Opinion | Lessons from online retail data on our food supply chains
4 min read 20 May 2020, 10:16 PM ISTData patterns suggest that supplies of perishables are taking longer to overcome their disruption
PremiumOn the eve of 25 March, when the first lockdown to deal with the covid crises was announced, it came as an unanticipated shock to India’s economic apparatus. Overnight restrictions on the movement of people and goods came into force, throwing the economy out of gear. There was a ban on the transportation of all goods, except those that were deemed essential, like food and medical supplies.
The resilience of food supply chains in India was tested to their limits. However, little is known about how these were impacted, except for anecdotal evidence from farmers who were facing transportation and harvesting hurdles. There were also some media reports about a fall in arrivals of farm produce in Agricultural Produce Marketing Committee (APMC) mandis.
The data required to study the impact of this disruption is also challenging to come by, as the ongoing covid-19 pandemic poses a threat not only to human health, but also to the health of statistical systems around the world. For example, the lockdown imposed in India has impacted regular price data collection. The National Statistical Office (NSO) deferred the release of retail inflation numbers for April 2020 since the economic lockdown had affected the routine price collection exercise carried out by public officials. In the absence of timely data, policymaking in India will likely have to fly blind.
This column explores how online data can be tapped to generate real-time insights into some of the pandemic’s economic impacts. We use online retail data to estimate the impact of the covid-induced commercial shutdown on stock-outs, and the persistence of these effects. India’s food supply chains suffer from lack of adequate warehousing facilities. The lockdown involved restrictions on inter-state transportation as well. In conjunction with subsequent lower labour availability, this could have led to disruptions in these supply chains. As such lockdowns could become a frequently-used tool to deal with infection outbreaks, our analysis portends the possible bottlenecks in food supply chains using online grocery retail data from three Indian metro cities.
We collected data from one of the largest online food retailers, for three cities—Delhi, Kolkata and Chennai—and found that in-stock products fell by around 10% for fruits and vegetables, and edible oils, while the impact on their prices was minimal. The effect on online prices could have been low due to directives given by the government to retailers not to increase prices of essentials. Online prices can easily be monitored by the government to prevent price gouging.
But what explains this fall in product availability? We found that products that were listed less frequently on the website before the lockdown explain most of the decline. The previously low-listing products could possibly have weaker supply chains. As an additional test for supply chain disruption, we found that the fall in availability was smaller for products produced near retail centres. Product availability for vegetables and fruits produced near urban retail centres was reduced by half. These results were also confirmed using data on mandi arrivals, where arrival quantities fell by 20% during the first lockdown, but no fall was observed for commodities whose production zones were near the cities. These results show that products travelling longer distances to reach the final point of sale could have faced greater transportation bottlenecks.
Given that we are in Lockdown 4.0 now, another important question arises. Have the supply chains recovered? We have found that the supply of low listing non-perishables like oils started to recover around 10 April, and reached its pre-lockdown levels by the end of April. The supply of low listing perishables like fruits and vegetables has shown recovery, but has settled at a lower level from the pre-lockdown availability. Since non-perishables can be transported over long distances without the worry of spoilage, their supply has recovered. But quick transport for perishables could still be posing a hurdle that is hurting their supply.
Overall, we have found that supply chains in India disrupted in the aftermath of the first lockdown have since recovered somewhat. However, they continue to be disrupted in the case of perishables. This has implications for both consumers and producers. If the country’s supply engines are not oiled in time, it can lead to losses for farmers. They are likely to face greater spoilage risk and declines in farm-gate prices due to transportation hurdles. On the other hand, consumers in urban centres might continue to face shortages of products. Given our results, farmers who produce perishable products might need immediate support from the government in ways that would help their produce be delivered from farms to plates in a timely manner.
The reforms announced by finance minister Nirmala Sitharaman last week have been referred to as a “1991 moment" for India’s agricultural sector. We cannot foretell whether or not deregulation of the sale and purchase of agricultural commodities, which aims to bring down inter-state trade barriers, will be successful. In the absence of data, we may not even be able to recognize the effects of deregulation anytime soon. When a system is upended, it lends itself to alternate ways of thinking. Maybe this is an appropriate time to use the potential of online data to detect economic gaps and address them without delay.
Kanika Mahajan and Shekhar Tomar are assistant professors of economics at Ashoka University and Indian School of Business, respectively
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