A food price shock could shave $49 billion off India’s GDP, says UN report

A doubling of food prices caused by price volatility and rising populations could shave off $49 billion from India's gross domestic product (GDP) in future, warns a new UN report, which said the world will likely suffer from more volatile food prices due to rising populations.

The UN Environment Programme-Global Footprint Network report, entitled ERISC Phase II: How food prices link environmental constraints to sovereign credit risk, features countries according to how badly they will be affected if global food commodity prices double.

If global food prices double then China could lose $161 billion in GDP and India could lose $49 billion, says the report.

"In the future, the world will likely suffer from higher and more volatile food prices as a result of a growing imbalance between the supply and demand of food. Rising populations and incomes will intensify the demand for food while climate change and resource scarcity will disrupt food production," it said.

The report, which studies the impact of a global food price shock on 110 countries to assess economic risks from this growing imbalance, states that five African countries - Benin, Nigeria, Cote d'Ivoire, Senegal and Ghana - will be worst hit if food commodity prices double.

But, in terms of money loss, the report said, China will see the most amount of money wiped from its GDP of any country - $161 billion, equivalent to the total GDP of New Zealand.

India will see the second highest loss to GDP - $49 billion, equivalent to the total GDP of Croatia.

It said the risk exposure of individual countries is largely determined by their net food trade and the share of average household spending on food commodities.

Countries such as Egypt, Morocco, and the Philippines that combine high food commodity imports and high household spending on these commodities see the worst effects in terms of reduction in absolute GDP, worsening of current account balances, and higher inflation.

Other large emerging market countries, including, Indonesia and Turkey, are also strongly impacted as they have high household spending levels on food commodities and moderate net imports of these commodities.

Countries expected to experience an increase in GDP include South American cash crop exporters such as Paraguay and Uruguay and agricultural powerhouses such as Brazil, Australia, Canada and the United States.

"Fluctuations in food prices are felt directly by consumers and reverberate throughout national economies. As environmental pressures mount, it is important to anticipate the economic impact of these stresses so that countries and investors can work on mitigating and minimising risk. And as the global population continues to rise, food prices can be a bellwether for how environmental risk translates to economic risk and vulnerability," UNEP executive director Achim Steiner said.