Emerging Markets for GM Foods:An Indian Perspective on

Consumer Understanding and Willingness to Pay

Satish Y. Deodhar (IIM-A)Sankar Ganesh (IIM-A)

Wen Chern (OSU)

Motivation• GM inevitability seems to come from:

– Population growth– Productivity plateau– Rapid technological advances, and– Freer agricultural trade

• India - late entrant in the GM Crop cultivation• Today 5th largest area in GM crops (ISAAA)

• Technology adoption & welfare gains issues have been addressed– E.g. Gupta and Chandak (2005)– Neilsen and Anderson (2000)

Food Crops

• Commercial production of food crops not allowed in India at this time

• (Bt) cottonseed oil – cooking medium• Corn imports are at zero duty (GM corn?)

• Need to understand consumers’ opinion• Implications of allowing GM food crops

– GM Crop regulation, labelling, extension activity– Avoid KFC experience!

Product Choice

• Cottonseed oil– Popular cooking medium– Quite likely Bt cottonseeds being pressed for oil

• Golden Rice– Staple food– Holds promise to alleviate nutrition deficiency

• GM fed Chicken– The most common and popular non-vegetarian

food

Survey Design

• City of Ahmedabad– A representative group of town and city people– 12 to 15 households from 43 wards of the city– Total size of 602 responses

• Questionnaire put on web– Answers sought from students, professors,

businesspersons and scientists– Total size of 110 responses

• Questions on– Knowledge, perception, and acceptability– Socio-economic and demographic profile– Choice between GM and non-GM in CV format

Random Utility Approach

Uij = u (Zj, Dj, gij)

Uij = Vij + gij

V0j = a0 + b0 Zj + c0 (dj – Pgmj)

V1j = a1 + b1 Zj + c1 (dj – Pngmj)

I* = a + bZj – c(Pngmj – Pgmj) + gj

Z

j

E[WTPngmj – WTPgmj ] = a/c + b/c E[Zj]

Z

Table 4.1(a): Income Distribution of the Respondents

ParticularsCity Survey Internet Survey

Number

Percentage Number Percentage

Yearly total household income ( Rs)

<50000 147 24.58 4 3.64

50000 to <1 lakh 266 44.48 9 8.18

1 lakh to < 2.5 lakhs 149 24.92 31 28.18

2.5 lakhs to < 5 lakhs 33 5.52 37 33.64

5 lakhs to < 10 lakhs 3 0.50 20 18.18

≥ 10 lakhs 9 8.18

Total 598* 100 110 100

* 4 respondents did not reveal their income

A Representative Characteristics

Some Observations

• More than 90% of city respondents do not know what GM is all about

• About 85% of internet respondents know somewhat or nothing about GM foods

• After giving pros and cons of GM food, more than 70% of city respondents willing to buy GM foods.

• Almost all want mandatory labelling, but only about 30 percent willing to pay for it !

• Ethics and religion matter much more to city respondents than internet respondents

Ceteris Paribus• If government’s regulatory performance is

considered excellent or good, the chances of choosing non-GM food do not increase

• Likelihood of GM food consumption increases as one moves from very-poor to middle income categories

• Being in joint family and female increase the likelihood of choosing non-GM food

• As GM prices decrease relative to non-GM, chances of choosing GM increase

• Based on expected WTP, consumers are willing to pay a premium of about 19.5% for golden rice, 16% for GM oil, and less-than 1% for non-GM fed chicken

Implications

• Majority of the middle class may just be willing to buy GM foods.

• Labelling issue will be important until consumer apprehensions about GM persist

• Information extension activity by consumer forums, ministries and firms may be necessary

• (Perceived) consumer confidence in regulatory mechanism may be critical in acceptance of GM foods