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Thalinomics

  • Category
    Economy
  • Published
    20th Feb, 2020

The Economic Survey 2020 coined a new term called ‘Thalinomics’ and the government pitched the term as “economics for the common man”.

Context

The Economic Survey 2020 coined a new term called ‘Thalinomics’ and the government pitched the term as “economics for the common man”.

About

  • The Economic Survey 2020 made a unique attempt to quantify the cost incurred in putting together one complete home-made meal — the healthy Indian thali.
  • Thali prices represent the total money spent on preparing dishes for a meal in a household.
    • Thalinomics captures the economics of a plate of food in India.
  • Rise in Affordability: Despite recent concerns about rising food prices, the Economic Survey has stated that for a worker, a vegetarian thali is 29% more affordable since 2006-07. And affordability of anon-vegetarian thali improved by 18 per cent.
    • It also looked at an industrial worker’s ability to pay for two thalis a day for his/her household of five individuals.
  • Conclusion: Basically the survey attempts to calculate the cost that an average worker incurs based on his actual plate of food in India.
    • And on calculating that cost, the survey concludes that works were able to save due to moderation in prices of items that form part of a regular Indian thali.

Food inflation trends

Food inflation based on CPI declined to a low of 0.1% in 2018-19 against 1.8% in 2017-18, 4.2% in 2016-17 and 4.9% in 2015-16. However, the government revised the inflation projection from 3.5-3.7% in the second half of 2019-20 to 4.7-5.1%.

Calculations

  • The analysis is based on data on prices taken from the Consumer Price Index for Industrial Workers (CPI IW) for around 80 centres in 25 States/UTs from April 2006 to October 2019.
  • The survey took into account the prices of cereals (rice/ wheat), sabzi (vegetables, other ingredients), dal (pulses with other ingredients) as well as the cost of fuel.
  • In a non-vegetarian thali, pulses are replaced by 60 gm of non-vegetarian components keeping in mind prices of eggs, fresh fish and goat meat.
  • It also took into consideration prices of ingredients such as spices and condiments such as mustard oil, coconut oil and groundnut oil, turmeric and chillies.
  • For fuel, cooking gas prices as well as firewood prices were taken into consideration.

State-wise performance

  • Across the board gains: Both across India and the four regions– North, South, East and West – we find that the absolute prices of a vegetarian Thali have decreased since 2015-16 though it increased during 2019.
    • Exception: Gains are observed across regions, with the exception of the Northern Region and Eastern Region in 2016-17 in the case of vegetarian Thali.
  • Southern region with highest gains: The highest gain in any year was in the Southern region for a vegetarian Thali in 2018-19 of around 12 per cent of annual earnings of a worker.
  • Jharkhand thali the cheapest: Jharkhand emerged as the State with cheapest vegetarian thali during April-October 2019.
    • Two vegetarian thalis for a household of five in Jharkhand required about 25 per cent of a worker’s daily wage.

Results from Thalinomics

  • Gains: After 2015-16, an average household of five individuals that eats two vegetarian thalis a day gained around ?10,887 on average per year, while a non-vegetarian household gained ?11,787 on average per year.
    • Gains here are spends that households saved on due to moderation in the prices of commodities.
    • A worker who would have spent 70% of their daily wage on two vegetarian thalis a day for a household of five in 2006-07, would only have to spend 50% of their income for the meals in 2019-20.
  • Fall in prices: Survey said there was a shift in the dynamics of thali prices from 2015-16. Gains are due to significant moderation in prices of vegetables and dal from 2015-16 when compared to the previous trend of increasing prices.
  • Reasons for gains due to reform measures: Many reform measures were introduced during the period of analysis to enhance the productivity of the agricultural sector as well as efficiency and effectiveness of agricultural markets for better and more transparent price discovery:
    • PradhanMantriAnnadataAaySanraksHanAbhiyan (PM-AASHA).
    • PradhanMantriKrishiSinchayeeYojana (PMKSY) - Per DropMore Crop.
    • PradhanMantriFasalBimaYojana(PMFBY).
    • Soil Health Card.
    • E-National Agricultural Market(e-NAM).
    • National Food Security Mission(NFSM).
    • National Food Security Act(NFSA).
  • Recent trend is inflationary: Survey shows that accelerating food inflation over the last few months has broken the earlier trend.
    • Workers are now forced to use an increasing share of their wages on food.

Challenges

  • Small sample size: The calculations deal with workers engaged in the organised manufacturing sector, which form only 28% of the total manufacturing workforce.
    • It excludes workers from the unorganised sector, as well as rural and agricultural workers.
  • Fall in incomes: While it is true that there was a decline in food prices during most of the period since 2015-16, this is also a period of stagnant or declining rural wages and highest unemployment.
    • Low inflation is meaningless when real wages are falling in rural areas, as this means that the poor are not able to consume more as their incomes are falling.
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