Food Supply Situation in India Ahead of Monsoon 2023

• 02 Jun 2023

For Prelims: Southwest Monsoon, Food Inflation, Reserve Bank of India's monetary policy, consumer price index

For Mains: Impact of the monsoon season on India's food supply, Role of food supply in influencing inflation, Role of the Reserve Bank of India in monitoring and managing food supply-related risks

Why in News?

• As the monsoon season approaches, the food supply situation in India is being closely monitored. While there are currently no shortages, the spatial and temporal distribution of the monsoon rainfall plays a crucial role.
  • The India Meteorological Department (IMD) has forecasted just-about-normal rainfall during the southwest monsoon season (June-September).
  • The implications of the monsoon on food supply will have a significant impact on the Reserve Bank of India's monetary policy.

What is the Current Status of the Food Supply?

• Fine Balance in Wheat:
  • Unseasonal rain and gusty winds in March and early April in 2023 affected standing wheat crops.
    • However, the yield losses were not as severe as initially feared.
  • Government agencies have procured about 26.2 million tonnes of wheat during the current marketing season, ensuring sufficient stocks.
  • Although wheat stocks appear low, the combined stocks of wheat and rice are ample to meet the requirements of the public distribution system and other welfare schemes.
• Relief in Milk Supply:
  • February-March 2023 witnessed unprecedented milk shortages, leading to soaring prices.
    • However, the situation has improved due to a comparatively mild summer and favorable pre-monsoon showers.
  • Improved fodder supplies and high milk prices have triggered a supply response from farmers.
• Tightrope Walk in Sugar:
  • The closing stocks of sugar for the current sugar year (October-September 2023) are projected to be 5.7 million tonnes.
  • This level of stocks can meet the domestic requirement for 2.5 months, including the peak festival season demand.
  • The main concern is the monsoon's impact on sugarcane, which requires significant water during the growth phase.
  • Sugar production for the next year depends on a normal monsoon.
• Edible Oil and Pulses:
  • The supply position for edible oils seems comfortable due to viable imports covering domestic crop shortfalls.
  • Global price crashes have made imported crude palm, soybean, and sunflower oil affordable.
  • Ample stocks of chickpeas and imports of masoor red lentils contribute to a comfortable supply of pulses.

What is the Global Standing of India's Agricultural Sector in 2022-23?

• Milk Production:
  • India takes the lead as the world's largest producer of milk.
• Wheat Production:
  • Following China, India is the second-largest producer of wheat globally.
• Rice Production:
  • India is the second largest producer of rice, and at Number One in exports.
• Sugar Production:
  • India has emerged as the largest producer and consumer of sugar, while also being the second-largest exporter.
• Pulses Production:
  • India stands as the largest producer of pulses globally.

How Does Food Supply Impact RBI's Monetary Policy?

• Food Supply and Inflation:
  • Food supply impacts the prices of food items, which contributes to the consumer price index (CPI) used to measure inflation.
  • High food inflation directly affects headline inflation, which reflects overall price changes in the economy.
  • High food inflation can reduce consumers' purchasing power, leading to lower demand for other goods and services and affecting economic growth.
  • Industries relying on food inputs, such as beverages, may face increased production costs during high food inflation.
  • High food inflation can cause social and political unrest, particularly among the poor who spend a significant portion of their income on food.
• Food Supply and Monetary Policy:
  • Monetary policy involves regulating money and credit supply to achieve price stability, growth, and financial stability.
  • The repo rate, set by the central bank, influences interest rates, including lending rates, deposit rates, bond yields, and exchange rates.
  • Changes in the repo rate impact aggregate demand and supply, which influence inflation and growth.
  • The central bank considers various factors, such as inflation, growth, fiscal policy, global conditions, and financial stability, when adjusting the repo rate.
  • Food supply is closely monitored by the central bank due to its implications for inflation and growth outcomes.
  • The central bank assesses the impact of food supply shocks on both headline inflation and core inflation (excluding volatile items like food and fuel).
  • Persistence and pass-through of food inflation to other sectors of the economy are also taken into account.
  • Government policies affecting food supply, such as minimum support prices (MSPs), procurement, buffer stocks, and the public distribution system (PDS), are considered by the central bank.
  • Based on its assessment, the central bank may adjust the repo rate to achieve its inflation target of 4% with a tolerance band of +/- 2%.

What are Government Initiatives Related to Food Security?

• National Food Security Mission.
• National Food Security Act (NFSA) 2013.
• Rashtriya Krishi Vikas Yojana (RKVY).
• Integrated Schemes on Oilseeds, Pulses, Palm oil and Maize (ISOPOM).
• eNAM Portal.
• Minimum Support Prices (MSP) for Agricultural products.
• Pradhan Mantri Fasal Bima Yojana (PMFBY).
• National Horticulture Mission.

UPSC Civil Services Examination, Previous Year Question (PYQ)

Prelims

Q.1 With reference to the provisions made under the National Food Security Act, 2013, consider the following statements: (2018)

1. The families coming under the category of ‘below poverty line (BPL)’ only are eligible to receive subsidised food grains.
2. The eldest woman in a household, of age 18 years or above, shall be the head of the household for the purpose of issuance of a ration card.
3. Pregnant women and lactating mothers are entitled to a ‘take-home ration’ of 1600 calories per day during pregnancy and for six months thereafter.

Which of the statements given above is/are correct?

(a) 1 and 2 only
(b) 2 only
(c) 1 and 3 only
(d) 3 only

Ans: (b)

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Mains

Q.1 In what way could replacement of price subsidy with Direct Benefit Transfer (DBT) change the scenario of subsidies in India? Discuss. (2015)

Source: IE