World food prices rose for a seventh consecutive month in December 2020, with all the major categories, barring sugar, said the United Nations Food and Agriculture Organization (UN-FAO).

Try this PYQ:

Q.Which one of the following is not a sub-index of the World Bank’s ‘Ease of Doing Business Index’? (CSP 2019)

(a) Maintenance of law and order

(b) Paying taxes

(c) Registering property

(d) Dealing with construction permits

World Food Price Index

• The FAO Food Price Index is a measure of the monthly change in international prices of a basket of food commodities.
• It consists of the average of five commodity group price indices [cereal, vegetable, dairy, meat and sugar], weighted with the average export shares.
• The index has become a critical and timely monthly indicator of the state of international food markets, gauging the change in food commodity prices over time in nominal and real terms.

Why it matters?

• High food prices have contributed to a surge in inflation
• There are social and economic advantages from high food prices for example higher prices are an opportunity to improve farmers’ incomes and to stimulate investments in farming.
• For developing countries that are major exporters of food, the rise in world prices helped to bring about an improvement in the terms of trade and a strong balance of payments.

Concerns raised

• That said higher food prices for domestic consumers created fresh problems of poverty and hunger.
• Lower-income families spend a higher proportion of their budgets on food.
• Higher prices hit them hardest causing a fall in real living standards.
• This means that food price inflation can act as a tax on the poor and have a regressive effect on the distribution of income.

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