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2 Food and Energy Security for Development in India Ashok Gulati & Kavery Ganguly Presentation at Third IBSA Summit Academic Forum IBSA Partnership for Shared Prosperity and Inclusive Globalization 13 th October 2008, Hall No. 3, Vigyan Bhavan, New Delhi, India Tuesday, October 14, 2008

3 Introductory Remarks Food & Energy security: crucial issues for developing countries like India Recent spike in food & fuel prices has heightened that concern How can these be addressed domestically? What is the role of trade (bilateral & multilateral) in ensuring food-fuel security? Can South-South (SS) business & trade links be instrumental? Page 3

4 Food Security~ definition A situation that exists when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life - FAO 2002, The State of Food Insecurity in the World Page 4

5 Elements of Food Security Availability of food at national level: through domestic production and/or through imports (question of import capacity and Foreign Exchange Reserves) Access to food at HH level: issue of purchasing power. Access at intra- HH level: more an issue of gender discrimination and sociology at HH level Absorption of food: clean drinking water, environmental hygiene and primary health care Page 5

6 Availability of food at national level India India is largely self-reliant in food Net exporter of cereals (marginal..3-4 million tons of rice, and some times wheat..) Biggest agl. Imports: edible oils and pulses Big ticket agl. Exports: oil meals, fishery, cereals, cotton, sugar, tea/coffee,. Agl. Exports almost double of agl. Imports Foreign exchange reserves ($280 billion plus) enough to import and ensure availability of food Page 6

7 Problem is largely at Household level: Declining Poverty Ratio in India, but still counting 300 million plus below poverty line (2004/05) million nos percent population below poverty line (million nos) poverty ratios (percent) Source: Planning Commission Page 7

8 Where are the poor in India? Head count ratio by Major States ( ) Orissa Bihar Madhya Pradesh Uttar Pradesh Maharashtra Tamil Nadu Karnataka West Bengal Rajasthan Assam Gujarat Andhra Pradesh Kerala Haryana Himachal Pradesh Punjab Jammu and Kashmir Source: Planning Commission Note: Bihar, Madhya Pradesh, and Uttar Pradesh include the reorganized states of Jharkhand, Chattisgarh, and Uttaranchal, respectively Page 8

9 Regional breakdown of poor: (1981; 2005) China shows the way. (total population living below $1.25 a day = million) (1981) (total population living below $1.25 a day = million) (2005) 11% 3% 6% 15% 7% 27% 9% 44% 10% 33% 22% 13% China Rest of East Asia and Pacific India Rest of South Asia Sub-Saharan Africa Others China Rest of East Asia and Pacific India Rest of South Asia Sub-Saharan Africa Others Source: Chen and Ravallion, Aug 2008 Page 9

10 Yet bigger problem is in Children s Nutritional status: India (NFHS) Percentage of Children under age Stunted (too short for age) Wasted (too thin for height) Underweight (too thin for age) NFHS1: NFHS2: NFHS3: Source: National Family Health Survey, Ministry of Health and Family Welfare, GOI Note: Data for the year are provisional Page 10

11 Rising Food & Energy Prices International Commodity Prices US$/ton US$/barrel Maize (US No.2, Yellow Rice (White Rice, Thai 100% ) Palm Oil* (mainly Indonesian, 5% ffa) Crude Oil** Wheat (US No.2, HRW) Sugar Soya oil* (Dutch, fob ex-mill) Page 11

12 Agricultural Growth & Poverty Reduction GDP growth originating in agriculture is at least twice as effective in reducing poverty as GDP growth originating outside agriculture (World Development Report 2008, World Bank) for China~3.5 times effective for Latin America~ 2.7 times effective for India-??? Page 12

13 Global Poverty Scenario ~ what do we learn from China story?? (focus on agl. first ) Regional breakdown of headcount index for international poverty line of $1.25 a day Percentage China India Sub-Saharan Africa Source: Chen and Ravallion, Aug 2008 Page 13

14 Food security: Looking beyond food grains (India: Diversifying Production Patterns) 2.7% 20.3% 31.1% TE % 14.1% Fruits&Vegetables 26.4% Foodgrains Other Crops Livestock 31.7% Fishery 27.8% TE % Fruits&Vegetables Foodgrains Other Crops 24.7% Livestock Fishery Source: Calculations based on price series obtained from National Accounts Statistics (back series 1950/ /2000), 2007 & National Accounts Statistics 2008, Central Statistical Organization, Government of India Page 14

15 Diversifying plate and plough towards HVA means Business opportunities for the private sector Greater role for the private sector all along the value chain. India largest producer of milk, but processes only 18% through organized sector.. Second largest producer of F&V, but processes less than 2% (post harvest losses 25-30%) Needed: large scale private sector investments in logistics, cold storages, modernization of agl. markets, processing and organized retailing Page 15

16 Food-Fuel Tradeoff ~role of bio-fuels Recent price spikes have been attributed to increased demand for bio-fuels to a large extent Accounts for 30% of the rise in weighted average of grain prices 39% of increase in real prices of corn 21% of increase in prices of rice 22% of increase in prices of wheat as per IFPRI study (Rosegrant, 2008) This has a widespread implication, particularly on the ~food security of the poor ~use of natural resources (land, water, etc) for production of fuels Page 16

17 Why Bio-fuels for India? ~ rising energy requirements & beyond Presently, India imports more than 70% of its crude oil needs (Annual oil import bill USD 61.2 billion (April- February )). World energy requirements are likely to be 50% higher in 2030 than today & 45% of this is likely to orignate from China and India together (Executive Summary,page 3,World Energy Outlook, 2007). Growing environmental & climate change concerns Page 17

18 India s Ethanol policy from molasses/sugarcane Policy of 5% blending since 2003, spread to all states in 2007, to increase to 10% blending from Oct. 2008, but...government developing cold feet Leading producer of sugarcane (356 mn tons in ), but in likely to be 20-25% lower... Also, unlike Brazil, sugarcane in India is primarily irrigated crop & highly subsidized in terms of power & irrigation subsidies (3% of the cropped area in Maharashtra under sugarcane uses more than 60% of its irrigation water) ~triggers food-fuel trade off Page 18

19 Potential South-South Business & Trade Links Biotechnology for pro poor growth Bt cotton revolutionized cotton production in India Energy sector (ethanol) Transfer of final products depending on dd-ss situation & cost effectiveness (IBSA to join hands to create a global market for Ethanol) Utilizing land & water abundance (as in Brazil) Trade in soya and pulses But much more potential in investments in agro-value chains (logistics, processing, and retailing) Page 19