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Food Supply Situation in India Ahead of Monsoon 2023

  • 02 Jun 2023
  • 8 min read

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?

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?

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)


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

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