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Inventory Restocking
Government stimulus and Indian restructuring
COVID-19 and its attendant complications, has challenged many countries food security initiatives. India, with is large population of migrant workers, is no exception, and the Government’s response has drawn praise in ensuring the availability, accessibility and utilization of food continues broadly uninterrupted.
As of early March, the availability of food grains in the country remained well supported with 4 million tonnes of grains and 3 million tonnes of pulses in national storage. However, it has been been other perishable commodities, such as fruits, vegetables, eggs, meat and milk, constituting nearly 78% of total food consumption, which have been in shorter supply. Moreover, declining demand from falling incomes has had a consequent impact in production income to farmers, traders and consumers.
That said, agriculture has shown has been significantly more resilient, when considered against other sectors in the Indian economy. The country's farmers have managed to successfully harvest winter crops and have even sold summer crops, despite some of the shortage supplies in inputs such as fertilizer that characterize the current procurement environment. It’s inevitable given border closings and restricted movements in transportation, that there would be disruption to supply chains. Notably, this has been more pronounced at some of the private ports rather than the government owned ports, (which we operate in), which have remained open.
As of early March, the availability of food grains in the country remained well supported with 4 million tonnes of grains and 3 million tonnes of pulses in national storage. However, it has been been other perishable commodities, such as fruits, vegetables, eggs, meat and milk, constituting nearly 78% of total food consumption, which have been in shorter supply. Moreover, declining demand from falling incomes has had a consequent impact in production income to farmers, traders and consumers.
That said, agriculture has shown has been significantly more resilient, when considered against other sectors in the Indian economy. The country's farmers have managed to successfully harvest winter crops and have even sold summer crops, despite some of the shortage supplies in inputs such as fertilizer that characterize the current procurement environment. It’s inevitable given border closings and restricted movements in transportation, that there would be disruption to supply chains. Notably, this has been more pronounced at some of the private ports rather than the government owned ports, (which we operate in), which have remained open.
Many governments, and India is no exception, have undertaken massive inventory restocking programs, particularly given the significant price spread that has emerged between wholesale and retail prices being faced by consumers at the checkout. Stability in food prices will be driven by its availability, which of course depends on how the contagion in controlled, and the degree to which freedom of movement in goods and services in restored.
India was quick to institute a massive national stimulus program, benefitting 800mn people including the distribution of foodstuffs, including ghee, xxx, xx, xxx
Cognisant that health is underpinned by nutrient rich diets, large swathes of the population, without subsidized food supplies are forced to take on food that is available, and typically less healthy, than what would be considered they habitual diets.
The Indian government has also moved quickly to enhance social safety programs, direct benefit transfers such as cash, and advancing disbursements, including social security payments, and pensions. Between ensuring liquidity and providing foodstuffs reach all corners of the country, the vast majority of the population has fared well during the pandemic.
The crisis has also catalysed other more longer term measures as well – upgrading health infrastructure and adjusting public policies and programs to encourage greater NGO and private sector involvement in the agricultural sector.
India’s Stimulus Package in numbers:
India’s Stimulus Package in numbers:
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National Stimulus
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Wheat & rice p.p.
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Cooking Gas Cylinders
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Senior Citizens
Ultimately, our role is to ensure commodities move from areas of surplus, to deficit, and teaming up with
co-operative governments ensured that a nation which accounts for 17.7% of the world’s population did not go short of vital food stuffs.ARIA Commodities
Many of these have not necessarily been welcomed by the farming community at large, and will need to gain buy in from a number of stakeholders, which may be resistant initially. For example, some of the changes include de-regulating agricultural marketing, encouraging contract and corporate farming and allowing for bulk storage of essential commodities by private warehouses.
Such changes have already met with resistance. Many farmers view these incentives are finding favour with some of the private trading companies, rather than supporting existing arrangements, which provides minimum prices for agricultural produce having assessed productivity and outputs.
As one of the private trading companies, we are sensitive to some of these concerns, and given that the majority of farming units are small in terms of their operations, wholesale deregulation could easily be seen to transfer greater control of food inventory, hence the supply chain and pricing to the private sector. The government in that respect, could be seen to have lesser influence over the sector, meaning less protection afforded to farmers.
Ultimately, the government's thinking in this regard is well intended – it recognises that the private sector can react more dynamically to crises, such as COVID-19, even though to date the Indian government's response has been broadly lauded. In our view, from the perspective of agricultural value chain actor, we were pleased to be to support the government's restocking efforts. There is always a balance to be struck, allowing private trading companies to rapidly respond to global crises support initiatives, whilst retaining a balance whereby governments can ensure social security programs and widespread stimulus underpinned by food restocking reaches those who most readily need it. Ultimately, our role is to ensure commodities move from areas of surplus, to deficit, and teaming up with co-operative governments ensured that a nation which accounts for 17.7% of the world’s population did not go short of vital food stuffs.