UN blames India, developing nations for rising food prices

September 4th, 2008 - 7:37 pm ICT by IANS  

New Delhi, Sep 4 (IANS) India, China and other developing nations are responsible for a surge in commodity prices, says a global report on trade and development, prompting experts at home to term the price situation a global phenomenon.”The surge in prices has been mainly the result of rapidly increasing demand from several fast growing developing economies, in particular China and India,” says the UN Conference on Trade and Development (Unctad) report 2008.

The high demand for commodities, the report says, is “owing to their (China and India) highly intensive use of energy and raw materials for industrialisation, urbanisation, and infrastructure development.”

Fear of high food prices looks set to haunt the people for some more time, as the report predicts “some easing of prices” with a rider that “they will remain high and volatile”.

Though the Unctad report talks of better prospects for some food crops in the current season, it offers no cheers to the masses.

“There may be some easing of prices from current levels, but they will continue to be high and volatile. Markets are likely to remain extremely sensitive to new supply shocks and shifts in investor sentiment,” says the report.

A “high and volatile” price situation for food commodities does not augur well for the policymakers and consumers, as the “world food prices roughly doubled between Jan 2006 and May 2008, and they have increased by over 80 percent since April 2007″.

The report added: “While prospects for some food crops are better in 2008, it will take some time before stocks are replenished to normal levels.”

“The report points out challenges for the global economy and policymakers and task ahead,” said Nagesh Kumar, director general of a city-based independent think tank - the Research and Information System for Developing Countries (RISDC) - after releasing the report here Thursday.

“The surge in commodity price including that of food grains is a global phenomenon. There is a deficit in demand and supply of essential commodities everywhere,” said Dalip Kumar, an economist with another New Delhi-based policy think tank, the National Council of Applied Economic Research (NCAER).

The report says “the combination of a slowdown in global growth and sharply rising primary commodity prices has important implications for monetary policy.”

Claiming that in the short-term, as the elasticities of supply and demand are low, the report says that oil prices are likely to remain high.

“However, the slowdown of the world economy could lead to a downward adjustment in oil consumption” and that “oil price could reach $200 per barrel.”

What should India do?

“We need to increase production, and stabilise population. Food prices are going up, as demand picks up, but the supply side continues to remain constrained,” said Dalip Kumar.

“Good monsoons and an increase in agricultural output put India in a comfortable zone, but leaves no scope for complacency till we are able to achieve agricultural growth rate of four percent,” he told IANS.

India, currently struggling with a double-digit inflation against China’s single digit (only 6.3 percent in July this year), produced 96.43 and 78.40 million tonnes of rice and wheat respectively in the last crop season.

The government has targeted production of 129 million tonnes of rice by 2011-12, at a growth rate of 3.7 percent, along with other food grains.

India’s food grain production was estimated at 230.67 million tonnes in 2007-08.

As per an official estimate, the demand for rice in India is projected at 128 million tonnes for 2012 and will require a production level of 3,000 kilograms per hectare against the current average yield of 1,930 kilograms per hectare.

The consumption of rice in 2006-07 was 88.25 million tonnes.

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