Unbridled inflation in India continues to race ahead

South Asia, Africa most vulnerable to food inflation

Business

April 18, 2022

/ By / New Delhi

Unbridled inflation in India continues to race ahead

According to the United Nations’ Food & Agricultural Organisation, food commodity prices rose 23.1 pc in 2021, the fastest pace in over a decade (MIG photos)

The latest data on wholesale price index rise, released today by the government, shows inflation racing to record levels in March. Though it may be mainly due to fuel price rises, its impact is mainly felt in rise in food prices, which have already been high due to the Russian invasion of Ukraine.

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Few would have been surprised by the news today that inflation in India has risen again in March, because it was expected that inflation would keep rising. But what caught most analysts and bankers off guard was the extent to which inflation had raced ahead as the government says inflation in March hit a record high of 14.55 pc, almost double of the rate of 7.89 pc in March 2021 and higher than 13.11 pc in February.

While most of the price rise is directly due to the rise in fuel prices, which have jumped by 15 pc since late March 2022, the impact of higher price at the fuel stations is being felt across the entire economy and most crucially in food sector. The data released this morning shows that food inflation has risen to 8.71 pc in March from 8.47 pc in the previous month.

Partly the rise in fuel and food prices can be blamed on the Russian invasion of Ukraine in late February which has sent prices of crude oil surging to record highs and completely disrupted the global food and fertiliser markets as both the countries at war are major producers of wheat and fertilisers. Together, Russia and Ukraine account for almost a third of global wheat exports and about a fifth of corn, both part of staple diets across the world and most of which is exported through ports on the Black Sea which have been closed since the war began.

As a result, wheat prices have jumped over 50 pc since the war began and are now ruling at record levels. Not just grain, but also up are other foods, notably meat prices. Also, as Russia and Ukraine are large exporters of fertilisers and hence the war has hit not only the prices of crops already harvested but also put a question over the fate of future crops, driving the prices even higher.

The food price rise in the year 2022 is bad in itself, but it has come on the back of increases that go back to the pandemic or even pre-pandemic era. And the rate of inflation seems to be accelerating year on year. According to the United Nations’ Food & Agricultural Organisation (FAO), food commodity prices rose 23.1 pc in 2021, the fastest pace in over a decade. Indeed, global food prices were about 40 pc higher at the end of 2021 than they were in 2019. And as a direct result of the war, the rate is set to accelerate this year even further as FAO’s tracker for prices for meat, dairy, cereals, oils, and sugar was at the highest level in over 50 years.

The scenario for the rest of the year is indeed a bit scary as with over two years of disruption of farming and trade due to Covid-19 pandemic, world food stocks have been declining. In fact, they declined last year for the fifth straight year and with climate change, higher input costs have made farming even less productive than before, clouding the picture for the outputs and prices in the mid-term as well.

India and South Asia most vulnerable

Though every part of the world has been hit by the price rise, the worst impact has been felt on the low-income nations where already food was by far the largest expenditure even before the pandemic began. For instance, in developed world, food is about 17 pc overall consumer spending, while in sub-Saharan Africa, the poorest region in the world, it was already at 40 pc.

The World Food Programme, another UN agency, says that food insecurity around the world has doubled over the past two years and that about 45 million persons are on the brink of a famine.

Though unlike sub-Saharan Africa, India, Pakistan and Bangladesh are large producers of food the first two are also large exporters, food insecurity has risen, rather sharply in India, the largest producer of food in the region. Even though, India has millions of tonnes of grain, notably wheat, in its government-controlled graneries, food insecurity has worsened in India since the outbreak of the pandemic and a balanced nutrition, already out of reach for a significant chunk of the population, has deteriorated rather sharply since 2020.

Being the second largest country in the world and with the largest share of the poor, the situation in India is rather traumatic and on certain parametres worse than Africa and amongst the lowest in the world.

For instance, according to Global Nutrition Report 2021, as many as 53 pc of women of reproductive age (15-49 years) were anaemic and there was no data on whether India progressed at all in tackling low birth weight amongst children. Another worrying figure is that 34.7 pc of children under 5 years of age are stunted and 17.3 pc of children under 5 are afflicted by wasting, another life-long impact of prolonged malnutrition. Nearly 60 pc of deaths of children under 5 is directly linked to poor nutrition.

What is worrying about India is that even before the pandemic, the situation of malnutrition and child health had been worsening. According to a nationwide survey, malnutrition amongst children became more prevalent and stunting amongst children rose in 13 of 22 states and territories from 2015-2020. Even the so-called rich states face the challenge as Gujarat, the home state of Prime Minister Narendra Modi, topped the nation in proportion of stunted children under 5 years of age, with 4 in 10 children afflicted by it.

Nutrition experts have long called on the government to deal with anaemia amongst women to help deal with malnutrition of children and low-birth weights, but with limited and declining government spending on nutrition as well as healthcare has certainly exacerbated the situation in India over the past two years.

But a dramatic fall in nutrition is not limited to India. The anti-government protests that have left Sri Lanka teetering over the past few weeks are mainly due to food and fuel price rises.

But the malaise goes far beyond South Asia. Most experts believe that Africa, notably sub-Saharan Africa, is definitely in the same boat as may be some other countries in Asia.

If the situation was so grim before the war began in Europe, one can only imagine the impact of the war and the subsequent disruption in food supplies and inflation on the most vulnerable communities in the world. As it is, almost all of these nations were set to miss the deadline of United Nations Sustainable Development Goal of addressing hunger and providing balanced nutrition to all by 2030. With less than eight years to go, even the limited progress made towards these goals by African and South Asian nations is certain to have been erased and the countries pushed back by years, if not decades.

Once again, India is a good indicator. The UN had estimated in 2019 that India lifted the largest number of people out of poverty in the history of world as it managed to move 271 million above the poverty line in 2006-2016. In 2021, the UN estimated that 46 million Indians had fallen into extreme poverty in 2020, about half the total number in the world and overall 88-115 million Indians became poorer due to government’s response to Covid-19.

Though the NGOs and some governments have reinforced their efforts to tackle the issue of hunger, much more can be and needs to be done, by the national governments and above all the rich nations and the extremely wealthy persons around the world, most of whom have seen their fortunes soar since the pandemic-outbreak just as the poor across the street were struggling find even one square meal a day. Without a generous injection of cash and provision of nutritious food in the areas that need them, the world is on course to see one of the biggest tragedies of living memory unfold.

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