Rising food prices and food security in South and South West Asia: Policy Options Prof. S. Mahendra Dev Director and Vice Chancellor, Indira Gandhi Institute of Development Research, Mumbai
Rising food prices and food security in
South and South West Asia: Policy
Options
Prof. S. Mahendra Dev
Director and Vice Chancellor,
Indira Gandhi Institute of Development Research, Mumbai
Contents Trends in food prices in South Asia
Reasons for increase in food prices
Impact of rising prices on macro variables,
poverty and food security
Response of South Asia on food price rise
Role of small farmers in South Asia
Policy options to mitigate the adverse
effects of rise in prices
Food Security in South Asia
There are challenges in all three components of
food security : availability, access and nutrition in
South Asia and also South West Asia
In South Asia, they are better off with cerela
production but diversification has to increase
It is known access to food is a problem in many
of these countries. Poverty is high.
Undernutrition is a problem. Nearly 45% of the
children in South Asia suffer from malnutrition.
The levels are almost double to those of Sub-
Saharan Africa
Increase in Food Prices Food prices increased significantly during 2007-
08 and 2010 and 2011
The food consumer price index shows most of
the countries in South Asia and South West Asia
showed double digit food inflation.
In 2011, Bangladesh (11%), Nepal (14%),
Pakistan (18%), Sri Lanka (11%)
During Jan 10 to Jan 11, Iran food inflation was
26%. Basically bread and cereals (46%) and fats
and oils (64%)
Over all and Food Inflation in India
Commo
dities
2006-07 2007-08 2008-09 2009-10 2010-11
All 5.42 4.66 8.1 3.8 9.6
Primary 7.85 7.61 11.0 12.7 17.7
Food
Articles
7.78 7.78 9.1 15.3 15.6
Fuel and
Power
5.61 0.93 11.6 -2.1 12.3
Manufac
ture
4.43 4.97 6.2 2.2 5.7
--Food
products
3.22 4.27 8.7 13.5 3.7
Inflation for food articles in India
0.00
5.00
10.00
15.00
20.00
25.00
Apr-
05
Aug
-05
Dec-0
5
Apr-
06
Aug
-06
Dec-0
6
Apr-
07
Aug
-07
Dec-0
7
Apr-
08
Aug
-08
Dec-0
8
Apr-
09
Aug
-09
Dec-0
9
Apr-
10
Aug
-10
Dec-1
0
Apr-
11
Food Articles
Reasons for price rise Global Factors
--Natural disasters; Export restrictions
-- Population growth and demographic changes
-- High growth in Emerging economies and demand for
food
-- Conversion of food into bio-fuels
-- Increasing financialization and speculation in
commodity markets
Domestic Factors
-- Structural and cyclical factors
--Structural: Consumption patterns away from cereals
to fruits, vegeta, dairy, meat, fish. Protein inflation.
--Neglect of agriculture, investments, technology etc.
Impact on Macro, poverty and food security Impact on macro economic aggregates directly or
indirectly
-- Consumption, investment, output, overall inflation,
trade balance, fiscal balance; rise in interest rate
negative impact on consumption and investment
Impact on poverty and food security.
--Most people pushed into poverty in Bangladesh 2.9
million; The country most people were prevented
from stepping out of poverty 8 million in India
-- Impact on malnutrition : poor consume less of
micronutrients and vitamins. Children are pulled out
of school.
-- Adverse impact on MDGs
Policy responses of South Asian countries Monetary policy: Increase in interest rates in India 13
times since early 2010; Reduction in rates in
Pakistan and Sri Lanka
Other measures
-- removal or cuts in import taxes or value-added taxes,
increases in buffer food grain stocks, export
restrictions, or price controls and consumer
subsidies
--Social protection programmes like cash transfers,
employment guarantee scheme in India, also in
Bangladesh. Strengthening public distribution
systems
--Regional cooperation better in 2010/11 compared to
2007/08; Bilateral export-quota arrangements
Policy Options to contain food price inflation
Increase in supply of agricultural
commodities by increasing productivity
Focus on small farmers
Strengthening social protection policies
Regional cooperation
Global level cooperation
Increase in Agri. productivity in South Asia Fatigue in green revolution areas: Technological
progress getting out of steam for the irrigated
system. Hybrid rice and better crop management
Yields of many crops are lower in South Asia
For example, world average yield of rice is 4.31
tonnes per hectare. In India, yield of rice is 3.4
tonnes per ha. compared to China’s 6.6 tonnes/ha
Agriculture investment in infrastructure: irrigation,
roads, communications, research and extension etc.
Credit, land and water management, institutions
Marketing and price incentives
Also focus on rainfed areas and small farmers
More than 80% are small and marginal holdings.
Constraints, challenges faced by small holders The average size of operational holdings : 0.6 ha. in
Bangladesh, 1.4 ha in India. The average size of farm
in Turkey is high
Generally, small farmers do not have level playing field
with large holding in accessing land, credit, inputs,
markets, technology etc.
Inadequate savings: It is one of the constraints for
sustainability of livelihoods and investment in agri.
Indian data shows that consumption is higher than
income for farmers upto 2 ha.( fig.)
Role of women
Lack of property rights and land issues
Low level of formal education and skills
Access to institutional credit is low and indebtedness
Constraints and challenges (contd.)
Globalization challenges: Increasing
globalization has added to the problems
faced by the small holding agri.
Globalization has exposed small farmers to
greater competition from trade.
Impact of climate change
Diversification challenges
Risk and vulnerability
Opportunities in Asia Dietary patterns are changing. due to urbanization
and income growth. High value agriculture has
emerged in several parts of Asia.
The major challenge faced by small farmers are
declining productivity, risks associated with
diversification to high value crops, environmental
constraints including those arising out of climate
change and idiosyncratic risks like floods and
droughts” ( IFAD, 2011).
There are many opportunities like producer
organizations, super markets and value chains, contract
farming in Asia for marketing.
Opportunities for Small holding agriculture
Technological innovations
--zero tillage
--Public sector led improved technologies
--Nutrient management
--Bio-technology
--Information technology
Institutional Innovations
--land and water management: institutions like
water user associations for water management
of canal irrigation
Institutional Innovations Women’s collectives: Women’s cooperatives, producer
women’s groups and other forms of group efforts
Institutions for Marketing of Small holders
--There are several models: Contract farming, self help
group model, co-operative model and producer co-operat.
--One of the most successful producer organization is dairy
cooperative in India with 12.3 million members.
--Contract farming is also successful in some cases; It is
context specific
Super markets and supply chains
FDI in retail : controversial?
Small Farmers and Information (India example)
Indian private companies and NGOs are global leaders in providing information to farmers, as a spinoff from India’s meteoric rise as a world leader in ICTs.
E-Choupal (Internet Kiosks) has expanded access to internet in rural areas. Up to 6,400 internet kiosks were set up between 2000 and 2007 by ITC Limited, one of the largest agricultural exporters.
It reaches about 4 million farmers growing a range of crops - soybean, coffee, wheat, rice, pulses or shrimp - in over 40,000 villages.
They get free information in their language about local and global market prices, weather forecasts, farming practices and crop insurance.
Mobile phone revolution also helped the farmers in South Asia
Regional level cooperation Every country having buffer stock is expensive.
Therefore, the proposal of regional cooperation like
SAARC food bank would be useful.
Joint agricultural research programmes for
development of abiotic stress tolerant improved
varieties and hybrids, and natural resource
management techniques (e.g.minimum tillage)
•Cooperation in new sciences such as GIS, remote
sensing, water forecasting, systems modeling
•Free exchange of technology and information such as
germplasm, improved animal breed, improved disease
management technologies and practices
•Capacity building through development of regional
training facilities (Hossain, 2011)
Global level cooperation Initiatives by G20 (agricultural minister’s meeting in
Paris. They commit five main objectives for action
“(i)Improve agricultural production and
productivity both in the short and long term in order
to respond to a growing agricultural commodities
demand
(ii) increase market information and
transparency in order to better anchor expectations
from governments and economic operators;
(iii) strengthen international policy coordination
in order to enhance confidence in international
markets and to prevent and manage food market
crisis more efficiently;
Global level cooperation (iv) improve and develop risk management tools for
governments, firms and farmers in order to build
capacity to manage and mitigate the risks
associated with food price volatility, in particular to
the poorest countries;
(v) improve the functioning of agricultural
commodities’ derivatives markets through the work
of Finance Ministers and Central Bank Governors”
(p.3).
G20 has to take initiative on reducing speculative
activities and conversion of bio-fuels.
South-South Cooperation CGIAR systems, ICRISAT
Conclusion Food price volatility is not new but we have to take
measures to mitigate the risks of adverse effects and
reduce price volatility it self.
In South Asia all three components of food secutity :
availability, access and nutrition have to be improved.
Apart from short term measures, long term solution is
increase in agricultural productivity and rising
incomes of farmers
Rural non-farm sector development is also important
for shifting people from agriculture
Strengthening social protection measures
Region level cooperation. Also Global cooperation
particularly in reducing speculative activities