The Elephant Is Jogging

Economic Growth Begins To Transform Food Demand

After more than three decades of sluggish economic gains stretching from independence to the early 1980s, Asia’s elephant has now broken into a jog. The economy has grown at an annual rate of 5.7 percent since 1980, ranking India among the fastest growing economies. Rapid per capita income growth is now the major force behind the emerging transition of Indian agriculture and policy. Although India is still home to a large share of the world’s poor, the share of the population in poverty is declining, and a significant, relatively affluent, middle class has emerged.

India’s per capita income of about $460 remains low by developed country standards, but actual buying power is more than five times that amount because Indian prices for many goods and services are well below world averages. Middle-class households with buying power well above that average include roughly 150-200 million consumers and constitute the fastest growing segment of the population. Urbanization is also on the rise. Urban dwellers account for about 28 percent of the population, and their share of the population is growing about 3 percent annually.

Higher incomes, particularly in lower- and middle-income households, are having an important impact on food demand in India because these groups tend to spend a relatively large share of their income on food consumption. Middle-income and urban consumers are also likely to spend more of their income on upgrading and diversifying their diets, eating out more often and eating more processed and convenience foods.

Indian food consumption patterns have diversified significantly since the 1980s. Consumption of fruits, vegetables, edible oils, and animal products is rising much faster than that of wheat and rice, staple grains in the Indian diet.

Milk—of which India is now the world’s largest producer—along with eggs and poultry meat are the most important animal products, and all are registering strong growth in production and consumption. Poultry meat is finding broad consumer acceptance, in part due to its low relative price, and the sector is growing 10-15 percent per year—ranking it among the fastest growing poultry sectors in the world.

Despite traditional vegetarian dietary preferences, the growth of the poultry and egg industries is evidence that the expansion of meat and feed demand will play a role in the transformation of Indian agriculture, as it has in other developing countries. In fact, consumer studies suggest that while 20-30 percent of consumers have strict vegetarian preferences, meat consumption by the remaining 70-80 percent is limited more by income than religious preference.