Tartgeted food subsidies to help South Asia cope with future food
prices
A spike in the cost of food staples such as rice and wheat could push
tens of millions more people into extreme poverty in South Asia but food
subsidies targeted at the very poorest in the region would help them
cope with still-high prices, says a new report by the Asian Development
Bank (ADB).
South Asia’s high population growth rates and the high number of
people already living on or close to the extreme poverty line of $1.25 a
day means it is one of the most vulnerable regions in the world to food
price shocks. Spending on food already accounts for half the total
budget of low-income households.
Subsidising the cost of a basic meal for the poorest and most
vulnerable in places like India means the help goes to those who need it
the most without putting an excessive burden on government finances,”
said economist in ADB’s South Asia Department and an author of the
report, Hiranya Mukhopadhyay.
The study says that a 10 percent rise in prices could push almost 30
million more Indians and nearly four million more Bangladeshis into
extreme poverty. Pakistan is also at risk, with the same price leap
causing an additional 3.5 million people to drop to or below the
$1.25-a-day income mark.
Nepal and Sri Lanka would be less affected, although a further surge
in wheat prices would be especially painful for Sri Lanka, which is
completely dependent on imports of the staple and has already seen
prices hit historical highs in recent years. The report – Food Price
Escalation in South Asia – A Serious and Growing Concern - notes that
after peaks in 2008 and 2011, prices of key food commodities have eased
somewhat, although the rate of decline has been slower in South Asia
than the international average.
In addition, the region suffers from higher overall food inflation
rates than the rest of developing Asia, with food making up a bigger
share of items measured by the consumer price index.
Short-term weather shocks and costlier oil account for some of the
past price upside but the study says rapid population growth, changing
food consumption patterns linked to higher incomes, and stagnating
agricultural output are more critical factors driving rising food demand
and inflation.
Although governments in the region have taken steps to counter higher
prices, some measures may not be helpful to neighbouring countries.
India’s temporary food export restrictions, for example, could have had
adverse impact on prices in neighboring countries, as India is the
world’s second largest rice producer. Long term, Governments must step
up support for agricultural research to spark another “green revolution”
to lift output and help develop crops more resistant to weather
extremes.
More investment in infrastructure, such as irrigation systems and
farm-to-market roads to improve distribution and reduce post harvest
losses is also essential.
Strengthening home-grown initiatives such as the Food Bank
established in 2008 by the South Asian Association for Regional
Cooperation may also help to smooth out price volatility and improve
food security in the South Asian region during times of shortage, the
report says.
ADB
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