The Hindu Business Line : ‘India, China have no role in global food prices spurt’

Hyderabad, June 6 The recent extraordinary increases in food prices globally are closely linked to the public policy responses to high energy costs in advanced economies as well as turbulence and financial markets and situations, according to Dr Y.V. Reddy, Governor, Reserve Bank of India.

Delivering the convocation address at the Acharya N.G. Ranga Agricultural University here on Thursday, Dr Reddy said the impact of such policy-induced diversion of food to biofuels was significant at this juncture. “It reflects a preference to fill the fuel tanks of automobiles rather than fill empty stomachs of people,” he added.

Adequate incentives to farmers to increase the supply of agricultural products were not being provided by public policies in many economies of the world, Dr Reddy said.

He also refuted the argument that rapid growth of China and India was lifting the standard of living of millions thus putting pressure on global demand for food products.

“A closer scrutiny will reveal that enhanced demand cannot explain a sudden spurt in prices in one year since these two economies have been growing at elevated and accelerating levels for over a decade,” he pointed out.

Further, the drought conditions in some countries like Australia and Ukraine might provide some explanation for prices increase, he added.

Despite severe imponderables, the supply response with regard to food grains is possible in a year or two. “As per Food and Agriculture Organisation estimates, wheat output is set to achieve a new record in 2008, though against the backdrop of deeply depleted stocks. Global rice production is also expected to be marginally better than the previous year,” he said.

On the implications of global scenario on India, Dr Reddy said there was a need to augment food supplies within the country since marginal requirements or even of perception of shortfalls in domestic supply could have a significant impact on world prices.

“As we have over half the workforce depending on agriculture and scope for increasing productivity, India can become ‘Annapurna’ for the world,” he added.

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