Food prices hike may cost India’s GDP $49 bn

The Dollar Business Bureau

The United Nations Environment Programme (UNEP) - Global Footprint Network Report said that India and China may lose around $49 and $161 billion respectively if the global food prices increase.

The report also mentioned, “In the future, the world is likely to suffer from higher and more volatile food prices as a result of a growing imbalance between the supply and demand of food.” The rising populations and incomes will intensify the demand for food, while climate change and resource scarcity will disrupt food production, it further added.

“Fluctuations in food prices are felt directly by consumers and reverberate throughout national economies. As environmental pressures mount, it is important to anticipate the economic impact of these stresses, so that countries and investors can work on mitigating and minimising risk,” said Achim Steiner, Director of UNEP Executive.

The report, titled ERISC (Environmental Risk in Sovereign Credit) Phase II, noted, around 110 countries continue to face an extreme economic threat from the hike in global food prices. And the five African countries, Nigeria, Benin, Senegal, Cote d’Ivoire and Ghana are likely to fare worst if the prices of food commodity will double.

In terms of downfall in GDP, Morocco, Egypt and the Philippines, might realise the worst effects. The reason being, these countries integrate imports of the food commodity, and subsequently their spending on these commodities, to examine the negative impact on their GDPs' current account balances and inflation.

However, Indonesia, China and Turkey, three of the world’s largest developing markets, are expected to witness the highest negative impact. It's because they spend household incomes on food commodities and on net imports of these commodities.

UNEP also noted that China would see around $161 billion wiped out from its GDP, equivalent to the total GDP of New Zealand. Meanwhile,

India could lose nearly $49 billion from its GDP, which is equivalent to the total GDP of Croatia. However, some countries such as Brazil, Canada, Paraguay, the US, Australia and Uruguay, would take advantage of the growth in global food prices.