Projection using a Flexible Demand System for India

This paper attempts to utilize two variants of a flexible demand system for making demand projections of six broad commodity groups, separately for rural and urban areas of India. The popular almost ideal demand system is used for this purpose. Demand projections are made under two alternative income growth scenarios for the immediate post-sample period 1988-89 to 1992-93. The two model variants are found to forecast the demands differently, particularly in rural areas. In continuation of the historical trend, the models predict a sizeable decline in the per capita monthly consumption of cereals in urban India. This may signify shifts in consumer tastes and preferences away from cereals in urban areas, thereby raising serious nutritional concerns.