India's Growing Economy Doesn't Help Poor

Inflation has led to higher food costs, debilitating for those making $2 a day.

ByABC News
April 11, 2008, 10:32 AM

NEW DELHI, April 11, 2008 — -- Look into Rita Benarji's frying pan and you can see the effect of rising food prices in India.

There, simmering in the oil -- that once cost $3.75, but now costs almost $7 -- are six balls of dough. There used to be eight.

"We make the same amount of money we always have," she told ABC News, stirring her dinner in the Kalkaji slums of New Delhi. "But because expenses are so high, we have to eat less."

Wholesale inflation here is at its highest level in 3½ years -- 7.41 percent -- the government announced today, up from 7 percent a week earlier. That has directly led to higher prices at the markets. Fruits and vegetables are 20 percent more expensive than they were a month ago. In the last year, the prices of some oils have nearly doubled.

That has debilitated some members of the 800 million poor here who live on less than $2 a day. Some eat less, some ration more, all are suffering.

"The prices are so high in the normal market," Suresh Kumar, who runs a "fair-price shop" filled with food provided by the government, told ABC News. He sells sugar for 25 percent less than the local markets, but right now, his shop is empty, unfilled for the last two weeks. "It's very difficult for the normal man."

But India is not the only victim in the global food crisis, which has led to rioting from Haiti to Egypt and could raise the global poverty rate as much as five percentage points, according to the World Bank. It is also part of the cause.

Visit the high-end market in the Vasant Vihar section of Delhi, and there is no shortage of oil or dinner. There is only unprecedented demand.

India has never been richer, and more-affluent Indians have never eaten more meat and more milk -- two types of food that require more grains to produce, therefore reducing the grains left over for the rest of the world.

"The two largest countries in the world -- China and India -- with a total [population] of around 2.2 billion are having GDP [gross domestic product] growth of 8 [percent] to 10 percent, thus giving more income to their population to buy food," Jacques Diouf, the director-general of the U.N. Food and Agriculture Organization, told ABC News in New Delhi.