In an earlier article, we drew attention to India’s ‘cereal gap’: a large difference between the net availability of cereals and household consumption. Here, net availability refers to net production (gross production minus a ballpark allowance for feed, seed and wastage) plus net imports minus changes in public stocks. Until 2008 or so, there was little difference between net availability and household consumption. In other words, cereal production was almost fully accounted for by known uses of it. Since then, however, the cereal gap has grown by leaps and bounds.
Today, cereal production is around 300 million tonnes per year, and net availability is above 250 million tonnes if we accept official figures for net imports, changes in public stocks and the “feed, seed, wastage” (FSW) allowance. What about household consumption? In our earlier work, we took 12 kg per person per month as a generous upper bound for per-capita cereal consumption in 2022-23, based on an extrapolation from earlier trends. Using that benchmark, we estimated the cereal gap at a minimum of 45 million tonnes in 2022-23.
Recent consumption data, however, suggests that the gap is actually much larger. According to the latest consumption survey conducted by the National Sample Survey Office (NSSO), per-capita cereal consumption was just 9 kg per person per month in 2022-23 – 9.61 kg and 8.05 kg per person in rural and urban areas, respectively. Assuming that India’s population was around 138 crore at that time, as projected by the National Commission on Population, total household consumption of cereals would have been around 150 million tonnes in 2022-23. This implies a cereal gap of more than 100 million tonnes.
Annual estimates of the cereal gap are presented in the graph below. Here, per-capita cereal consumption is assumed to decline linearly from 11.6 kg to 10.7 kg per person per month between 2004-5 and 2011-12, and then again from 10.7 kg to 9.1 kg per person per month between 2011-12 and 2022-23 – the NSSO estimates for these years. As the graph shows, the cereal gap started growing quickly from around 2008 onwards. The graph ends in 2022-23, but provisional statistics for 2023-24 suggest that the cereal gap will be above 100 million tonnes again this year.
It is worth noting from the graph that aggregate household consumption of cereals has been hovering around 150 million tonnes per year for many years. This is because population growth is compensated by the decline in per-capita consumption. Meanwhile, cereal production is increasing steadily at around 2.5% per year in the last 10 years. One outcome of this imbalance is a massive increase in cereal exports: more than 30 million tonnes per year in 2021-22 and 2022-23. Another outcome is the persistent tendency of public stocks to balloon way above the norms. Even after taking all this on board, 100 million tonnes of cereals are still unaccounted for – every year.
Cereals, of course, have other uses than household consumption. Expert studies suggest that there is a case for doubling the feed component of the FSW allowance, from the traditional 5% of gross production to 10%. That would knock off 15 million tonnes from the cereal gap. Using production estimates from Statista.com and related sources, we can plausibly knock off another 8 million tonnes for grain-based ethanol production in 2022-23, one million tonnes for beer, and one million tonnes for “biscuits, bread, buns, cookies and croissants”. These are all upper bounds, especially for ethanol as its grain allocations are partly reflected in the Food Corporation of India’s estimates of changes in public stocks. Adding all this up, and deducting the total from 100 million, we still have an unexplained cereal gap of 75 million tonnes.
That’s a humongous quantity – enough to feed half a billion people for a year, or the entire population of Gaza for 250 years. By the same token, further allowances for “indirect” cereal consumption such as restaurant meals are unlikely to be of much help in explaining the cereal gap.
Could it be that cereal production figures are exaggerated? The basis of these figures calls for urgent scrutiny. It would be surprising, however, if they were consistently off the mark by more than 10%. Even at that rate, inflated production would not explain much of the cereal gap.
There is a related puzzle: if India is awash with cereals, as the cereal gap suggests, then why are cereal prices rising fast? The year-on-year inflation rate for the cereal component of the Wholesale Price Index was 12.1% in October 2022 and 7.5% in October 2023 – considerably higher than the WPI for all commodities in both cases. The cereal market, it seems, does not work in textbook demand-supply fashion.
As discussed earlier, the cereal gap is not just a statistical puzzle. For purposes of forward planning and price policy, India needs reliable estimates of cereal production and its uses. How are minimum support prices to be sustained if cereal production continues to grow much faster than household consumption? Is it possible and desirable to prolong, if not amplify, the recent binge of cereal exports? Has the time come for a major effort to diversify Indian agriculture away from rice and wheat? These and related questions are difficult to answer in a data fog.
There is another reason for concern. What if the cereal gap hides a scam of some sort? It looks like there is a “hidden guzzler” of cereals somewhere in the economy. Why would the guzzler hide, if the deed is above board? Hopefully, time will tell.
Jean Drèze is Visiting Professor at the Department of Economics, Ranchi University.
Christian Oldiges is Senior Economic Affairs Officer at the UN Economic and Social Commission for Western Asia.
