Apr 23, 2014, 9:24 am (BST)
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Subsidy can help check food price hike in S Asia: ADB
DHAKA, March 20 (BSS) - A spike in the cost of food staples like rice and wheat could push tens of millions more people into extreme poverty in South Asia but food subsidies targeted at the poorest in the region would help them cope with still-high prices, says a new report by the Asian Development Bank (ADB).

South Asia's high population growth rates and the high number
of people already living on or close to the extreme poverty line
of $1.25 a day mean it is one of the most vulnerable regions in
the world to food price shocks, said the report released
yesterday (Monday) in Manila.

The study -- Food Price Escalation in South Asia: A Serious
and Growing Concern -- says that spending on food already
accounts for half the total budget of low-income households.

The study said a 10 per cent rise in prices could push almost
30 million more Indians and nearly four million more Bangladeshis
into extreme poverty. Pakistan is also at risk, with the same
price leap causing an additional 3.5 million more people to drop
to or below the $1.25-a-day income mark.

"Subsidizing the cost of a basic meal for the poorest and
most vulnerable in places like India means the help goes to those
who need it the most without putting an excessive burden on
government finances," said Hiranya Mukhopadhyay, an economist in
ADB's South Asia Department and an author of the report.

Nepal and Sri Lanka would be less affected, although a
further surge in wheat prices would be especially painful for Sri
Lanka, which is completely dependent on imports of the staple and
has already seen prices hit historical highs in recent years.

It said after peaks in 2008 and 2011, prices of key food
commodities have eased somewhat, although the rate of decline has
been slower in South Asia than the international average.

In addition, the region suffers from higher overall food
inflation rates than the rest of developing Asia, with food
making up a bigger share of items measured by the consumer price

Short-term weather shocks and costlier oil account for some
of the past price upside but the study says rapid population
growth, changing food consumption patterns linked to higher
incomes, and stagnating agricultural output are more critical
factors driving rising food demand and inflation.

The study suggested that in the long term, governments must
step up support for agricultural research to spark another "green
revolution" to lift output and help develop crops more resistant
to weather extremes.

More investment in infrastructure, such as irrigation systems
and farm-to-market roads to improve distribution and reduce post
harvest losses is also essential.

Strengthening home-grown initiatives such as the food bank
established in 2008 by the South Asian Association for Regional
Cooperation may also help to smooth out price volatility and
improve food security in the South Asian region during times of
shortage, the report says.
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