The other big fallout of soaring food prices for the Asian region is likely to be a significant rise in debt. So far, it was believed that bloated debt was a problem that only Europe and the US were facing on account of the global crisis. But Asia is also likely to join this bandwagon. Take India for instance. It still has one of the highest proportion of poor in the world. This obviously means that most will not be able to afford food at such high rates. As a result, the Indian government would most certainly increase subsidies sharply and cut import taxes, which would put an additional strain on its finances.
Indeed, the crisis in Egypt was a product of the inability of the Egyptian government to tackle the problem of high inflation. And though extreme, noted economist Nouriel Roubini believes that persistently high food prices and inflation could raise the risk of more governments getting toppled. Certainly, Asian governments including India will have to give serious thought to some long term reforms if such shocks are to be avoided in the future.
Do you think that rising food prices will lead to a bigger crisis in Asia in the future?
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