Editorial: Food worries

On the eve of the annual Fund-Bank meetings, Robert Zoellick, president of the World Bank Group, voiced alarm and a dire warning about the global food situation. His emphasis on this issue reinforces the view that food inflation is perhaps the most significant threat to the global economy today, even more than the financial crisis in the US. The largest growth engines, China and India, are deeply affected by the problem, as are other Asian economies, which are also amongst the fastest growing in the world. Asia, at least, has its growth momentum and fiscal cushions to fall back on as it tries to deal with the problem. Mr Zoellick's worries are all the more significant as far as Africa is concerned. While the resource-rich economies in that continent have benefited from the increase in commodity prices, the widespread vulnerability to rising food prices is all too obvious.

Even as the issue climbs to the top of the political agenda in India, threatening to disrupt the remainder of the Budget session of Parliament, some comfort can be drawn from the fact that India is amongst the best off as far as Asian countries are concerned. The wholesale price index for food items rose by annual rates of between 5 and 6 per cent during February and March. In China, the headline rates for January and February were around 13 and 16 per cent, while in Indonesia, they were around 13 per cent. Vietnam has it particularly bad, with prices increasing by over 30 per cent in March. Only Malaysia seems to have achieved inflation rates lower than India's. The positive implication of this comparative picture is that India's food price situation is currently being driven by relatively favourable domestic circumstances, and further comfort will be provided by a good monsoon. The advance forecast for the south-west monsoon was announced yesterday by the India Meteorological Department (IMD), predicting monsoon rainfall this year to be 99 per cent of the long-period average. However, the situation of overall scarcity does pose a threat as well. If the monsoons are indifferent or poor, the option of importing one's way out of shortages appears increasingly remote. International trade in staples like rice and wheat will virtually dry up as countries strive to secure their own supplies by imposing export restrictions and other measures.

From India's perspective, it is ironic that, even as the economy moves to a new growth trajectory and a far more significant global role, the country continues to be vulnerable to the age-old threat of food shortages. The relief from good monsoons and higher production of staples worldwide, both of which seem possible this year, will be at best temporary. The root cause of this problem remains the complete absence of change in the economic environment for agriculture, whether it relates to output prices, input prices, investment in infrastructure and a host of constraints. The immediate priority of government is clearly to protect vulnerable households from the rising prices, for which a combination of the measures already undertaken and effective implementation of safety nets "" a true test for the NREGS "" and distribution of food supplies is required. But these will not address, indeed may even be in conflict with, the structural changes needed to provide more lasting solutions. The agricultural reform agenda must once again take centre-stage in the policy debate; it is now a matter of survival.