Millennium Post

2/3rd of protein food demand driven by rural India

Rising income levels in rural areas have led to an unprecedented demand for protein-based food items, leading to sustained pressure in headline inflation, says a Crisil report. ‘Rising incomes in rural areas are fuelling greater spends on protein products such as milk, eggs and meat in the hinterland. Overall spending in the country on protein food doubled to Rs 2 lakh crore in 2009-10 from 2004-05. Two-thirds, or Rs 1.33 trillion, of this came from rural households,’ according to the Crisil report.

The report warned that while more and more rural population is getting protein in their diets, the concern is that supply shortages are driving up prices and impacting overall food inflation. Overall, the report said that households spent Rs 2,02,700 crore in 2009-10 compared with Rs 96,100 crore in 2004-05 on animal-sourced protein food, namely milk, meat, fish, and eggs.

It further noted that with the rising incomes and population growth, nearly 1.7 crore more rural households have bought milk and milk products in 2009-10 compared to 2004-05, taking the proportion of rural households purchasing milk and milk products to 80 per cent in 2009-10, almost 5 percentage points higher than they did in 2004-05.

Similarly, the proportion of rural households purchasing eggs, fish and meat rose to 62 per cent from 58 per cent over the same period, the report said.

The report further said in 2009-10, almost 20 per cent of the demand for direct consumption of milk, eggs, and meat was unmet due to the shortfall in supply, which further fuelled inflation.

For the first time in many months, food inflation came down to single-digit in August at 7.5 per cent, while overall headline inflation inched up a tad to 7.81 in the month. Food inflation stood at a high of 10.5 per cent in May. The persistently high inflation has been forcing the Reserve Bank to hold interest since April.

The contribution of protein-food inflation (animal proteins: milk, eggs, fish and meat) to overall food inflation has risen from 23 per cent in 2005-06 to over 50 per cent in 2011-12, the report said.

‘Since 2009-10, there has been a sustained divergence between inflation in protein foods and inflation in other food items. Unlike other agricultural products, the supply of protein foods does not depend directly on the monsoons. Hence, good rain falls do not help in alleviating the upward pressure on protein-food prices. If protein-food inflation continues to remain high, it would keep overall food inflation high, and, therefore, raise inflationary expectations further,’ says the report.   
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