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Resource centre on India's rural distress
 
 

Rising incomes fuel rural spending on proteins
-The Times of India

Rural India is spending more on protein products such as milk, eggs and meat due to rising income as overall spending by Indians on protein foods doubled to Rs 2 lakh crore in 2009-10 from 2004-05, a study showed on Monday.

The study by ratings agency Crisil said that two-thirds of this spending came from rural households. But while more rural Indians are getting protein in their diets, the concern is that supply shortages are driving up prices and impacting overall food inflation. Food inflation has remained a policy headache for nearly three years due to strained supplies. The Reserve Bank of India (RBI) has also consistently flagged the impact of stubborn food inflation on overall price pressures. It has been urging the government to raise supplies and farm productivity to tackle the problem.

According to the study in 2009-10, around 11-16%, 15-21% and 18-25% of the demand for direct consumption of milk, eggs, and meat, respectively, remained unmet due to the shortfall in supply, adding that the survey focused on animal protein only. The supply shortfall has led to prices of protein-food contributing nearly 50% to overall food inflation in India. "Unless this shortfall is addressed, protein affordability in rural areas could be adversely impacted if wages undergo a correction from their current high growth trajectory," the study said. The study based onNational Sample Survey Organization data (NSSO), showed that nearly 17 million more rural households bought milk and milk products in 2009-10 compared to 2004-05 taking the proportion of rural households purchasing milk and milk products to 80% in 2009-10, almost 5 percentage points higher than 2004-05.

Similarly, the proportion of rural households purchasing egg, fish and meat increased to 62% from 58% over the same period. However, rural per capita consumption of milk, eggs andproteins continues to remain lower than its urban counterpart, reflecting a potential for significant further growth in rural demand for proteins.

Rural per capita (annual) consumption of milk in 2009-10 was 49.4 litres versus 64.3 litres in urban areas. For meat and eggs where per capita rural consumption stood at 5.7 kg and 20.8 eggs in 2009-10 as against per capita urban consumption of 6.7 kg and 32.1 eggs. It said that even if the share of rural households purchasing milk remains at the 2009-10 level, another 17 million more rural households would purchase milk and milk products by 2014-15. The study cautions that protein food inflation is likely to remain high unless the supply of milk, meat and eggs for direct consumption is increased to meet the growing demand.

Lack of effective cold storage infrastructure and adequate storage facilities have contributed significantly to the supply shortfall. "The decision to allow FDI in the retail sector would help develop a more effective cold storage chain, thus reducing wastage and increasing supply of highly perishable protein-foods," said D K Joshi, chief economist at Crisil.