News Excerpt:
The demand for cereals used directly in households is declining in India. Official statistics indicate that cereal production is exceeding total consumption, yet some additional factors remain unclear.
More About the News: Cereal demand for direct household consumption is declining in India, but it is increasing for usage in processed meals, animal feed, and fuel. Official data indicates that cereal production is exceeding total consumption, but there are still some unanswered questions about other indications.
Changing Pattern:
- The National Sample Survey Office's latest Household Consumption Expenditure Survey (HCES) report shows a steady decline in the monthly per capita consumption of cereals—from 12.72 kg to 9.61 kg in rural areas and from 10.42 kg to 8.05 kg in urban areas—between 1999-2000 and 2022-23.
- The overall per capita consumption has dropped from 11.78 kg to 8.97 kg during this period.
Disparity in data
- As per above data total annual cereal consumption by Indian households, in direct or home-processed forms, has only slightly increased from 148.4 million tonnes in 1999-2000 to 153.1 mt in 2022-23.
- In contrast, cereal production has significantly increased from 196.4 mt in 1999-2000 to 303.6 mt in 2022-23.
- The gap between officially estimated cereal production and HCES-based household consumption has widened from 48 mt in 1999-2000 to nearly 151 mt in 2022-23.
New Demand for cereals
- In India, while the demand for cereals for direct household consumption is declining, there is an increasing demand for their use in processed foods like bread, biscuits, and noodles.
- This trend is supported by data from official household consumption expenditure surveys (HCES).
- Furthermore, a large share of cereal grains is used for animal feed or industrial starch production.
- Cereals are also converted into alcohol and ethanol. Many sugar mills now have multi-feed distilleries that operate on cane molasses or grain, driven by the government’s ethanol blending program.
Export of cereals
- In 2021-22, India exported a record 32.3 million tonnes of cereal. While the export of cereals was 30.7 mt in 2022–2023.
- However, exports only account for a fifth of the 150 mt-plus difference between production and direct household consumption in 2022-23.
The Unexplained Surplus
- Adding together exports (32 mt), processed food consumption (38 mt), and usage for feed, starch, and fermentation (50-55 mt), the total annual cereal demand is estimated at 275-280 mt. This is significantly below the estimated 300 mt-plus domestic cereal output.
- The surplus is likely absorbed by government agencies and stored in the Food Corporation of India’s warehouses for public distribution system (PDS). PDS requires 59–60 mt of cereal per year for distribution.
High cereal inflation despite extra production
- If the agriculture ministry's cereal output forecasts are correct, the country produces at least 25 million tonnes of extra grain per year, putting downward pressure on market prices and potentially increasing government stocks.
- However, considering the current high rate of cereal inflation (8.69% in May) in spite of export bans and limitations, as well as the fact that government warehouse supplies are running low (16-year-low for wheat on June 1), one may question the accuracy of official output estimates..
