April Analysis: Economy and Development


Food Security Amidst Second Lockdown

As different parts of the country undergo partial and complete lockdown as a precautionary measure to stop the second wave of the COVID-19 pandemic, one cannot help but wonder what threats the new social restrictions and economic stoppage can pose to food, nutrition, and agricultural security across the country. Nepal being a low-income agrarian economy is most vulnerable on accounts of economic lockdown as it is predominately dependent on imports of consumable products from its neighboring nations to fulfill the consumption demand of its domestic citizens.

The looming crisis

Recalling the food crisis experienced last year due to months of lockdown; consumer behaviour has drastically changed since the announcement of the recent restriction orders. Fear factor among the public has prompted them to create a surge in demand for essential products, resulting in a price hike of daily consumable goods and commodities. With people ordered to stay at home, stock hoarding and piling of foods has increased, leading to a surge in demand for fast-moving consumer goods (FMCG), domestic produce, perishable goods, and imported consumable products. However, with the Southern borders closed, import of consumable goods and commodities (of Indian origin) into the country has been temporarily halted; leaving consumers with lesser supply, and consequently higher market prices. Retail prices of domestically produced goods and groceries too has hiked, so much so that consumer rights activists have complained that the retail prices have increased by almost two-fold, since the announcement of restrictive orders by their respective local governments.

Similarly, reduced domestic production of cereal crop (due to late winter droughts) is adding to the burgeoning stress on domestic demand. Despite being an agro-economy, Nepal witnessed a fall of 8 percent in yield of wheat harvest during the recent months. This sharp reduction in output of about 1,71,000 tonnes roughly translates into a loss of more than NPR 5.3 billion. Regarded as the third major harvested cereal crop after rice and maize, this fall in production of wheat is likely to turn into a major supply crisis in the upcoming months of prolonged lockdown.

Table 1: Annual Wheat Production for the last five fiscal years.

Fiscal Year (FY):Annual Wheat Production (in tonnes):
2020-20212.09 million
2019-20202.18 million
2018-20192.08 million
2017-20181.94 million
2016-20171.84 million
(Source- The Ministry of Agriculture and Livestock Development)

Moreover, the country’s farming sector also faces chronic underinvestment, underproduction and severe lags in modernization and infrastructural development. Even with the government’s decision to allow foreign direct investment (FDI) in the agricultural sector, (with an immovable capital investment of NPR 500 million and export of 75 percent of total produce); it is only applicable in nine sectors, leaving out sectors like primary agro-production, animal husbandry, cottage and small industries with no investment prospects. This is expected to invite misuse of investment, privatization of the sector and practice of monopoly in commodities market.

Combating Measures

In this backdrop, Nepal’s underdeveloped agriculture sector in a dilemma. The slow but continual spread of COVID-19 is expected bring in startling effects to Nepal’s agriculture and food security. With harvesting periods being severely impacted, significant cultivable lands being left barren, import of essential food commodities temporarily halted, and practice of selective investment; citizens fear evitable food insecurity and shortage throughout the upcoming months.

While the second wave of COVID-19 will have huge repercussions on human health and economy, it will have more salient effects on agriculture. To address such uncertainties, several short- and long term-reforms are needed to maintain a stable food supply chain which includes- encouraging local food sufficiency, procurement of seeds/chemicals/fertilizers on a local level, increasing manpower in agriculture through increased employment opportunities, and stricter monitoring of the food market alongside provision of social protection mechanism for the most vulnerable.

Poverty, economic decline and food insecurity are synonyms to one another. To combat them, efforts from all tiers of governance are required; otherwise, the country can end up facing economic shocks and consequences more detrimental than the virus itself.

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