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Government projects record food output by Ruchira Singh

India is likely to see record foodgrain production in the current year on good rains, the second advance estimate of the agriculture ministry showed on Friday.

Output of total foodgrains comprising rice, wheat, coarse cereals and pulses was seen at 250.42 million tonnes (mt) in the July-June crop year of 2011-12, up 2.3% from the year-ago 244.78 mt, the data showed.

This is significant as the optimistic projection comes just ahead of the government’s plans to launch an ambitious food security programme.

However, while the aggregate story is positive, there are sectoral concerns with the estimates projecting a decline in the output of oilseeds and pulses that could potentially revive pressures on food inflation.

Production of total pulses was estimated at 17.28 mt, down 5.26% from the previous year’s 18.24 mt. Production of nine oilseeds was seen at 305.29 mt, down 6% from last year’s 324.79 mt.

“For the first time, we are beating the target,” P.K. Basu, agriculture secretary, said in an interview, referring to the target of 245 mt for foodgrains set earlier in the year. “The third and the fourth estimates (to be made later) generally show higher numbers, so there are chances the final output could be even higher.”

Basu said conducive monsoon and winter rains, increasing focus on foodgrains by several state governments and measures implemented by the Centre are responsible for the increase in production.

“Traditionally, Punjab and Uttar Pradesh were agri-centric,” he said. “Now many state governments have got involved, which has helped in increasing investments in foodgrains.”

Basu said, “An excessive energy” was seen in states such as Jharkhand, Gujarat and Haryana, helping raise expectations of output.

An economist said the higher foodgrain estimate was in line with expectations and will help ease food inflation in the near term. “We can take a lot of comfort from the fact that rice and wheat production are expected to be higher given that we have had high inflation and are looking at the food security Bill,” said Madan Sabnavis, chief economist at CARE Ratings.

“But the concern is over the prices of pulses and edible oils in the international market and the exchange rate of the rupee (as the shortfall in pulses and edible oils is met by imports),” he said.

As the harvest of the winter-sown, or rabi, crop in March-April draws closer, international prices are expected to react to India’s demand, which could pressure food inflation.

India’s food price index declined 1.03% in the year to 14 January, government data showed last Friday, against an annual drop of 0.42% in the prior week, a Reuters report said.

Food inflation has slowed from nearly double digits last year, largely because of rising demand for higher proteins and rising incomes.

Sabnavis said until March he expected food inflation to rise to 2-3% as the low base effect wanes, but after April, when the harvest starts arriving and the import estimates of pulses and oilseeds is clearer, food inflation could crawl up to 4-5%.

CARE’s headline inflation estimates are at 6.5-7% till March, after which in 2012-13, headline inflation is likely to be at 5% on an average basis, with some blips during the year.

Basu said a part of the pulses and oilseeds belt was facing a drought that had made farmers shift to coarse cereals and cotton, when they saw a delay in rains. However, this would be offset by the performance of other regions. “Every year, there are patches where something goes wrong, but the overall picture is not affected,” he said.

To be sure, the current crops at the stage of maturity still face a threat of damage in case the weather turns unfavourable.

Friday’s data also showed cotton output is estimated at 34.09 million bales (one bale is 170kg) in 2011-12, up from 33 million bales in the previous year. Sugar cane production is estimated at 3,478.65 mt this year, up from 3,423.82 mt a year ago.

The higher foodgrain output could improve prospects for more exports in the next fiscal after 2 mt each of wheat and common rice were allowed in the current year. However, Sabnavis said this was unlikely as the food security Bill is expected to become a law next year and implementing it would necessitate the need to have higher stocks.