Arhar Daal ka Dohra Shatak...the news item in Hindi newspaper Dainik Jagran had given some food for thought to deep-dive the problem. It's basic economics of supply and demand, stupid! The cost-push supply and demand pull is the reason for pushing up the price of this pulse in India!
The cost-push supply side first.
a. The area sown of slow growth crops, pulses, had not increased over the period, rather gone down: it is fluctuating between 3.3-4 million hectares since last 10 years.
b. The yield of Arhar (tur) is also very low with 6-7 quintals per hectare, also being long-cycle crop, once sown, locking in the farmer for the entire season. But, it also leaves the crop vulnerable to late-season deficiency in rainfall. The crop withers, expectations of output are scaled down and, consequently, those about prices are ratcheted up. In both 2009 and 2015, adverse short-term impacts from the monsoon pattern reinforced the long-term structural stagnation in the crop to cause a sharp drop in output (or expected output). The total factor productivity (TFP) growth, measure the growth of production not attributable to growth of inputs, of Arhar also shows the lack of technical progress and efficiency improvements in the production hampering the overall yield.
c. Further, unlike other pulses, Arhar has lower shelf life and low production world-wide, which also hampers the supply side factor in short term.
Now the Demand pull factor.
a. Among all kind of pulses, Arhar, considers as 'superior good', behaves in a typical Engels' Law, with an increase in incomes, the demand for such goods increase more than proportionately. The Indian dietary patterns are moving from cereal-dominated diets to increasing shares of proteins and vegetables. In fact, this is also an indicator of Indian economic development story.
Obviously, from the policy perspective, it is not easy to execute. The right kind of incentives mechanism can be designed in keeping with the above simple factors in mind.
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