Demand Elasticities
For Pulses
and
Public Policy Options
The C O N T E N T S
What is the case study about?
Pulses and public policy options
Domestic Production and Consumption
Elasticity of Demand of Pulses
Question 1
Question 2
Question 3
What is the case
study
about?
The Case Study on Pulses has covered the following points:
Examines the dynamics of the pulses market
in India.
Emphasizes on elasticity of demand.
The study delves into the current year's
outlook, forecasting a significant increase in
pulse production due to favorable
agricultural conditions.
Highlights economic indicators and
elasticity values, shedding light on the
demand and price responsiveness of pulses
in the Indian market."
The C O N T E N T S
What is the case study about?
Pulses and public policy options
Domestic Production and Consumption
Elasticity of Demand of Pulses
Question 1
Question 2
Question 3
Pulses and public policy options
The Indian Constitution doesn’t have a Right to
Food as a fundamental right. It was coming
under the ambit of Right to Live with Human
Dignity.
In 2013, National Food Security Act was
introduced with the aim of ensuring food
security for all citizens of India. It provides legal
entitlements to subsidized food grains to eligible
beneficiaries.
Pulses are not included under this Act, but
concerns about self-sufficiency do apply to them.
The options for public policies regarding them in
the short run require estimation of the growth of
their domestic production and consumption.
The C O N T E N T S
What is the case study about?
Pulses and public policy options
Domestic Production and Consumption
Elasticity of Demand of Pulses
Question 1
Question 2
Question 3
Pulses and their agriculture season
There are 3 major cropping seasons in India-
RABI
KHARIF
Sown period:
Sown period:
OctoberDecember
Harvesting
Period: April-
June
ZAID
June-July
Harvesting
Period:
SeptemberOctober
States like Madhya Pradesh, Uttar Pradesh, Maharashtra, Rajasthan,
and Andhra Pradesh are the major pulse-producing states in India.
Pulses Production in India
India’s production of Pulses
Year
Rabi
Kharif
Total
2010-11
7.12
11.12
18.24
2011-12
6.06
11.03
17.09
2012-13
5.92
12.43
18.35
2013-14
6.00
13.26
19.26
2014-15
5.73
11.42
17.15
2015-16
5.53
10.79
16.32
2016-17
9.58
13.55
23.13
2017-18
9.31
16.11
25.42
2018-19
8.09
13.98
22.07
2019-20
7.72
15.44
23.16
2020-21
8.49
17.09
25.46
2021-22
8.25
19.50
27.75
Qty is in Million Mt
Source: Ministry of Agriculture & Farmers Welfare, GoI
Qty is in Million Mt
Source: Ministry of Agriculture & Farmers Welfare, GoI
27.75
25.46
23.16
22.07
2.77
201718
2.51
201617
2.98
201516
6.66
16.32
17.15
201415
2.6
201314
5.68
201213
5.88
201112
4.63
19.26
3.66
18.35
4.02
17.09
3.5
18.24
201011
25.42
Import
23.13
Production
2.78
Pulses Demand in India
India’s Demand of Pulses can be understood through the
below graph which talks about production vs Import of
Pulses.
201819
201920
202021
202122
The C O N T E N T S
What is the case study about?
Pulses and public policy options
Domestic Production and Consumption
Elasticity of Demand of Pulses
Question 1
Question 2
Question 3
Elasticity of Demand for Pulses
Income elasticity of Demand - +0.716 < 1
The magnitude of the income elasticity is less
than 1.
When income elasticity of demand <1 but still positive,
the demand for pulses is income inelastic.
Inelasticity implies that
Change in quantity demanded is proportionally
less than the change in income.
Overall, a positive income elasticity
less than 1 for pulses indicates that
they are a necessary or staple good,
as people tend to consume them
consistently but not at a rate that
proportionally matches their income
increases.
If income elasticity was
exactly 1, it would be
termed as unitary
elastic, where a 1%
increase in income
results in a 1% increase
in the quantity of pulses
demanded.
If income elasticity was
>1, it would be
considered income
elastic, meaning a 1%
increase in income leads
to a more than 1%
increase in the quantity
of pulses demanded.
Elasticity of Demand for Pulses
Price elasticity of Demand - -0.635 < 1
The magnitude of the price elasticity is less than 1.
When price elasticity of demand <1 but still negative, the
demand for pulses is price inelastic.
Inelasticity implies that
Change in quantity demanded is proportionally
less than the change in price.
Overall, a price elasticity of -0.635 for
pulses indicates that consumers are not
very responsive to changes in the price of
pulses.
Even if the price of pulses increases, the
decrease in quantity demanded is
proportionally less, suggesting that pulses
are considered essential or necessary, and
consumers continue to purchase them
even with price increases.
If price elasticity was
exactly 1, it would be
termed as unitary
elastic, where a 1%
increase in price results
in a 1% increase in the
quantity of pulses
demanded.
If price elasticity was >1,
it would be considered
price elastic, meaning a
1% increase in price
leads to a more than 1%
increase in the quantity
of pulses demanded.
Inelastic nature of Pulses
Limited
Substitutes
Price
Inelasticity
Income
Inelasticity
INELASTIC
NATURE OF
PULSES
Long-term
Consumption
Patterns
Perception of
Value
Seasonal and
Supply
Constraints
The C O N T E N T S
What is the case study about?
Pulses and public policy options
Domestic Production and Consumption
Elasticity of Demand of Pulses
Question 1
Question 2
Question 3
Demand met through imports = 20%
Total demand =
100%
Demand met internally =
80%
Should we import
pulses during this
year, or do we have
enough to export?
Domestic production of pulses is
expected to increase by
Average = 32 % => 80 * 0.32 =
Optimistic = 35% => 80 * 0.35 =
Pessimistic = 29% => 80 * 0.29 =
25.6
28
23.2
The current production for this year would
be
Average = 80 + 25.6 =
105.6 Mn MT
Optimistic = 80 + 28 =
108
Pessimistic = 80 + 23.2 =
103.2
Income in real terms may grow at 7.8%,
consumer price inflation may be 5%
Assuming the income from the production is
100,
Increase in income =
107.8/105
= 1.02% increase
Should we import
pulses during this
year, or do we have
enough to export?
Change in demand due to increase in
income, Income elasticity =
%change in quantity demanded / %
change in income
0.716 = x / 1.02
x = 0.73
Also, Population growth =
Increase in demand =
1.5%
0.73 + 1.5
= 2.23%
= 102.23
In all three scenarios, the demand will be
met domestically, and we will have enough
to export.
The C O N T E N T S
What is the case study about?
Pulses and public policy options
Domestic Production and Consumption
Elasticity of Demand of Pulses
Question 1
Question 2
Question 3
If we do not want to
export or import
pulses, by how much
would the domestic
prices of pulses
change in relative
terms and in
absolute terms?
Price elasticity = % change in quantity
demanded / % change in price
Price elasticity = -0.635
% change in quantity demanded= 0.73
(derived in previous question)
0.635 = 2.23 / x
Therefore, %change in price = 2.23 / 0.635
= 3.51%
Price must increase by 3.51%
The C O N T E N T S
What is the case study about?
Pulses and public policy options
Domestic Production and Consumption
Elasticity of Demand of Pulses
Question 1
Question 2
Question 3
Let the Minimum
Support Price (MSP)
of pulses be the
current equilibrium
price. Then, by how
much does it need
to be changed if the
government wants to
create a buffer stock
of about 2% of the
domestic production
of pulses for future
needs?
Price elasticity = % change in quantity
demanded / % change in price
Price elasticity = -0.635
Therefore, %change in price = 2 / 0.635
= 3.15%
Price must increase by 3.15%
Observations
and Recommendation.
From this case study, we understand that
Pulses by nature are price and income inelastic. They are essential to
the Indian diaspora. Our recommendation to the government is to
include pulses in the range of subsidized food grains included in NSFA.
It is also recommended that we produce at optimistic/average levels
so we have
1. A buffer in case of crisis or emergencies while maintaining the
same price.
2. Enough to export and generate revenue