Short-term policies to curb inflation harmful: FAO

Written by Press Trust of India | New Delhi | Updated: Jan 28 2011, 06:16am hrs
Warning against high inflationary trends, United Nations Food and Agriculture Organisation (FAO) has asked developing countries not to take short-term policy measures like export curbs to contain food prices.

Emerging economies should carefully examine the implications of high food prices and not to take any policy action that might appear useful in the short-term but could have harmful, longer-term effects or even aggravate the situation, the UN body said, while releasing the latest policy guide for countries to tame food inflation.

The FAO guide will assist policy makers in developing countries in addressing the negative impacts of high food prices, it said.

Food inflation in India still continues to rule high at 15.57%. To tame the rising inflation, the government has taken measures such as ban on export of onions, non-basmati rice, wheat, besides withdrawing duty benefits on export of milk products.

The guide addresses the conditions under which policies and programmes are best adapted. It also cautions against measures that might appear useful in the short term but which could have harmful longer-term effects, it added.

The FAO Food Price Index, a measure of basic food prices at international level, peaked in December 2010.

Sharing the experience of the food crisis of 2007-08, FAOs Policy and Programme Development Support Division Director Richard China said, some cases, hastily taken decisions by governments to mitigate the impact of crisis have aggravated its impact on food security.

He also pointed out that export restrictions applied by some surplus food-producing countries exacerbated the global food market situation during the 2007-08 crisis.

FAO strongly advises against such measures (export curbs), as they often provoke more uncertainty and disruption on world markets and drive prices up further globally, while depressing prices domestically and hence curtailing incentives to produce more food, he noted.