Food Inflation in India
Food Inflation In India
In recent times, food inflation has been perhaps the most challenging problem faced by Indian leaders and policy makers. The trends of inflation of food prices computed on a year on year basis are as shown in fig. 1.
Figure 1: Inflation figures for Food Articles, Foodgrains, Rice and Wheat (Base: 1993-94)
Food inflation in India can be estimated by movement of composite food index in WPI. The food index consists of two sub components, namely primary food articles and manufactured food products. The overall weight of the composite food index in the WPI is 24.31 per cent, comprising primary food articles with a weight of 14.34 per cent and manufactured food products with a weight of 9.97 per cent. The WPI food inflation has moderated to 8.59 per cent in December 2010 after reaching its peak of 20.22 per cent in February 2010.
Of its two components, primary food price inflation touched a historic high in the revised series at 21.9 per cent in February 2010, thereafter declining to 9.4 per cent in November 2010 and once again rising to 13.6 per cent in December 2010. Both primary and manufactured food inflation has been analyzed by selecting specific cases of wheat and sugar.
Primary food price inflation: Analysis into the High Inflation of Wheat Prices
In spite of a positive wheat output for three consecutive rabi marketing seasons (RMS) from 2007-08 (April to March) to 2009-10 and negligible wheat exports during the same period, the WPI inflation rate of wheat was ruling high for the most part of the period from April 2008 to August 2010. The overall average wheat inflation rate recorded from April 2008 to August 2010 was 8.41%.
The primary cause for high wheat inflation appears to be the bullish market sentiment emerging from the low wheat buffer stocks position from January 2005 onwards. The factors responsible for higher market prices during RMS 2007-08 were the continued low levels of buffer stocks, substantial
In recent times, food inflation has been perhaps the most challenging problem faced by Indian leaders and policy makers. The trends of inflation of food prices computed on a year on year basis are as shown in fig. 1.
Figure 1: Inflation figures for Food Articles, Foodgrains, Rice and Wheat (Base: 1993-94)
Food inflation in India can be estimated by movement of composite food index in WPI. The food index consists of two sub components, namely primary food articles and manufactured food products. The overall weight of the composite food index in the WPI is 24.31 per cent, comprising primary food articles with a weight of 14.34 per cent and manufactured food products with a weight of 9.97 per cent. The WPI food inflation has moderated to 8.59 per cent in December 2010 after reaching its peak of 20.22 per cent in February 2010.
Of its two components, primary food price inflation touched a historic high in the revised series at 21.9 per cent in February 2010, thereafter declining to 9.4 per cent in November 2010 and once again rising to 13.6 per cent in December 2010. Both primary and manufactured food inflation has been analyzed by selecting specific cases of wheat and sugar.
Primary food price inflation: Analysis into the High Inflation of Wheat Prices
In spite of a positive wheat output for three consecutive rabi marketing seasons (RMS) from 2007-08 (April to March) to 2009-10 and negligible wheat exports during the same period, the WPI inflation rate of wheat was ruling high for the most part of the period from April 2008 to August 2010. The overall average wheat inflation rate recorded from April 2008 to August 2010 was 8.41%.
The primary cause for high wheat inflation appears to be the bullish market sentiment emerging from the low wheat buffer stocks position from January 2005 onwards. The factors responsible for higher market prices during RMS 2007-08 were the continued low levels of buffer stocks, substantial
References: * Basu, Kaushik (2011): “India’s Foodgrains Policy: An Economic Theory Perspective”, Economic & Political Weekly, 46(05): 37-45. * Chand, Ramesh (2005): “Whither India’s Food Policy”, Economic & Political Weekly, 40(11): 1055-62. – (2007): “Wheat Supply, Price Prospects, and Food Security”, Economic & Political Weekly, 42(19): 1659-63. * Dev, S Mahendra and N Chandrasekhara Rao (2005): “Food Processing and Contract Farming in Andhra Pradesh: A Small Farmer Perspective”, Economic & Political Weekly, 40(26): 2705-13. * Rajiv Kumar, Pankaj Vashisht, Gunajit Kalita (2010): “Food Inflation: Contingent and Structural Factors”, Economic & Political Weekly, March 6, 2010 * Government of India (GoI) (2002a): “Report of the High Level Committee on Long Term Grain Policy”, Department of Food and Public Distribution, accessed on 30 April 2011 (http://fcamin.nic.in/dfpd/EventListing.asp? Section=High%20Level % 20Committee%20Report&id_pk=12& Parent ID= 0). * (2002b): Annual Report 2001-02, Department of Food and Public Distribution (DF&PD) (Ministry of Consumer Affairs, Food and Public Distribution) (MCAF&PD). * (2011): Economic Survey 2010-11, Ministry of Finance.