Data Collection Could Help India Tackle its Food Inflation Problem

Livemint     23rd August 2020     Save    
QEP Pocket Notes

Context: The recent spike in Indian inflation is a reminder of how food prices are notoriously volatile.  Technology, with the use of data, can provide solutions to reduce price fluctuations.

Reason for fluctuations in supply

  • Erratic weather
  • Mis-calibrated expectations of Farmers:  illustrated through the Cobweb Model.
  • Farmers base their expectations of future prices on what they see in the spot markets at the time of sowing
  • Harvest-time price expectations based on current prices
  • For, E.g. when farmers see high prices of onions, they decide to grow more of these, thus setting the stage for overproduction.
  • Absence of cold-storage infrastructure.

Measures to tackle the fluctuations in supply/price of food items

  • Provide farmers with better forecasts
  • Gather real-time data on the area under cultivation for a few important crops, with their expected harvesting dates
  • Develop a smartphone app for farmers to enter the information after sowing and give them monetary incentives for doing so.
  • The app could show real-time data of sowing preferences of farmers and can help in containing oversupply
    • Random audits and the monitoring of eventual sales to prevent malpractices.
    • Intervention should be at the production stage rather than at the final stages.

    Data forecasts can work effectively because

    • Access to technology: Smartphones have already penetrated deep into the hinterlands due to the availability of cheap data.
    • It will enhance the ability to diversify: Reliable forecasts well ahead in time may prompt them to diversify their crops
    • Time-series forecasting and machine learning will help in improving algorithms that forecast prices.

    Conclusion

    • Devising a system around data can play a meaningful part in reducing the price volatility of farm produce
    • It could also help governments manage the delicate balancing act between protecting the interests of food producers and consumers
    QEP Pocket Notes