10% food price hike could push 30 mn Indians into poverty: ADB

A 10% spike in food prices could push 30 millions more people into extreme poverty in India, a report by the Asian Development Bank (ADB) has said.

"A 10% rise in prices could push almost 30 million more Indians into extreme poverty," the report 'Food Price Escalation in South Asia: A Serious and Growing Concern' said.

India's wholesale price-based inflation, which remained high during most of 2011, was at 6.95% in February. Retail inflation was at 8.83% in February on account of higher prices of protein based items and edible oil products.

Besides India, the report said that the 10% rise in food prices could push nearly 4 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, it said.

However, 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 added.

According to the report, South Asia is one of the most vulnerable regions in the world to food price shocks because of its high population growth and the high number of people already living on or close to the extreme poverty line of $1.25 a day.

But food subsidies targeted at the very poorest in the region would help them cope with still-high prices, it said.

"Subsidising 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.

Spending on food already accounts for half the total budget of low-income households in the region.