Food Inflation Trends and Causes
Food Inflation Trends and Causes
In our country almost 40% people are living below the poverty line and high inflation makes it extremely difficult for them to maintain the livelihood. Though Inflation hits the poorer the most, it also affects the middle class of our society significantly. For past few months Indian economy has been witnessing consistent spiralling food prices. Country got some respite with the food inflation rate declining to 6.60 percent for the week ended November 26, from 8.00 percent in the previous week. According to the data released by Ministry of Commerce & Industry the 52 –week average inflation has come down to 10.45 percent. The annual rate of food inflation is measured in wholesale price index or WPI and currently the base year is 2004-05.
Food inflation has been the primary driver of general inflation and this downward trend for past weeks is giving hope amidst the difficult economic situation. This improvement can be credited to better monsoons this year and improvement in supply and distribution of certain commodities. And also,as per the latest crop estimates, the food grain production in 2010-11 reached a record level of 241.6 million tonnes and is expected to touch 245 million tonnes.
On examining the food inflation trend for past 3 years India has faced spells of high inflation many times. On a closer look the major factors leading to inflation are different every time. Global scenario had a role to play in the high inflation rates during 2008-09. Along with that the domestic policies related to money supply also accelerated the inflationary trend. But for past one year RBI has been very strict with the monetary policies changing the rate for 13 times since march 2010. This indicates thatthe roots of food inflation lie in the supply side constraints both from the production and distribution side.
In this paper we will first look at the factors driving the recent food inflation and then few measures taken by Government to
In our country almost 40% people are living below the poverty line and high inflation makes it extremely difficult for them to maintain the livelihood. Though Inflation hits the poorer the most, it also affects the middle class of our society significantly. For past few months Indian economy has been witnessing consistent spiralling food prices. Country got some respite with the food inflation rate declining to 6.60 percent for the week ended November 26, from 8.00 percent in the previous week. According to the data released by Ministry of Commerce & Industry the 52 –week average inflation has come down to 10.45 percent. The annual rate of food inflation is measured in wholesale price index or WPI and currently the base year is 2004-05.
Food inflation has been the primary driver of general inflation and this downward trend for past weeks is giving hope amidst the difficult economic situation. This improvement can be credited to better monsoons this year and improvement in supply and distribution of certain commodities. And also,as per the latest crop estimates, the food grain production in 2010-11 reached a record level of 241.6 million tonnes and is expected to touch 245 million tonnes.
On examining the food inflation trend for past 3 years India has faced spells of high inflation many times. On a closer look the major factors leading to inflation are different every time. Global scenario had a role to play in the high inflation rates during 2008-09. Along with that the domestic policies related to money supply also accelerated the inflationary trend. But for past one year RBI has been very strict with the monetary policies changing the rate for 13 times since march 2010. This indicates thatthe roots of food inflation lie in the supply side constraints both from the production and distribution side.
In this paper we will first look at the factors driving the recent food inflation and then few measures taken by Government to