Are Food Grain Stocks Alarmingly Low?

By: Sutanu Guru

The last time India confronted a genuine food shortage crisis was arguably in 1987 when failed monsoons had led to dangerously low levels of stocks

Two factors have raised concerns that food grain stocks in India will be at very low levels in 2022, and even up to March, 2023. First, erratic monsoons have more or less guaranteed that the Kharif harvest will drop from 115 million tons in 2021 to less than 105 million tons in 2022. Second, the Narendra Modi regime has extended the free food grain scheme(officially known as Pradhan Mantri Garib Kalyan Anna Yojana) till December 2022. The massive welfare scheme that directly benefits 800 million Indians was set to expire by the end of September. The extension means a further depletion of food grain stocks. But is the situation really alarming?

An exclusive story written by Harish Damodaran for the front page of The Indian Express on 14th october with the headline: ‘Wheat, Rice Stocks Hit Five Year Low, Wheat Only A Little Over Minimum Buffer’ has triggered a mini debate on social media. The story goes on to analyse how ‘cereals and products’ retail inflation rate at 11.53% in September not only reflects growing anxieties about shortfalls but also the fact that this s highest rate of inflation since the new Consumer Price Index was unveiled in 2012. Amid reports of downgraded GDP growth rate forecasts, shrinking exports and an actual decline in the Index of Industrial Production in August, the possible spectre of food shortages does draw attention of economists and analysts.

According to data available with the Food Corporation of India, the minimum required “buffer” stock of wheat is about 20.5 million tons while the total stocks available in FCI godowns currently is 22.76 million tons. Since the next wheat harvest will be due in March next when the Rabi crop enters the market, there could be a danger of wheat stocks falling below the minimum required level.

There can be no doubt whatsoever that food grain stocks have declined precipitously in 2022. As the chart will indicate, food grain stocks declined from 72.16 million tons in October 2021 to 43.20 million tons in October this year. Incidentally, 2021 October saw the highest levels of stocks in the last six years. But does this fall mean India is headed for a food shortage crisis? 

The last time India confronted a genuine food shortage crisis was arguably in 1987 when failed monsoons had led to dangerously low levels of stocks. But there are two reasons why any apprehensions about India facing a food shortage crisis may be overblown. The total annual consumption of wheat and rice in India is around 205 million tons. The current stocks are 43.20 million tons. Add another 105 million tons of Kharif harvest and one is looking at close to 150 million tons. With average monthly consumption of about 17 million tons, India will need a little more than 100 million tons between now and March 2023 when the Rabi harvest will start coming in. So it would be sensationalism to suggest that India is entering a phase of food grains shortage crisis. Even The Indian Express says that “the overall cereal stocks position was relatively comfortable”.

More important, booming tax revenues have given the government ample fiscal room to further extend the free food grains scheme for 800 million citizens if food inflation rises further. Its time to think ahead yes, but not to needlessly panic.