Food Price Increases in South Asia: National Responses and Regional Dimensions

March 17, 2011 - Besides negatively affecting macroeconomic stability, food price inflation decreases the welfare of households who are net buyers, rather than sellers, of food. In particular, it threatens the welfare of poorer households, for whom food takes a large share of total spending.

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Poor people are likely to have been especially hard hit by high food prices.

First, poor people spend a larger proportion of their income on food.

Second, the food price inflation of 2007-08 was especially severe for cereals, and the proportion of cereals in total food spending is much higher for the poor than the non-poor.

Moreover, households who previously were living not far above the poverty line are likely to have fallen into poverty as the result of higher food prices.

The rise in global food prices was highest for cereals, which remain relatively expensive: between 2005 and 2008 the international price of wheat more than doubled, and rice and maize prices tripled, and as of June 2009, wheat and maize prices remained substantially higher than four years previously (by respectively 55% and 87%) while rice prices were about double.
Increases in food prices have happened before but were mostly short-term phenomena. In the past, the spikes were usually because of bad crops due to floods, drought, and other natural disasters. "The current increase looks more permanent at least for the next few years because there are more structural elements that came into play," said Johannes (Hans) Jansen, World Bank's Senior Agriculture Economist for the South Asia Region and author of the report.