INDIA: LOW-KEY RESPONSE TO SEVERE SETBACK IN AGRICULTURE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700050023-0
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 12
• Document Creation Date: December 20, 2016
• Document Release Date: March 10, 2006
• Sequence Number: 23
• Publication Date: February 1, 1973
• Content Type: IM

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Confidential
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
India: Low-Key Response to Severe Setback in Agriculture
On file Department of Agriculture
1 release instructions apply.
CIA
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ER IM 73-25
February 1973
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96
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
February 1973
INTELLIGENCE MEMORANDUM
INDIA: LOW-KEY RESPONSE
TO SEVERE SETBACK IN AGRICULTURE
1. In spite of a serious setback in agricultural production in 1972,
India's leadership has avoided large-scale foodgrain imports by drawing down
buffer stocks and reducing government-subsidized food rations. Purchases
of foreign grain since December have been limited to less than 2 million
metric tons in the face of an expected decline in production of 9 million
or 10 million tons in the 1972/73 crop year.1
2. The government has drawn down foodstocks by about 6.5 million
tons. Much of the remaining 3 million tons may be unfit for human
consumption. Subsidized foodgrain rations in most parts of India have been
reduced to 50% or less of the normal level. Nonetheless, no reports have
yet been received of widespread starvation. The government apparently has
earmarked the limited imported foodgrains for the major cities, where public
unrest could erupt into anti-government agitation.
3. New Delhi's decision to limit imports is a calculated risk based
on a combination of high hopes for the spring harvest, a reluctance to
request concessionary foodgrains, an unwillingness to draw heavily on its
foreign exchange reserves, and the steep international prices for grain and
shipping. The decision does not preclude the purchase of small amounts
through discreet shopping on a fairly continuous basis. Purchases of corn
and grain sorghum in lieu of wheat are most likely in order to avoid
generating further price rises on world markets.
Note: This memorandum was prepared by the Office of Economic Research
and coordinated within the Directorate of Intelligence. Questions and
comments on this Intelligence Memorandum are welcome. The may be
directed to
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4. So far, the consequences of the drought have been alleviated
somewhat by government efforts (a) to redistribute grain from surplus to
deficit areas, (b) to increase the scope of the food ration system, and (c) to
underwrite public works programs for the rural unemployed. The general
result of the government's decision not to make a concerted and costly
effort to obtain more food from abroad is likely to be increasing consumer
dissatisfaction, growing criticism in the drought areas, and a widening
credibility gap regarding New Delhi's statements on the food situtation.
5. In mid-February 1973 large areas of central and western India
are experiencing acute shortages of food, water for drinking and irrigation,
and electric power. Near-famine conditions are being reported from some
areas, and several million people have already migrated to nearby cities and
other less affected areas. Scarcity of fodder and water is resulting in the
!oss of numerous draft animals. This memorandum describes the extent of
the drought, its effects on agricultural production and foodstocks, and the
government's efforts to cope with the severe food shortages. It also assesses
New Delhi's limited options with respect to imports of foodgrains.
Impact of the Drought on Agricultural Output
6. About 75% of India's agricultural production takes place during
the summer monsoon season, which normally begins in May or June and
lasts through September or October. Most areas receive about 80% of their
annual rainfall during this period. Only a few crops are grown during the
remainder of the year, mainly wheat, barley, some oilseeds, and minor rice
crops. Thus the success of India's crops depends on the timely arrival and
intensity of the monsoon. Late arrival delays planting and lowers yields.
Below-normal2 rainfall results in local crop failures during the summer and
insufficient moisture for planting the winter crop. Between 20% and 25%
of the cropped area has some form of irrigation, but some of this irrigation
fails unless the monsoon is adequate to fill the reservoirs and tanks, to
maintain the underground water tables, and to provide hydroelectric power
for irrigation pumps.
2. Normal is defined as the average annual rainfall for 1901-50. The Indian government, on the
other hand, officially considers annual rainfall within 20% of the 50-year average as "normal."
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7. The 1972 monsoon arrived late and rainfall was erratic throughout
the remainder of the monsoon season. Total rainfall from June through
September was below normal for all major agricultural areas. It was 20%-50%
below normal in areas of the country that usually account for more than
half of total foodgrain production. Rainfall was particularly sparse in six
states - Maharashtra, Gujarat, and Rajasthan and parts of Madhya Pradesh,
Karnataka (formerly Mysore), and Andhra Pradesh (see the map).
Maharashtra, in its third year of drought, is unusually dry. About
220 million people - more than one-third of India's population - live in
the areas affected by severe drought. Low rainfall has also severely
aggravated the chronic food shortage in Bihar. The current drought is about
as severe as the droughts of 1965 and 1966, which were centered in the
densely populated and intensively cultivated Indo-Gangetic Plain -- including
West Bengal.
8. Little more than a year ago, after victory in the war with Pakistan
and after five successive years of good crops, India announced its
achievement of self-sufficiency in foodgrains production. At the end of
1971, with buffer foodgrain stocks at about 7.5 million tons, New Delhi
ended the import of foodgrains on concessionary terms. During the first
half of 1972, the government even announced plans for exporting some
foodgrain and donated 850,000 tons to the new nation of Bangladesh.
9. The subsequent poor monsoon, however, dashed all hope for
self-sufficiency in the near term. Foodgrain output in 1972/73, even
assuming a good spring harvest, is projected at about 96 million tons (see
the table), 8% below 1971/72 and 11% below the peak year of 1970/71.
The fall-harvested foodgrain crop dropped 16% from the previous year.
Annual output of ^otton, jute, oilseeds, and sugarcane - important
industrial crops planted mainly during the monsoon season - also is
projected to decline sharply. Lack of moisture at the proper time reduced
both the area planted and the yields of each of these industrial crops.
Government Efforts to Combat the Drought
10. When the probability of a poor monsoon became clear last
summer, New Delhi finally began taking ameliorative measures with varying
degrees of success. Foodgrain prices already had risen sharply, rural
un, mployment was increasing rapidly, and rumors were spreading of deaths
by starvation in hard-hit local areas. Principal measures undertaken by the
government included (a) expanding the buffer stock program, (b) saving
as much as possible of the drought-damaged fall crop, (c) instituting a major
program to expand the forthcoming spring harvest, and (d) importing
foodgrains.
CONFIDENTIAL
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India: Production of Major Cropsa
1972/73
Percentage
Change Over
1970/71
1971172
1972/73b
1971172
1970/71
Foodgrains
108.4
104.7
96.0
-8
-11
Fall Harvest
68.9
62.0
51.8
-16
-25
Rice
39.6
39.3
33.0
-16
-17
Other grains
and pulses
29.3
22.7
18.8
-17
-36
Spring Harvest
39.5
42.7
44.2
4
12
Wheat
23.8
26.5
27.7
5
16
Other grains
and pulses
15.7
16.2
16.5
2
5
Oilseeds
9.2
8.4
N.A.
...
Of which:
Peanuts
6.1
5.7
3.8
-33
-38
Sugar cane
(Crude sugar)
13.0
11.7
10.6
-9
-18
a. The crop year is from 1 July to 30 June.
b. Preliminary.
Buffer Stocks
11. New Delhi first att3mpted to calm public fears by emphasizing
that buffer stocks -- about 9.6 million tons in government hands on 1 July
1972 - were the largest ever and would be ample for any emergency.
Procurement from the 1972 spring wheat crop was still under way, and
a procurement goal of 4.6 million tons was set for the fall crop, compared
with 3.2 million tons the previous year. Procurement did not go well,
however, because market prices for the diminished quantities of foodgrains
had risen above procurement prices. Despite levies imposed by the
government on traders and zonal restrictions on trade, the total amount
of grain actually collected from both spring and fall crops amounted to
4.6 million tons, compared with 8.3 million tons in the same period of
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1971. As a result, the grain released through the public distribution system
during July-December 1972 included about 6.5 million tons drawn from
the buffer stocks.
12. In order to extend its ration system to more of the needy areas,
the government increased its retail outlets for subsidized grain from 125,000
in July 1972 to about 164,000 in January 1973, compared with a previous
peak of 153,000 at the end of the 1965-66 drought. The monthly subsidized
ration per person was reduced to 8 kilograms (kg), about 18 pounds,3 from
its previous level of 12 kg. Even so, since December, various deficit states
have complained of receiving considerably less grain than they need, and
actual monthly rations in a number of areas have been less than 6 kg.
Some ration shops in severe drought areas have reportedly closed for long
periods for lack of any grain. Central stocks were officially reported at
3 million tons on 1 January 1973 and again on 1 February. Much of this,
however, is probably unfit for human consumption, consisting of grain
damaged by rain during the procurement process or spoiled during storage.
Saving the Crop
13. During July-December 1972 the government allocated about
US $370 million to help the states fight the drought damage to the fall
crops and to provide relief work. Crash programs to save the crops included
drilling wells and installing pumps for irrigation, providing loans for seed
and fertilizer, and giving priority to agriculture rather than industry for
scarce electric power. Relief projects were also planned to expand irrigation
facilities instead of the customary road construction as relief work. Lack
of equipment and technical expertise required to build irrigation facilities,
however, has resulted in the expenditure of less than half of the total
allocated funds, and most of the relief projects have involved simply
breaking up rocks for future road building. Nevertheless, at the end of 1972,
relief projects were providing some work and income for 4.2 million people
in severe drought areas, compared with about 2.5 million persons employed
on similar projects during the previous drought in the mid-1960s.
Boost for the Spring Harvest
14. In October 1972, in an effort to make up for the poor fall harvest,
New Delhi allocated $220 million to a crash program aimed at increasing
the 1973 spring foodgrain harvest by 15 million tons over the 42.7 million
3. This ration would provide about 900 calories per day per capita, roughly 40% of the average
caloric intake in India. Foodgrains normally represent about 70% of total caloric intake. In selected
areas, people with sufficient income can partly close the gap with free market purchases of grain -
reportc,' :) costing double the ration shop paice in some areas - sugar, vegetable oils, and home
grown vegetables. However, supplies of these and other foods have also been reduced by the drought
and their prices have increased sharply.
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tons of the 1972 spring harvest. In January 1973, however, the goal was
reduced to an increase of 6 million tons. The less sanguine US agricultural
attache in New Delhi has projected an increase of only 1.5 million tons.
Among measures to achieve the original goal, the government planned to
ensure that farmers had sufficient fertilizer, seed, plant protection, and water
to increase the land planted to high yielding varieties (HYV) of wheat to
12 million hectares from 7.5 million hectares the year before.
Notwithstanding these plans, a general shortage of water, electric power
for pumps, and chemical fertilizer has limited the HYV wheat area to little
more than 8.5 million hectares. Moreover, shortages of inputs will curb
yields on the hectares actually planted. Specifically, compared with original
goals of providing emergency irrigation to 1.5 million hectares and a total
of 2.2 million tons of fertilizer, the Ministry of Agriculture reportedly
provided water to only 500,000 hectares and made available only
1.5 million tons of fertilizer. India's fertilizer factories were operating at
about two-thirds of capacity in the last half of 1972 because of shortages
of raw materials, spare parts, and electric power. Moreover, earlier
commitments for fertilizer imports from East European countries were not
fully met, because those countries elected to sell surplus fertilizers for hard
currency instead of rupees. Finally, the United States suspended commodity
assistance at the end of 1971, which had included fertilizer as well as raw
materials and spare parts for fertilizer factories.
Purchases of Foreign Grain
15. In mid-November 1972 the government announced it would
import 1 million to 2 million tons of cereals, substantial quantities of
vegetable oils and pulses, and some upland cotton in order to build up
stocks. New Delhi apparently felt compelled to make the announcement
because of rising domestic food prices and widespread fears of drastic food
shortages. The public announcement, however, further increased world
prices in a grain market that had already tightened in the wake of large
Soviet and Chinese purchases. By the time India began to buy grain in
early December, it had to pay $97 to $100 per ton for wheat, compared
with a mid-November average world price of about $90 and a July price
of about $50. Shipping costs also had increased by about 30% - India
had to pay an average of about $17 per ton in December.
16. In mid-January 1973, according to the Minister of Agriculture,
total 'reign purchases amounted to about 2 million tons at a cost of
$200 :).illion. At the end of January, however, Indian officials in London
reported that only 1.5 million tons of grain had been purchased -- 1 million
tons of wheat and 500,000 tons of grain sorghum. Of the total,
810,000 tons were purchased in the United States, about 470,000 tons
in Canada, and 215,000 tons in Argentina.
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17. New Delhi had hoped that the imported grain would shore up
the rationing system until the spring harvest grains could be collected and
distributed, beginning in April at the earliest. It now seems that the bulk
of the deliveries will be delayed. Only about 200,000 tons will be delivered
in February and possibly another 500,000 tons in March and early April.
Because of unusual demands on world shipping capacity to move grain to
the USSR and the People's Republic of China (PRC) and owing to
consequent high charter prices, India apparently has only chartered about
40 ships with a total capacity of 600,000 tons. Moreover, a number of
these ships are scheduled to load in US Gulf ports, where in mid-February
most ships were being delayed up to a month by port congestion.
18. In mid-October 1972, apparently in anticipation of difficulties
in collecting foodgrains, the hierarchy of Mrs. Gandhi's Ruling Congress
Party decided that the wholesale grain trade should be in government hands.
New Delhi urged the food ministers in the various states to prepare a
takeover of wl ~,at and other winter grains trade beginning in April 1973
and of rice and other grains in November 1973, promising that the central
government would provide adequate financial support. Some state officials
voiced objections and doubts about their ability to handle the trade, but
it appears that the takeover will begin as scheduled. As yet, however, the
states have received no central guidance regarding key questions, and a
high-level committee of central and state government officials has been given
until '1 April 1973 to provide policy guidance and advise the central
government on the cost of the plan.
Some Implications of the Government's Policies
Toward Foodgrain Imports
19. New Delhi apparently hac decided not to re-enter the world
market until the outcome of India's spring harvest is clear. Government
officials have publicly stated that he situation will he reassessed in March.
High world grain prices, a desire to conserve foreign exchange, and the
arrival of timaly rains for the spring crops apparently have prompted the
Indian government to delay any decision on large-scale imports. Even if
New Delhi does not re-enter the market in March, it is likely to to so
in the summer, if only to improve its stock position and tide over the
ration system until the fall crops are harvested.
20. Mrs. Gandhi is taking a calculated risk with her "wait and see"
policies. The overall food situation is likely to continue to deteriorate at
least until the spring harvest, which begins in March in some areas but
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takes place mainly in April and May. Shortages of drinking water and
cutbacks in hydroelectric power also could become increasingly acute until
the monsoon rains begin in May or June. Even when the spring crop is
harvested, distribution problems may cause the situation to remain serious
in severe drought areas. Foodgrains already purchased abroad cannot arrive
soon enough or in sufficient quantities to permit much relief to even the
major port cities until the first part of April.
21. New Delhi has enough foreign exchange reserves to buy large
quantities of grain on a commercial basis, if necessary. For several years,
however, the government has restricted imports even at the expense of
economic development in order to build up reserves to more than $1 billion,
the equivalent of five months of India's total imports. Rather than making
a sharp departure from its present tight foreign exchange policies, the Indian
government probably would ask the United Nations to arrange food aid
on concessionary terms if large-scale imports became necessary.
22. Mrs. Gandhi's calculated risk includes the hope that inflation can
be kept under control. At the end of 1972 the wholesale foodgrain price
index had increased by 17.4%, compared with a year earlier, and prices
in drought areas had increased even more. Pulses, which have been
increasingly scarce for several years because of shifts of land to other
foodgrains, led the index with a 22% gain. The usual seasonal decline in
foodgrain prices during December did not occur and prices continued to
rise in January. The cuts in food rations and shortages in severe drought
areas led to similarly sharp increases in open market retail prices as well.
For example, Rajasthan market prices of coarse grains were reported to
be double the ration prices. In Calcutta, prices rose between 15% and 30%
during December alone. The industrial sector was faced with a 16% increase
in the index of raw material prices. The increase would have been even
greater if India had not had a substantial carryover of cotton fibers from
a bumper crop in 1971/72. In total, all commodities in the wholesale price
index increased by 12% during 1972 after showing increases of only 4%
annually in recent years.
23. The central government can expect increasing consumer
dissatisfaction, strong criticism in the drought areas, and a growing
credibility gap regarding the food situation. Apparently concerned about
the possibility of food riots, Mrs. Gandhi has been especially attentive to
the needs of the cities. Of the grain already purchased abroad, only 40%
is destined for Bombay, the closest metropolis to the drought area. The
remainder is destined for the other large cities, including Calcutta and
Madras. The rural areas will have to subsist on reduced food supplies and
hopes of getting at least some of the imported grain.
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