Indian rice prices have dropped since 1950

Recently I had a heated discussion with some friends - most of them settled in the US with excellent IT careers. The topic was about how everything has suddenly become expensive in India. I tried to point out that ever since independence, the average life span has gone up from about 35 years to 69 years, infant mortality has gone down from 25% to 7% of live births, literacy and level of education has improved, and poverty levels have gone down from 75% to about 25%, even cell phones have permeated to about 20% of population. All this points to the fact that life has improved. But the counter argument was if you don't have money, what good is long life, or even cell phones? If you don't have enough to feed yourself, increasing life is increasing agony.

This was a bit surprising to me because about 3 years ago, when I have made a point about improving life due to improved economic conditions, everyone has said, what good is money if you don't have access to things that improve lives. This time it was the economic argument. Looks like it is a shifting target. Nevertheless, the question of whether basic things are getting more expensive or not is a valid question, and needs to be answered once and for all.

It has been about 60 odd years since independence. If we take that point as a reference point, we should be able to ask, for a typical man (50th percentile) have the necessities become more expensive compared to the money you earned. This is fairly straightforward calculation, though it is a bit tedious. So I am sticking with single example - the price of rice.

In 1950, the planning commission data shows that the size of the economy (GDP) of India was about 90 billion rupees. With a population of 360 million, that translates to about Rs. 250 per capita. Now, the per capita income is around Rs 37,000. So the income has gone up by a factor of 150. How have the rice prices done? Well, by a very rough estimates, the rice prices have gone up from about Rs 0.25 a kg to about Rs 13 a kg. This means rice prices have gone up by a factor of 65. So for the comman man, the rice prices have actually decreased by a factor of more than 2. No wonder the rice consumption per capita has gone up from about 40kg to about 80 kg (wikipedia). Indian production of rice has outpaced the the population by roughly 1% over the 60 years, every year. And this nicely reflects in the corresponding drop in prices. The drop is even substantial if you consider that every person is entitled to have some basic supply on their ration card at much lower prices (~Rs 5/kg? need to confirm).

I also came across the cosumer personal expenditure survey performed by NSSO, national sample survey organization. The findings are humbling, and yet eye opening. They found the distribution of all families that spend X amount of money on personal expenditure - food, clothing, shoes, transport, restaurants, tea etc. This does not include rent, investments, feeding livestock etc. What turns out is that most people - around the bottom 80% spend almost a fixed amount per month per person on food - very clost to Rs200. This seems paltry (and it is by the rest of the world standard), but it means about Rs 1000 for a family of 5 (two of these 5 are under 15). This buys you at least 15kg of rice, 10kg of wheat, 10 kg of pulses, 5 kg of vegetables, some oil, 5 kg of sugar, a dozen eggs, fuel, spices and cooking supplies. This does not sound extravagent, but it allows you to survive. The lowest 20% are a little worse off and need to use the lower grade supplies available on ration card.

This is by no means a wonderful situation. I am not making a point that everything is hunky-dory. All I am saying is that it is lot better than what it used to be. In 1950, it was dire - about 75% people were below poverty line - meaning they could not afford even the subsitance material mentioned above.