Few price control policies taken by the governments, including India, are likely to backfire by making the international market smaller and more volatile, a think-tank of International Food Policy Research Institute (IFPRI) has said.
"Price controls and changes in the import and export policies may begin to address the problems of poor consumers who find that they can no longer afford an adequate diet for a healthy life. But some of these policies are likely to backfire by making the international market smaller and more volatile," said a IFPRI report titled 'Rising Food Prices: What should be done?'
Like China and Russia, India has taken "the easy option of restricting food exports, setting limits on food prices, or both," it said, adding that India recently took steps to minimise the effects of higher prices on the population by curbing non-basmati exports, extending ban on pulses for one more year and liberalising imports of edible oils and maize to some extent.
"Export restrictions and import subsidies have harmful effects on trading partners dependent on imports and also give incorrect incentives to farmers by reducing their potential market size," IFPRI warned.
Besides, these national agricultural trade policies undermine the benefits of global integration, as the rich countries' longstanding trade distortions with regard to developing countries are joined by developing countries' interventions against each other, it added.
Meanwhile, IFPRI said that price controls would reduce the price that farmers receive for their agricultural products and thus reduce incentives to produce more food. Inflation, the silent killer!
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