The recent increase in global food prices has once again set off alarm signals in developing countries, especially in South Asia, where food inflation has been a major problem for some years now. Evidence from South Asian countries corroborates the fact that domestic factors do play a role in the international transmission; while rising global prices put upward pressure on domestic prices in a much rapid manner, its downward movements are less rapidly or effectively transmitted and often do not have any such impact. In this article the authors examine the issue of the international transmission of food price increases in South Asia, and assess the extent to which South Asian countries are vulnerable to the latest global price surge.

* This article was originally published in The Business Line on 14 June, 2011.

June 14, 2011.