In mid-June inflation in India hit its fastest pace in 13 years with prices surging at 11.63 per cent, faster than the growth rate. In just seven months the consumer price index tripled and things are expected to get worse in the coming weeks, especially when the strike by four million truckers in early July is factored in.
In the South Asian nation fuel, power and electricity prices rose 16.2 per cent in from a year earlier. Food costs jumped 14.6 per cent.
The government has responded by taking protectionist measures. Last Friday it banned the export of corn after restricting the export of rice, wheat and vegetable oil to contain domestic prices. But in doing so it is accentuating the world food crisis.
In the Philippines prices rose by 11.4 per cent last month, but food, beverage and tobacco costs jumped 16.5 per cent
Inflation in China has jumped to 8 per cent, with Singapore, Thailand and Hong Kong not far behind.
Experts expect inflation to rise further mirroring the rise in oil prices as well as those of raw materials and metals, but especially food.
In Asia wheat and corn have doubled in price since the beginning of 2007; rice prices are three times higher today than a year ago; palm, soybean and coconut oils have nearly tripled as well.
Fertiliser prices have simply exploded, with 400 per cent price increases for many categories.
Rising food prices are especially serious for countries emerging out of hunger and poverty. Food in China, India and Indonesia (which altogether represent 2.6 billion people) represents the lion’s share in their consumer baskets, running at between 30 and 40 per cent of the total, compared to an average of 15 per cent for industrial countries (which includes labour, services, supermarket and restaurant rents, packaging, delivery, advertising, etc.).
Higher oil and energy prices and greater affluence in many countries (also measured by higher food consumption) are likely to push up overall food prices. And food exporters have been quick to respond to price shocks by banning exports to contain domestic prices.
Food production is also being affected by the growing diversion of farmland away from traditional uses in favour of industrial development, urban sprawl and biofuel production. Even gains in productivity cannot cope with such demands.
Analysts expect Asian currencies to weaken. Since the start of the year the South Korean won lost 10.6 per cent against the greenback; similarly, the Indian rupee lost 8.7 per cent against the dollar.
For Peter Redward, head of Research for Emerging Asia at Barclays Capital Inc., the won and the rupee might lose another 13 and 6 per cent respectively in the next six months. The Filipino peso is also likely to drop in value.
Concern is growing that rising prices might force government to increase their subsidies, reducing money for other essential services, pushing up wages which might impact on prices.
In many Asian countries the crisis is raising questions about their development model, whilst more and more people are rediscovering the importance of agriculture as an economic activity.