Horticulture output exceeds cereals for first time
Given how consumption patterns have changed away from cereals, among even the poor, it is appropriate that, for the first time, India’s horticultural production has exceeded that of foodgrains. As compared to 255 million tonnes of foodgrains production in FY13, horticulture production rose to 269 million tonnes. Though preferences for foodgrains had started falling in the 1990s, it accelerated in the last decade. From 24.2% in FY94, the proportion of household expenditure on cereals fell to 22.2% in rural areas in FY00 and then to 12% in FY12; for urban areas, the fall was from 14% to 12.4%, and to just 7.3% in FY12. The problem, however, is that though the production of fruits has risen 4.4% per year since FY10 and vegetables 6%, this is still much lower than the 13.6% increase in nominal per capita income. Over a longer period of time, the equation gets worse, which is why it is not surprising that food inflation has been rising the way it has—while WPI cereals inflation rose 7.2% on average over the last 5 years, fruits WPI rose 8.6% and vegetables by 13%.
Despite rising demand, fruit and vegetable supplies have grown slowly because the current MSP structure assures farmers a steady income in certain crops like cereals while fruit and vegetable prices remain prone to large fluctuations. Moving to a per acre subsidy instead of the current MSP-based intervention will help as this will free the farmer to grow what he wishes to.
More than that, however, a mechanism is needed to stabilise horticulture prices. Organised retail has been seen as a possible means to that—it is only with large buyers in place that, for instance, large cold chain networks can come up in the backend. But since organised retail, of fresh fruit and vegetables especially, hasn’t grown fast enough, and its future looks a bit iffy given the anti-FDI mood—especially in the BJP—it is best not to pin one’s hopes on this. A more important measure, propagated extensively by ex-CACP chief Ashok Gulati, is to move to lower-cost methods for food processing—as compared to 65% in the US, 78% in the Philippines and 23% in China, just 7% of Indian perishable products are processed, leading to huge waste. Gulati’s solution is simple dehydration of fruits and vegetables—this lowers their weight and improves shelf life to 1-2 years, eliminating the need for expensive cold storage solutions. A vital prerequisite for this to spread is elimination of expensive mandi taxes/commissions, keeping other taxes to a minimum and to remove this from the category reserved for SMEs. It is only large players that can do branding and have the necessary muscle to create the necessary all-India farm-to-fork chains—SME suppliers can feed into these larger players, making it a win-win outcome for everyone.