Quazi Shahabuddin
Research Director
Bangladesh Institute of Development Studies (BIDS)
E-17, Agargaon, Sher-e-Bangla Nagar
Dhaka-1207
Sajjad Zohir
Senior Research Fellow
Bangladesh Institute of Development Studies (BIDS)E-17, Agargaon, Sher-e-Bangla Nagar Dhaka-1207
The shape of development in the medium to long-term is most likely to be influenced in a significant way by the dynamics of food grain demand -supply balance in the country. A consistent framework for projection of medium and long-term demand and supply of food grains in Bangladesh has, therefore, been developed in this paper. The analysis involves a prospective view of future demand for rice and wheat, and the growth of food grain production, particularly rice under increasing resource constraints. Alternative projections of food grain supply, demand and trade balance in year 2000 and beyond (upto year 2020) are presented in the paper. The exercise demonstrates that Bangladesh is expected to produce, under favorable conditions, enough rice to meet domestic demand, but would be unable to export regular varieties of rice due to its inability to generate surplus at a internationally competitive price. The prospect of export of aromatic varieties of rice, however, seems quite encouraging. Import of wheat (ranging between about one million ton in 2000 to about two million tons in 2020) will need to continue. The policy implications of alternative projection scenario have been spelt out in the paper.. Rural and urban desegregation are brought into the picture. Also, demand is desegregated by income-groups to allow differential impact across different income-groups in both rural and urban areas. Finally, food grains are desegregated into rice and wheat. Thus the projection carried out in this study disaggregate food grain demand with respect to rural and urban areas, rice and wheat, and income groups.
Demand Elasticities for Rice and Wheat
The set of demand elasticities used in our projection allow for variation both by income groups and by location (rural and urban area). Three alternative sets of income and price elasticities have been used- the first set recently estimated by Goletti (1993) using a version of limited dependent variable model (Tobin 1958), the second set estimated by Bouis a few years ago using food characteristics demand system (FCDS),4 and the third set estimated by Shahabuddin and Zohir (1995) following multi-stage budgeting approach.
Projected Demand for Foodgrains
Demand for rice and wheat have been projected following the methodology outlined in Section II. 1, and using alternative set of elasticities as well as alternative assumptions of income growth discussed above. While making projections, the expenditure elasticities were converted into income terms and also allowance have been made for a declining income elasticity by adjusting the elasticities as mean income of each group increases.
Projections of Foodgrain Supply
Foodgrain production, particularly production of rice over the next twenty years has been projected in terms of irrigation expansion and growth in yield. Expansion of irrigated area has been conceived in terms of growth in government irrigation (composed of canal irrigation and deep tubewells) and private irrigation (consisting of low-lift pumps, shallow as well as hand tubewells). With regard to yield growth, it may be noted here that since the supply model specification (Shahabuddin and Zohir 1995) already accounts for some variety-specific crops, and since variety-specific yields may safely be assumed to remain constant, we consider in our projection exercise growth in yield of composite dry Rabi/Kharif I season rice only. Such yield changes are due to changes in the mix of crops within the composite group.
Medium and long-term projections,Foodgrain demand, Supply,Trade balance
Socio-economic and Policy
Market analysis
Projections of demand and supply are carried out separately in this exercise. However, these were later linked in order to examine the prospects of trade in year 2000 and beyond. This was done by solving for the price changes required to make the projected excess demand (positive or negative) zero and then comparing the resulting "equilibrium" price with the projected import parity and export parity price. Foodgrain demand and supply have been projected independently of each other. The evolution of foodgrain demand due to population growth (including increasing urbanization) and income generation alone has been ascertained. Growth in foodgrain production has been projected in terms of expansion of irrigated area and increase in average crop yield due to changes in crop mix in specific seasons.
Projection of Demand for Foodgrains
Foodgrain demand over the next twenty years is projected in terms of population growth, urbanization and growth in real income. Rural and urban disaggregation are brought into the picture. Also, demand is disaggregated by income-groups to allow differential impact across different income-groups in both rural and urban areas. Finally, foodgrains are disaggregated into rice and wheat. Thus the projection carried out in this study disaggregate foodgrain demand with respect to rural and urban areas, rice and wheat, and income groups.
Demand Elasticities for Rice and Wheat
The set of demand elasticities used in our projection allow for variation both by income groups and by location (rural and urban area). Three alternative sets of income and price elasticities have been used- the first set recently estimated by Goletti (1993) using a version of limited dependent variable model (Tobin 1958), the second set estimated by Bouis a few years ago using food characteristics demand system (FCDS),4 and the third set estimated by Shahabuddin and Zohir (1995) following multi-stage budgeting approach.
Projected Demand for Foodgrains
Demand for rice and wheat have been projected following the methodology outlined in Section II. 1, and using alternative set of elasticities as well as alternative assumptions of income growth discussed above. While making projections, the expenditure elasticities were converted into income terms and also allowance have been made for a declining income elasticity by adjusting the elasticities as mean income of each group increases.
Projections of Foodgrain Supply
Foodgrain production, particularly production of rice over the next twenty years has been projected in terms of irrigation expansion and growth in yield. Expansion of irrigated area has been conceived in terms of growth in government irrigation (composed of canal irrigation and deep tubewells) and private irrigation (consisting of low-lift pumps, shallow as well as hand tubewells). With regard to yield growth, it may be noted here that since the supply model specification (Shahabuddin and Zohir 1995) already accounts for some variety-specific crops, and since variety-specific yields may safely be assumed to remain constant, we consider in our projection exercise growth in yield of composite dry Rabi/Kharif I season rice only. Such yield changes are due to changes in the mix of crops within the composite group.
The Bangladesh Development Studies,Vol. 23, No. 3/4 (Sept.-Dec. 1995), pp. 21-45 Published by: Bangladesh Institute of Development Studies
Journal