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Resource centre on India's rural distress
 
 

Grin and bear it: India’s ‘pulse problem' does not have an immediate solution -Dinesh Unnikrishnan
-FirstPost.com

Ram Naresh, who runs a small tea-snacks shop in Navi Mumbai isn’t really keen to discuss politics. “After all, what difference does it make to me? No matter who rules, prices keep going up,” Naresh says. Naresh, hails from a rural village in Uttar Pradesh, is clearly upset with the way prices of Dal and Onion has gone up of late.

He gets to save a little from his daily earnings after spending on purchases. “Everything is more expensive. It’s becoming tough,” Naresh said. The price of Tur dal, which used to cost Rs 75 per kilo in January, 2010 now costs Rs 153 per kilo. The price graph of other items isn’t too different.

The pulse problem

The recent spike in pulse prices has been the sharpest in a decade, with the increase more visible in tur and moong dals, an integral component of Indian households.

Like Naresh, many on the street have begun to feel the pinch of high prices on their household budgets.

Sadly, neither the central bank nor the government seems to have a concrete solution to offer, at least in the near term. The price spiral is clearly playing spoilsport in an otherwise improving inflation scenario after the Narendra Modi government came to power.

Pulse prices have escalated by 42 percent in October, when food inflation jumped to 5.25 percent from 3.88 percent in September. Overall retail inflation, as measured by consumer price index (CPI) inched up to 5 percent, still well below the January target of the Reserve Bank of India (RBI).

Experts say the reason for the pulse-shock is pure supply shortage. In other words, the RBI with its limited tools, is helpless to do much since monetary policy can only address demand side issues.

“Quite clearly the problem is more on supply side than demand side as supply shocks have led to increase in prices,” Madan Sabnavis of rating agency Care said.

Even for the government, Sabnavis said, it isn’t easy to find an immediate solution in the short term to contain pulse prices. The larger problem is that supply of pulses hasn’t increased as it should have in proportion with the demand.

Increasing income levels in rural segments would have contributed to a rise in consumption of pulses (tur, moong, urad and masur mainly) over years.

Rating agency, Crisil points out that pulses production in India has remained stagnant for nearly seven years since fiscal 2004, while demand accelerated. This resulted in per-capita availability of pulses to decline and prices to spiral.

Since then, the production hasn’t improved, but has actually come down on account of weak monsoons. India is largely dependent on rains for cultivation.

Four states produce about 70 percent of India’s pulses output – Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh. Of these, except Rajasthan, 4 out of the last 8 years have seen acute rainfall deficiency, causing pulses production to suffer, the Crisil report said.

India produced about 17.4 million tonnes of pulses in July-June crop year 2014-15, down from 19.25 million tonne produced in the previous crop year.

The current spike in the prices of pulses is mainly due to two years consecutive years of deficient monsoons and higher global prices.

Changing rural pattern

According to the National Family Health Survey 2005-06, about 89 per cent of the Indian population consumes pulses at least once a week. This is likely to have risen further over years on account of rising per capita income growth.

Post the implementation of National Rural Employment Guarantee Scheme, between 2010 and 2013, rural wages rose by an average 17 percent while per capita income too rose 7 percent between 2004 and 2012, twice the rate of the previous decade, showed the Crisil note. Changing dietary habits happen as people migrate to the higher-income racket.

Within the pulses, prices of tur dal have shot up the most in November - 104 percent on year. This is followed by urad dal, which rose by 88 per cent, according to data availed from the consumer affairs ministry.

The rise in tur dal prices is the highest at least since January 2010.
 
Economists are still debating whether rural India’s consumption pattern is indeed shifting to protein-based items, especially pulses.

For instance, Sabnavis of Care argues that there is no evidence to state that rural India is shifting diet to more protein-based food items. “Looking at the NSSO study for 2007-08 and 2011-12, pulses’ share in rural consumption declined from 3.2 per cent to 2.9 per cent. For urban, it came down from 2.2 percent to 2.1 percent,” Sabnavis said.

Nevertheless, there is no escape from the fact that the spike in pulse prices has begun impacting a large segment of population. The Indian Institute of Pulses Research forecasts the demand of pulses at 39 million tonne by 2050, which will require production to grow at an annual rate of 2.2 per cent, compared with the 0.9 per cent seen in the last decade.

The reason why a sharp spike in pulse prices do not fully reflect in the headline inflation number is the relatively low weight of pulses in food inflation. Pulses constitute only 6 percent of food inflation, while cereals constitute 25 per cent.

Checking hoarders

To be sure, the Modi government has been trying to increase pulse supplies in the market by clamping down on hoarders and by importing pulses. Over 5,366 tonnes of pulses have been offloaded in the markets so far out of a total 1.32 lakh tonnes seized from hoarders in raids conducted by the states, according to government officials.

A weak rupee and high global pulse prices would mean that importing prices would do limited help in easing pulse prices in the domestic market.

According to Sabnavis of Care, it isn’t easy for the government to address the issue in the short-term.

The medium-term solution is to increase production through use of innovation and technology and make production attractive to the farmer as high-yielding cereals such as rice and wheat. The government should also help farmers find ways to lower the cost of cultivation. The key is to improve efficiency as expanding the area under cultivation is difficult, experts say.

“Raising the irrigated area under pulses is an imperative, as is making available high-yielding variety seeds and nutrients at a reasonable cost. Both of these will help to raise productivity. Focus on post-harvest storage and transportation facilities is also critical,” the Crisil report said.

The short point is that there aren’t any near-term solutions to the pulse price. Going ahead, the country will have to ramp up production of pulses in the available area.

As of now, neither financed minister Arun Jaitley nor RBI governor Raghuram Rajan will have immediate solution.

(Kishor Kadam contributed to this story)

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