Thalinomics: The Economics of a Plate of Food in India

by Gaurav Pallod

Introduction


We have the Consumer Price Index, Wholesale Price Index, The Producer Price Index, etc. Why do we not have a price index which measures the price of food?


That would be the most natural and relatable index for the aam aadmi ("common man"). And that is exactly what the Central Government chose to do in their annual Economic Survey publication of 2019 - 20. This provided information regarding inflation in layman’s terms.


It compares the prices of a vegetarian and a non-vegetarian Thali, from all different states, over the last 5 years. Also, the components of this Thali are food and beverages, which make up 45.6% of the Consumer Price Index.


What is the use of this?


One reason why studying this ‘Thalinomics’ is important because the demand for food is highly inelastic. So even if the price increases, the quantity demanded is hardly going to decrease because food is a necessity. It might become a major exploitative force - pushing people below the poverty line.


The Government of India used these Thali figures to display how the policies undertaken in the Financial Year 2015-16 helped the average family gain an upper hand over this very exploitative nature of the food industry, where prices are volatile.


Esther Duflo and Abhijit Banerjee mentioned in ‘Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty’, the nutritional intake of the common man is directly proportional to productivity, and hence the overall well-doing of the nation. Hence, this index, although not a very accurate one, illustrates interesting facts about the Indian scenario.


So, what does this Thali price take into account?


Just like the Consumer Price Index takes into account a basket of goods. a vegetarian Thali is a similar basket converted to a plate of food consisting of a serving of cereals, vegetables, and pulses.


A crucial point to note is that the prices of the ingredients are not the market prices from your local mandi or a supermarket, but much lower in comparison.


The prices considered are assumed to be from the insurance, subsidy, and trade transparency schemes launched from 2015 onwards, such as National Food Security Act, Pradhan Mantri Annadata Aay SanraksHan Abhiyan, Pradhan Mantri Krishi Sinchayee Yojana, National Food Security Mission, etc.


Here, the prices used are ₹1/-, ₹2/- and ₹3/- per kg for Nutri-cereals, wheat, and rice respectively. And under the NFSA, these prices are available for 81.35 crore persons or about 60% of the Indian population.


Comparing the Prices of a Thali over time


The blue dotted line is the trend line or the best fit line has been drawn from the data points from 2006 - 07 to 2015 - 16, and projected from the on. And the black line is the actual price of the Thali.


So, the price should have been about Rs. 28 and Rs. 42, but are actually Rs. 24 and Rs. 38, for the vegetarian and non - vegetarian thalis, respectively. This can also be seen as the difference between the blue and black lines on any given point on the x-axis.


Hence, on average, due to the policies undertaken after 2015, the price of thali has dropped by ₹3, on average. That might seem like a small amount, but let's bring in some context.


Let's say that a household consists of 5 members, and each has 2 thalis per day. That sums up to about ₹11,000 in a year. And that is 6.5% of an average worker’s yearly wages.


Conclusion


Though economics affects the common lives of people in tangible ways, this fact often remains unnoticed. Food is not just an end in itself but also an essential ingredient in the growth of human capital and therefore important for national wealth creation.


And what better way to make economics relate to the common person than something that he/she encounters every day? A plate of food.




References


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Created by Yashvardhan Sharma and Amogh Narain Agarwal.