Food price hike changes consumption pattern

Increasing food price has led to altered consumption patterns. "As expected, households have reduced intake of food and/or shifted to cheaper food items," said a report of the World Food Programme (WFP).
Apart from that, Nepal is unlikely to overcome -- in the near future -- the key challenge of increasing agricultural production and reducing reliance on imports, which have made the country particularly susceptible to rising global prices during 2008, said the report on Nepal Market Review 2008.
Ninety-eight per cent of households reported that their expenses had increased during the year. For almost all households, high food prices were an issue, and in 58 per cent of households it was the major cause of increased expenditure. During the same period only 31 per cent of households saw an increase in their income while for 17 per cent income decreased.
When food prices were at their highest point during the middle of the year, households reported spending on average 67 per cent of their income on food. The extremely poor and urban poor had the highest share of food expenditure, 78 and 70 per cent respectively.
As food prices reduced towards the end of the year and people started to harvest paddy, the average percentage of income spent on food also reduced to 63 per cent.
"For nearly a year, Nepalis have been struggling with food prices that have yet to reduce significantly. We are very concerned about the effects that this sustained high food price is having on Nepal's poor," said WFP country director Richard Ragan adding that addressing this key issue needs to be made a priority in 2009 if food security is to be achieved.
"In many areas, people are skipping meals because they can't afford to buy enough food. The longer this goes on, the more vulnerable the people -- especially children -- become to malnutrition," he said adding that many of the factors that contributed to Nepal's inflation rate in 2008, like high transport costs, are still an issue.
Inflation in Nepal is said to be imported from India. But India's annual rate of inflation fell further this week that ended on February 14 to 3.36 per cent from 3.92 per cent the week before. Nepal's inflation rate, instead of following the Indian rate, is going up and is more than double than the target of seven per cent set by the budget. It stands at 14.4 per cent by the end of the first six months of the current fiscal year.
However, the report said that relatively strong harvests in 2008 in both India and Nepal should keep prices controlled through at least the first half of 2009.
Nepal can also expect further price reprieve if the full reduction of global fuel prices is passed on through the Nepal Oil Corporation (NOC). However, transporters have not reduced the transportation fare despite a four-time fuel price cut. The transporters' syndicate has been a key hurdle in fare reduction.
"Nepal did not experience as sharp a decline in food prices as other countries in the region during the final months of 2008 -- and this was 'partially' due to transportation costs remaining relatively high," said the report.