The low values represented by the World Bank's forecast are based on the assumption that demand for foodgrains will diminish along with economic growth. On the other hand, Bhalla's high forecast values presuppose increases in demand for feed crops deriving from demand for milk, dairy products, meat and eggs, all with an income elasticity greater than 1, expected to rise in line with economic growth. Verification of those estimates is beyond the scope of this report, but the following facts must be considered.
Figure 1-13 shows per-capita foodgrain consumption (rice and wheat separated) of each expenditure group in the major states, whereas Table 1-11 displays the expenditure elasticity of major foodgrain (rice and wheat) consumption14. These data demonstrate the following three points. Firstly, elasticity in the rural area is 0.42, which is significantly high. It must be noted that foodgrains are not inferior goods even for the high-expenditure (i.e., high-income) groups, therefore, the high rate of increase in demand for foodgrains regarded as likely to continue for a time in the process of the economic growth. In the low-income states, the consumption of minor cereals including millet and maize is second greatest. Increases in income may shift the demand from such cereals to the major foodgrains. For example, the expenditure elasticity is unusually high in Karnataka and Gujarat. This is because the consumption of minor cereals mentioned above is greater than that of rice or wheat, and such minor cereals became inferior goods for the high-income groups, shifting their consumption to rice and wheat.
Taking this sort of shift into account, it is very likely that the World Bank has underestimated the demand trend. Secondly, the presence of substantial differences in foodgrain consumption between groups (classes) will radically change widely the structure of demand for foodgrains, as income distribution varies in the process of economic growth. Thirdly, expenditure elasticity in foodgrain consumption is relatively high in the areas where rice is the staple food. So, if other conditions remain constant, the demand for rice, not for wheat, is expected to increase.
