Bharat SainiLast Updated on August 25, 2017 by Bharat Saini
As Global Meltdown or the Global Financial Crisis followed the Global Food Crisis, countries affected by the increase in food prices had to cope up with twin crises. The increase in food prices during 2007-08 caused much more adverse effect on the developing countries, compared to developed countries, due to the high share of food in total consumer expenditure and due to already existing vulnerabilities like hunger and malnutrition in the former. The global meltdown caused a slowdown in the economic activities and consequent loss of employment opportunities.
As per the World Development Report on Agriculture (World Bank, 2008), the slowdown in general economic activity would adversely affect the domestic and overseas demand for agri-food products which in turn causes an adverse effect on farm output and prices. Similarly, the economic slowdown could affect public investment in agriculture due to diversion of resources for economic stimulus to financial, manufacturing, and services sectors. Global financial crisis and economic slowdown affected the agricultural sector as under:
- A slowdown in the demand for agricultural products in the overseas markets affected the prices of agricultural commodities and the profitability of agricultural production.
- The growth of agricultural output dropped very sharply when there was a slowdown in global economy. The patterns of growth rates impact the demand for agricultural products, and therefore for all commodities. The solid growth posted in 2006 and 2007, combined with more structural changes in some economies, such as China, have put upward pressure on agricultural prices. Conversely, the frequent recessions in 2008 and 2009 generated a drop in demand for basic products, and led to a sharp decline in agricultural prices that had repercussions for French and European farmers. In the absence of continued demand, the global imbalance between supply and demand increased during 2009, giving rise to declining agricultural prices.
- Due to the global meltdown there was a deceleration in the growth of the overall economy and that had an effect on the resources available with the Governments for various sectors. This could be seen from agricultural advances from commercial banks and public investment in agriculture both of which lead to a decline due to slowdown in GDP growth.
- The global meltdown did lead to fierce trade competition – difficulty to export and to compete with imports.
- The crisis in addition to a shift in the global order of nations, illustrates how an economic sector such as agriculture is incorporated into economic channels and globalization.
