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The Analyst Magazine:
Food Price Inflation : Imported or Indigenous?
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While the prices of a wide range of commodities are increasing, food price inflation is likely to have the most significant effect on the poor and middle income groups and can have severe macroeconomic consequences.

 
 
 

The high level of inflation is catch ing the attention of policy mak ers, politicians and people world over. The South Asian region—with the high inflation rates of India (7.41%), Myanmar (20%), Sri Lanka (15%) and Pakistan (8%)—remains a worry. With a large number of people spending a major portion of their income on food, high prices of food threaten the livelihood of the poor in these countries. In addition to the increased food insecurity and associated social unrest, the efforts to fight malnutrition and poverty have been pushed back by several years. The political consequences of inflation could be immense. The government in India cannot turn a deaf ear to the present monetary crisis; beginning with Karnataka assembly elections in May 2008 and leading to the general elections in 2009, every policy decision of the government will be closely watched by the people.

Both `supply' and `demand' forces play their roles in the present food price crisis. On the supply side, a key factor is the rising levels of oil prices. Price movements for the two varieties of crude (Dubai Fateh and Brent) that are figuring in India's import basket show a continuous rise since May 2003, with current prices over $100 per barrel. It is not shortage of supply but financial speculation that is often blamed for high oil prices. The recent declines in stock market and in the value of the American dollar are adding fuel to the fire. High oil prices have pushed up the agricultural costs directly, since oil is an important farm input. The cost of transporting food has gone up as well.

 
 
 

The Analyst Magazine, Food Price Inflation, Monetary Crisis, Agricultural Sectors, Food and Agricultural Organization , FAO, Agricultural Markets, liberalization, globalization, World Food Prices, Global Agricultural Systems, Gross Domestic Products, GDP, Marketing Systems, Public Transportation System.