Investing to Nourish India’s Cities
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A report by the Chicago Council on Global Affairs investigates the state of nutrition in India’s cities and provides a series of recommendations on how to improve nutrition availability to urban consumers in the near future. India is forecast to experience the largest increase in urban population of any country in the world, it is estimated that India’s cities may have 400 million inhabitants by 2050.

The report provides a general overview of the urbanization and nutrition trends in India’s cities arguing that urban nutrition is a complex, dynamic, and evolving process. Currently around 32 percent of Indians live in urban areas ranging from megacities to towns. In general, the Indian population (55 percent) is clustered around 12 urban clusters across the country. Poverty rates are extremely high with 75 percent of India’s urban residents earning an average of $1.80 per day. Multiple studies, such as ‘The State of Food Insecurity in Urban India,’ illustrate that much of urban India is high to moderately food insecure. According to National Sample Survey data, urban Indians consume fewer calories than their rural counterparts across almost all income levels. The heavy reliance on cereals is quite similar between the urban poor and rural poor.  Yet almost 70 percent of urban Indians are not getting the average caloric intake of 2,100 kcal per day of nutrition recommended by the National Institute of Nutrition. There is a substantial gap between the poorest 10 percent of urban residents who consume 1,605 kcal per day and the wealthiest 10 percent of urban residents who consume 2,485 kcal per day (a 50 percent difference).

In this context, the report makes a number of recommendations that will help contribute to improving and ensuring adequate nutrition in India’s cities. The report highlights that India’s public distribution system (PDS) is currently crucial to supporting nutrition in India’s urban areas. Through the National Food Security Act of 2013, half of the urban population is now entitled to five kilograms of subsidized grains. However, the report highlights that there are significant challenges and inefficiencies in the PDS, for instance a High Level Commission report in January 2015 calculated that as much as 47 percent of grains procured is diverted from the PDS. The report highlights that India needs to explore various options in order to overcome these challenges to the PDS, for instance through the gradual introduction of cash transfers which could provide more transparency as well as choice and diversity in diets. In March 2016, the Indian government launched a pilot program in Chandigarh and Puducherry, offering direct cash transfers to food subsidy beneficiaries.

They argue for large-scale centralized warehousing and distribution centers and retail operations that could bring down overall food costs for the urban Indian consumer.   In recent years there have been significant investments in the regulatory regime for ensuring the health and safety of foods in India. This has led to the creation of the Food Safety and Standards Authority of India (FSSAI) in 2011. However, one of the most pressing challenges is to promote conformity with food standards in the unorganized sector, where noncompliance is extremely high. For instance, around 70 percent of samples tested by FSSAI in 2011 did not meet required standards. The report argues that the FSSAI’s capacity needs to be expanded to be able to provide oversight of the unorganized (and often informal) food distribution and processing sector.

The report highlights that India needs to build and expand its food supply chains in order to deliver sufficient quantities of affordable, safe and nutritious food to urban residents. India’s food supply chains are largely unorganized and highly fragmented, with food passing between many sets of hands from farmer to urban consumer. Many local traders and agents play an important role supporting workers and connecting small farmers to markets by facilitating collection of output and providing capital to farmers who are outside of the formal banking system. But the complexity to procurement and distribution of long marketing channels can inflate the cost of food by as much as 100 to 250 percent.

Similarly, another challenge to India’s food supply chains is the lack of modern food infrastructure, insufficient number of warehouses and lack of adequate cold storage facilities. Due to poor infrastructure the report highlights that between 30 and 40 percent of fresh produce is wasted. The report calls for significant new investment in new infrastructure to help support private supply chain development.  Similarly, despite India having the largest amount of cold storage facilities in the world most of them are outdated and not appropriate for handling large amounts of fresh produce. Moreover, the report recommends that a rapid expansion in India’s food processing industry is needed. This is because as urban areas require longer supply chains it is essential that food can be preserved, be of high-quality and retain sufficient nutrients. Currently, around 50 percent of all food produced in India is processed and as India continues to urbanize this proportion will increase. The report argues that this can most effectively be achieved through large scale investment, through for instance, the creation of the 42 mega food processing parks highlighted in the current five year plan.

In India, 98 percent of the food retail market is comprised of around 10 million small traders and grocers (whereas organized food retailers globally account for 72 percent of food sales).  Over the past decade, there have been numerous attempts by large domestic companies and multinationals to set up large supermarkets but these have largely had poor results. The government is leading a recent effort in trying to attract increased investment and in the 2016 budget, 100 percent foreign direct investment for the marketing of products produced in India is allowed for the first time.

The full report can be accessed here.

By Bas Paris

 

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