Food inflation makes India poorer, Vietnam richer

While large parts of the world are battling inflation, particularly that which stems from rising food prices, Vietnam is basking in its shadow. Reason: it is the one country benefiting fully from rising food prices.

As a result of food price increases over the second half of 2010, as many as 1.1 million people have been lifted out of poverty in Vietnam.

How has this happened?

The World Bank, in its paper ‘Estimating the Short-Run Poverty Impacts of the 2010-11 Surge in Food Prices’, divides low- and middle-income countries (that come under its ambit) into net buyers and net sellers of food.

Of these 28 countries, all countries at an overall level are net buyers of food, and thus their cost of living rises along with the rise in food prices, more than offsetting the rise in incomes from food prices.

A Firstpost report on this World Bank study published recently shows that as many as 10 million people were pushed below the poverty line due to rising food prices in India.

The only exception to this trend is Vietnam, which is a net seller of agricultural goods. This means that the rise in agricultural incomes is more than the increased cost of living due to higher agricultural prices.

Vietnam’s poverty rate has thus declined from an initial 21.4% to 20.2% now, as per our inference, given the 1.24 percentage points decline in the poverty rate. In absolute figures, the number of poor is now 17.5 million (20.2% poverty rate for a population of 86.9 million).

While the country’s staple food is rice, the maximum impact on poverty has been on account of a rise in the prices of maize (0.76 percentage points), rice (0.28 percentage points) and cotton (0.1 percentage points) as global prices of these commodities rose between 45-55%.

The World Bank uses US $ 1.25 per day, or between Rs 55-60 as the poverty line.