inequality. In the section on food security, Hanumantha Rao documents a very disquieting phenomenon, a decline in average cereal consumption per person in India from 1972-73 to 1999-2000.
He shows that cereal consumption per capita declined, on average, in the 1990s for households at all levels of expenditure and in both rural and urban areas. For example, among the poorest 30 per cent of the rural population in terms of consumer expenditure, cereal consumption per capita per month fell from (the already low) 11.76 kg in 1993-94 to 11.44 kg in 1999-2000.
As incomes rise, it is expected that there will be a change in consumption behaviour, with a decline in the direct intake of cereals, and a shift to a more diversified diet. This shift does not reduce the total demand for cereals since the indirect demand for cereals from a higher consumption of meats is likely to rise. However, and this is the point to be underlined in the case of India, it is very unusual for cereal consumption per person to decline when the total calorie intake is low (and below the norm). Data from the National Sample Surveys show a clear trend of decline in calorie intake.
Cereal consumption
In rural India, the average calorie intake per capita per day fell from 2,266 Kcal in 1972-73 to 2,183 in 1993-94, and further to 2,149 in 1999-2000, against a norm of 2400 Kcal. Further, among the lowest 30 per cent of rural households in respect of consumer expenditure, the per capita calorie intake fell from 1,830 Kcal in 1989 to 1,600 Kcal in 1998.
The pattern is very different in other countries. In the mid 1990s, according to FAO food balance sheets, the total calorie intake per person per day was 3,624 Kcal in the U.S., 2,766 in Japan and 2,898 in China. The contribution of calories from cereal intake ranged from 851 Kcal in the U.S. to 1,646 Kcal in Japan with China in between (1,186 Kcal).
In other words, the contribution of cereals to total calorie intake ranged from 23 per cent in the U.S. to almost 60 per cent in Japan. The low cereal intake in the U.S. is clearly associated with a high, above the norm, and rising calorie intake.
The author ignores the possibility of distress leading to a fall in consumption in India, and links the fall in cereal consumption to rural infrastructure and mechanisation. Two key results that he reports are the following. First, better roads are associated with lower consumption of cereals. The justification for this result is that roads improve the availability of non-farm (including non-cereal) products and make it easier to obtain a diversified consumption basket.
The second result is that higher mechanisation is associated with a lower consumption of cereals, supposedly because the decline in manual work reduces cereal requirements.
From this analysis, the author concludes that "the saturation point with respect to the consumption of cereals would soon be reached even among the poor," and argues that the decline in food grain consumption may "in fact be associated with improvement in human welfare."
These findings could have been ignored had they not concerned the grave problem of food security in India, and the very low levels of cereal and total food intake among a large majority of India's population.
Grain procurement
In the next essay, on food grain surplus, the author rightly disagrees with the idea that India has a long term "surplus" in food grain. He has a useful critique of the proposal by the Ministry of Agriculture to abandon the policy of procurement at the Minimum Support Price (MSP), and to shift, instead, to a combination of income support (deficiency payments as in the European Union) and income or crop insurance.
The system of MSP and open-ended procurement has contributed to the growth of food grain production in the country. Unlike European countries, where grain producers receive regular and large direct income subsidies, the only effective income support or insurance to producers in India has been the policy of open-ended procurement at the MSP.
It is important now that the reach of procurement in respect of crops and regions be expanded.
In conclusion, the book disappoints, since the author's attempt to reconcile his pro-reform zeal with the actual performance of the rural economy results in a set of policy recommendations that are unconvincing.
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