Income Inequality Threatens Food Security in India

16 May 2018 Andrew Thomson, Research Assistant, Global Food and Water Crises Research Programme

Background

Away from the bright lights of Mumbai and Bangalore, 660 million Indian farmers struggle to achieve food security in the poverty-ridden countryside. The battle to achieve food security is one of the most pressing issues facing India today. Despite strong economic growth, the prevalence of undernutrition fell only slightly from 210.1 million in 1990 to 190.7 million in 2016. India’s poor food security is reflected in the Global Hunger Index, where in 2017 it was ranked 100 out of 119, ahead of only Pakistan and Afghanistan in South Asia.

According to the World Bank, India will only have achieved food security when:

  1. There is enough food available to meet people’s needs.
  2. People have access to food under normal conditions.
  3. Volatility in production or prices does not threaten this availability.
  4. The quality of the food people consume is adequate for their needs.

It is the rise in income inequality, rather than the unavailability of food, which is the main driver of food insecurity in India. The bottom half of the population saw only a one per cent increase in their wealth in 2017, while the richest one per cent captured 73 per cent of India’s national income. As the growing urban upper- and middle-classes demand more diversified and protein-rich diets, large tracts of farmland will continue to shift from cereals to high-value agricultural commodities. That is likely to increase the price of cereals and other basic agricultural goods and further reduce food security among those living in poverty.

Comment

The high level of income inequality has effectively partitioned India into two countries. One comprises modern high-rises in major urban centres, the other is the backward countryside, where a lack of alternative livelihood opportunities, small farm sizes and the rising price of water threaten the food security of its residents.

According to a new research paper, inequality in India is at its highest level since 1922. It estimates that the Gini coefficient rose to 51 in 2017 from 45 in 1990. The Gini coefficient measures wealth distribution in a country on a scale of 0-100, where 0 represents complete equality and 100 complete inequality. Other estimates based on different economic data, however, indicate that while inequality has increased in India in recent decades, it is not as high as the research paper suggests.

The rise in income inequality coincides with the liberalisation of the Indian economy, which occurred in 1991 after an International Monetary Fund bailout. Decades of protective tariffs have made the Indian manufacturing sector uncompetitive against its East Asian rivals, but the new trade and investment freedoms have supported the growth of the services sector.

Though the development of service industries has done much to promote economic growth and the emergence of an Indian middle-class, the industry does not create as many jobs as the agricultural and manufacturing industries. Furthermore, it only benefits highly skilled workers and those in urban areas. The promotion of the services sector is a significant driver of income inequality, as rural and uneducated Indians are unable to directly benefit from it.

Another prominent cause of income inequality is the scarcity of arable farmland in proportion to the size of India’s rural population. In 2017, the average land holding was 1.15 hectares, but 67 per cent of India’s farmland is held by farmers who possess less than one hectare. These statistics suggest a large income disparity, not just between urban and rural populations, but also among farmers themselves.

According to the Indian National Sample Survey Office, farming households require a minimum of one hectare of farmland to achieve food security through subsistence farming. The large number of families that farm less than one hectare, creates a situation where a large segment of the population can no longer rely on subsistence farming to provide food security.

The additional burden of high water prices, on top of already crushing debt, will likely see the sale of many small holdings to those who wish to accumulate land to produce higher-valued agricultural goods, instead of staples like rice, wheat and maize. As more people cease to practice subsistence farming, there is likely to be an increase in the commercialisation of the Indian agricultural industry. That is likely to further shift the focus of the industry from promoting food security among the local population, to exporting agricultural products to either high-income urban centres or overseas markets..

It is here that India’s biggest food security issue lies, India is capable of producing enough food to feed its entire population, but in the face of rising income inequality, not everyone can afford it. As demand for high-value agricultural products continues to rise among the small Indian upper- and middle-classes, more farmers will reduce their production of less valuable staples to meet that demand. That, in turn, will push the price of these staples to a level that the majority of Indians, especially the bottom 50 per cent, will struggle to afford. As history shows, when people are hungry and income inequality is high, civil disturbances and social unrest often occur.

In response to the growing food security problem, the Indian Government announced a seven-point plan in 2017 to double farmer’s income by 2022; primarily through greater government assistance to farmers in the form of infrastructure provision, education and reforms in agricultural marketing. Whether this ambitious scheme is able to raise rural incomes and provide greater food security remains to be seen.

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