Financial crisis may hit investments in farm sector

Financial crisis may hit investments in farm sector

New Delhi: The global credit crunch may hit investment flow and production growth in the agriculture sector, although consumers may get some relief in the form of lower food prices due to a demand slump.

A financial crisis depresses the demand leading to lower food prices, but on the flip side credit crunch could prevent investments in farm sector and thereby affecting growth in production, says an expert.

Expressing his views on the crisis in global food and financial markets, International Food Policy Research Institute (IFPRI) director-general Joachim Von Braun said in a statement that the burgeoning world financial crisis has “pushed aside the attention of policymakers from the threat of rising food prices, but the global food crisis is far from over".

“The financial crisis reduces demand and speculative activity, leading to lower food prices, and this may provide some relief to poor consumers.

“At the same time, however, the credit crunch prevents accelerated flow of capital to long-term investments in sectors such as agriculture, just as this investment is urgently needed. This undermines production growth toward a more resilient global food system," Braun said.

He asserted that food crisis continues to threaten the food and nutrition security of poor people around the globe.

Pointing out that the pattern of low global investment in agri-research and development has contributed to slower growth in farm productivity, he said: “Unless the world addresses these challenges, the livelihoods and food security of millions of poor people, as well as the economic, ecological, and political situation in many developing countries, will remain at risk".

Progress in achieving development goals such as cutting hunger and poverty in half by 2015 is slipping. The number of hungry people actually increased by at least 75 million from 2004 to 2007, and probably increased by even more in 2008.

“Addressing these challenges will require significant increases in public spending," Braun said, adding that studies show that investments in agricultural research have extremely high rates of return in terms of growth and poverty reduction.