No. 55, March 2014

No. 55
(March 2014):

‘Let Them Eat Fat’

Are There Just Too Many of Us?

Industrial Wages: An Update

What the Fall in the Current Account Deficit Reveals

‘Let Them Eat Fat’

Official economists claim that increasing prosperity has diversified Indian diets. They tell us not to worry about the fact that people are consuming less cereals per head than before. After all, they say, Indians are now shifting to superior foods: “as households move up the income ladder, their expenditure on food shifts relatively towards proteins, fruits and vegetables and so on, which exacerbates demand pressures. Nobody would dispute this simple assertion. People eat better (as reflected in a more diversified and balanced diet) as they grow richer.”¹

Indeed, it is true that if people were growing richer they would be eating better. However, facts and figures about actual nutritional intake do not show that people are eating better (see Table 1).

Deteriorating diets
First, calorie intake per head has gone down in both rural and urban areas. Some pro-liberalisation economists claim that this is because the calorie requirements of the Indian people have declined with development. They say this even though figures show that people in more prosperous countries in fact consume far more calories than Indians do.

But the official economists are yet to explain an equally disturbing trend: falling protein intake per head (see Table 1). This latter decline has taken place because, for most people in India, cereals are the major source of protein, and cereal consumption itself has declined. At the same time, consumption of other sources of protein has not risen sufficiently to make up for this loss.

As can be seen from Table 2, consumption of pulses per head has declined; the same is true for meat, eggs, and fish (which are anyway negligible).² The consumption of milk has risen a little in urban areas; but, as already noted, total protein intake went down even in urban areas. This decline is particularly striking since per capita protein intake before the onset of neo-liberal economic reforms in 1991 was steady in rural areas and slightly rising in urban areas. (see Chart 1)³

Table 2 also makes clear that there has been a decline in per head consumption of vegetables, fruits, roots and tubers too. This is clearly a poorer diet, not “eating better”.

Rising intake of fats
Only one item of consumption shows a significant rise in both rural and urban areas: fats. Table 1 shows that consumption of fats rose between 1993-94 and 2009-10 by almost 22 per cent in rural areas and 14 per cent in urban areas. As a result, the share of oil and fats in total calorie consumption rose by three percentage points in both rural and urban areas.

Doesn’t the fact that people are eating more fats mean that they are more prosperous? No doubt, fat is essential to human diets. It provides energy and essential fatty acids to meet the body’s metabolic requirements and helps absorb fat-soluble vitamins. It is also true that higher income groups consume more fat per head than the poor do.

However, rising fat consumption in India is not an indicator of increasing prosperity. Rather, it has much to do with the different rates of increase of prices of different commodities. This has affected the way people, struggling to meet their basic needs, manage their budgets. The dramatic fall in the price of edible oil relative to other food items since 1994 is one of the reasons behind the increase in oil consumption. (Other factors include the growth of urbanisation and of migrant labour, which would increase the consumption of processed foods and of cooked food from restaurants/stalls.) This has helped fat consumption rise even as total calorie intake has fallen.

Open door policy for edible oils imports
What explains the relatively much slower growth rate of prices of edible oils? The story begins in 1994, with the establishment of the World Trade Organisation (WTO). The Indian government promptly abandoned its earlier Oilseeds Mission (which had promoted domestic production of oilseeds, and had thus virtually eliminated edible oils imports). With the establishment of the WTO regime, the Government brought edible oils imports under Open General License (i.e., removed non-tariff barriers to import), and reduced import tariffs drastically. Indeed, the Government reduced tariffs much below the levels required by the WTO.

Since palm oil from Malaysia and Indonesia was much cheaper than Indian edible oils, imports rose steeply (leading to a crisis for Indian growers of oilseeds, and stagnation in oilseeds production thereafter). Edible oils imports rose from around 0.35 million tonnes in 1994-95 to 8 million tonnes in 2009-10. They are estimated at 10.5 million for 2012-13 (November 2012-October 2013). India now depends on imports for 58.5 per cent of its edible oil requirements. The consumption of palm oil in India was very low before 1994; it now constitutes nearly half of all edible oil consumption in the country.

Meanwhile, as a result of State policy, agricultural investment in India went into a steep decline  in the 1990s. Notwithstanding some improvement in recent years, it has remained grossly inadequate. Thus overall agricultural output has lagged well behind the nutritional requirements of the vast majority of people. Moreover, the system of distribution has become increasingly perverse. Crucial to this process was the drastic reduction of the public distribution system (PDS) from 1997 on (with the introduction of the ‘Targeted’ PDS). Public and private distribution between them failed to deliver at affordable prices even such food commodities as were available.

Edible oil was the lone exception. As can be seen from the chart below, the prices of most food items rose steeply since 1994; but the average price of all edible oils grew much more slowly. This was because the wholesale price of imported edible oils (shown separately in the chart) actually fell.

Cheap imported edible oil has had certain seeming benefits. In the period since 1994, the growth of fat consumption has been fastest among the lower income groups; growth of fat consumption slows down as one goes up the income ladder. For the top 10 per cent, fat consumption has actually fallen in recent years.⁴

However, as can be seen from the actual pattern of consumption depicted in Tables 1 and 2, India’s open door policy for edible oil imports has not served the cause of improving people’s diets. Rather, diets have continued to deteriorate with respect to everything but fat.

What would have happened had the rulers not opened up to cheap edible oil imports? Given the overall policies being implemented, edible oils prices in India would, no doubt, have been much higher. Without the cushion of cheap oil, the overall price level would have risen even more steeply, consumers would have had an even more difficult time meeting their food requirements, and the Government of the day would have had to face sharper public anger.⁵

This could have been avoided by encouraging adequate production of oilseeds domestically and providing edible oil through the PDS. However, this would have gone against the Government’s liberalisation and globalisation policies. In a sense, then, the edible oil import policy merely facilitated successive Indian governments’ neglect of investment and growth in agriculture, and weakening of the PDS.

Of course, this cushioning was accomplished at a heavy cost in foreign exchange – $11.2 billion in 2012-13, a near-doubling in just three years (see Table 3). And given the scale of dependence on imports – now nearly 60 per cent of domestic edible oil consumption – India is very vulnerable to any sharp increase in international edible oils prices in future (e.g., with increased diversion to bio-fuels, a sudden depreciation of the rupee, or any change of policy in edible oil-exporting countries).

Moreover, palm oil is very high in saturated fats, and has been associated with increased mortality rates for heart attacks in low and middle income countries. A recent study attempted to mathematically model the effects of a 20 per cent excise tax on palm oil for domestic consumption; it claimed that it would avert between 7,10,000 and  9,30,000 deaths from heart attack and stroke (a 2-3 per cent reduction) over the period 2014-23.⁶

An increase in domestic production is no doubt feasible through improved yields of oilseed crops, which in India are low today at 50-60 per cent of the world average. There is a large gap between the actual yields obtained and the yields demonstrated at the farm level with existing crop technologies already available in the public sector.⁷ And of course, this must be part of a general improvement in agricultural investment and production, the system of food distribution and hence people’s diets. However, none of this is on the cards. As long as the cost of the present policies is silently borne by the people, there is no likelihood of any change.

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