A recent article in the Economic and Political Weekly journal looks at the impact of response measures to manage COVID-19 on India’s food system. India and many of its neighbours have been under lockdown since 23rd March, and this is set to be maintained until at least 30th April. This unprecedented state of lockdown, at the national level, is impacting on the food system in various ways. A group of researchers and practitioners from diverse sectors have contributed to the piece, including Dr Avinash Kishore from IFPRI. They focus on five key elements of the food system that are being impacted.
Food supply chains are being disrupted due to locally imposed prohibition of movement, even though food is on the list of essential commodities that should be allowed to move freely. This is causing disruptions in both intra and inter state movement of food. Along with imposing price controls, these factors are hampering the effective operation of the food system. Letting markets operate by removing such impediments would be a better solution.
Another major problem is the scarcity of labourers who are crucial to processing, moving and distribution of food. Without them, many of the physical operations in the food system cannot be undertaken, and so the system grinds to a halt.
A widespread credit freeze is being experienced across the financial sector, both in formal and informal lending spheres, caused by fear of disruptions to cash flow and significantly reduced demand. Financial institutions have become extremely risk averse. Repayment rates have declined sharply in the microfinance sector. Digital lending cannot happen without the backup of the bigger institutions. Lending against agricultural commodities that usually increases after harvest cannot be undertaken because stocks cannot be physically verified due to travel restrictions. Even where warehouses are in theory allowed to be open, local law enforcement and a lack of labour are disrupting normal processes.
Food demand is changing, with a loss of income for both rural and urban consumers; and closing of restaurants and hotels influencing the kinds of food people are buying. Staple foods remain important, but demand for high value commodities like milk, fruit and vegetables and meat, fish and eggs is declining because their consumption is linked to both income levels and price of goods.
Pessimistic market sentiments persist not only due to the current lockdown, but associated with the uncertainty of how long it might last; and the ability of the economy to recover.
The article identifies the immediate challenge as being the need to restore food supplies and ensure the purchasing power of poor households while still protecting the population from the health risks of the coronavirus itself. The ability of the Indian food system to function well has regional implications, since other south Asian countries are connected through formal and informal trade, and all countries are facing disruptions to their own supply chains.
The article is on line here. For more information, please contact Avinash Kishore ([email protected]).