Working Paper Series

The Impact of Rising Food Prices on Household Welfare in India

Authors

  • Alain de Janvry, Goldman School of Public Policy, University of California, Berkeley
  • Elisabeth Sadoulet, University of California at Berkeley

History

  • Goldman School of Public Policy Working Paper (March 2009)

Abstract

Food prices have more than doubled between mid-2006 and mid-2008, creating major
distress among the poor across the world, but also gainers among farm producers. While
transmission was largely averted in India, increasingly open food markets indicate the
need to anticipate the welfare implications of a repetition of such events in the future.
This paper simulates the welfare effects of the rise in the international price of cereals
and edible oils on a comprehensive typology of Indian households. Results show that
large farmers(with farm size of one hectare and more) would have gained as a group, and
that the average gain is large for those who gain, but that 59% of them in fact lose. The
main category of poor households negatively affected by the rise in prices is rural
(representing 77% of all losing poor households), both farmers and non-farmers. This is
contrary to conventional wisdom that looks at the urban poor as the main category to be
sheltered from rising prices through safety net measures, and expects most farmers to
gain. These rural households account for 79% of the aggregate welfare loss among the
poor. This makes a forceful case for the need to look beyond the urban poor when food
pricesrise.

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