Rice Price Hike’s Impact

The global food prices have risen recently. The food price index was 10.5 per cent p.a. in 2006, and it rose to 15.2 per cent p.a. in 2008. There was an increase of 40.8 per cent in the first four months of 2008. According to The Food and Agriculture Organization, 37 countries are facing food crisis and among them – 31 are in Asia and Africa.

A world leaders meeting was held recently to discuss this topic and several possible reasons were stated for the current food price increase. One was the rapid growth of China and India, both in terms of GDP and population, leading to increasing demand for food. Also, there are drought conditions prevailing in a number of countries and the production of food is declining. Increase in energy costs have also increased the cost of food production and hence its price. Many of the developing countries are converting corn and edible oils into biofuel. This is a wasteful use of a precious resource is also leading to food scarcity. Even with the decrease in interest rates world wide, there is growing financialisation of commodity trade. Speculation of commodities has risen.

India is one of the countries which has been hit by this rise, but it has been impacted to a lesser degree than most other countries. The prices of wheat and rice have risen by only one-tenth of the global price rise. It is due to the government’s policy of food security. Though India has been lucky to not feel the full force of this shortage, nevertheless, it is still facing a huge food crisis. The crisis is causing political and economical instability and social unrest. Food riots were reported in the state of West Bengal in 2007 over shortage of food and hence India has banned the export of rice (except for Basmati – which attracts a premium price). This move has been highly criticized by other countries. Two factors lie behind the rice export-ban. First and foremost, fears in ruling class circles that rising food prices will provoke social unrest. India’s population is hard-pressed to adequately feed, clothe, and house itself even in “normal times”. The other reason is political. Export of the staple food at the time of crisis will reduce chances of the government being voted again.

India is mainly an agricultural economy, but the share of agriculture in GDP is decreasing with time. While India recorded a GDP growth rate of 8.5 per cent in 2006-07, agriculture grew only by 2.6 per cent. For the five years from 2002-07, the average annual growth rate in agriculture has been a meager 2.2 percent, hardly more than India’s 1.5 percent annual population growth. A pivotal factor in India’s agricultural crisis is the growth in marginal land-holdings. In 1960, there were 51 million separate landholdings, covering 131 million hectares. By 2003, the number of landholdings had virtually doubled, to 101 million, while the total amount of land under cultivation had fallen to just 108 million hectares. Since 2003, the amount of cultivated land has also declined.

This a crisis which India can work upon by adopting various measures. First of all, agriculture should be one of the main objectives of each 5-year plan. Adequate amount of expenditure is required in this sector. Farmer suicides are one of the reasons why many people refrain from taking up farming. Loans at very moderate interest rates or subsidies could be provided to them. There is a need for a proper cropping pattern. Crops should be grown according to the suitability of the land and at places favorable in terms of weather conditions. Biotechnology could also improve the productivity of food, by developing genetically modified seeds.

Food is one of the major needs for survival and hence it should be given the utmost priority.

Aparna Vyas

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