Food Crisis ?
Four
years ago, soaring food prices had sparked off riots in countries as diverse as
Egypt, Bangladesh and Haiti. Some analysts have even suggested that the steep
rise in the cost of food was one of the reasons why simmering discontent in the
West Asia and North Africa had boiled over into the Arab Spring.
Rising food prices could once again be a cause for concern in many
countries, especially since most economies are also growing at a slower pace
compared to 2012. India is not the only country that has worried eyes staring
towards the clear skies. The US is also facing a severe drought. The US
Department of Agriculture warned on Wednesday that prices of groceries and
several meat products are likely to climb because of poor farm output. India
has no immediate reason to worry about the prices of cereals such as rice and
wheat. The granaries have ample stocks, around 30 million tonnes of rice and 50
million tonnes of wheat, far more than the mandatory buffer stock and strategic
reserve that has to be maintained. So prices can be capped if the government
intervenes effectively in the market.
The biggest worry is pulses and oilseeds, where we are
increasingly dependent on imports. Prices of these agricultural commodities
have been rising in the forward commodity markets, as traders anticipate
inflation. Poor output, higher imports and rising prices of pulses and oilseeds
could have two effects on the macro economy --- higher imports and further
inflationary pressure.
Food prices matter a lot for consumers in developing countries
because they account for a larger portion of family budgets compared to the
developed countries. India has already had very high consumer price inflation
in recent years, and inflationary expectations have soared, leading to wage
pressures in the economy as families try to protect their purchasing power.
Reserve Bank of India governor D. Subbarao asked in a recent speech whether
core inflation is a true indicator of price pressures in an economy such as
India’s, since around two-thirds of the weightage in the inflation indices is
accounted for by food and fuel. Further, central bankers in the West look at
core inflation but prices of food and fuel tend to be volatile, and add “noise”
to the inflation data. But food inflation in India has been persistent rather
than volatile.
Abdolreza
Abbassian, a senior economist at FAO told Reuters that plentiful supplies of
rice and better availability of wheat meant the situation was not as serious as
four to five years ago. “It is a serious situation which has to be monitored
closely but it is too early to refer to it as a food crisis situation,” he
said. “We do not see any production or supply problems with rice. That is very
important for food security of millions of people around the world.”
Many governments will be keeping their fingers
crossed on that one.
Source
: www.livemint.com
