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Food inflation in India UPSC NOTE

 Food Inflation in India

  • Food inflation is the increase in the prices of food commodities over a period of time. 

  • It is a measure of the rate at which the cost of food is rising

  • Food inflation can have a significant impact on households, businesses, and economies.

Factors that can contribute to food inflation, 

  1. Supply and demand: If the demand for food exceeds the supply, prices will rise. This can happen due to factors such as population growth, natural disasters, or trade disruptions.

  2. Production costs: If the cost of producing food increases, this can also lead to higher prices. 

This can be due to factors such as rising energy costs, labor costs, or fertilizer costs.

  1. Government policies: Government policies can also affect food prices. For example, tariffs on imported food can make it more expensive to buy food, while subsidies for farmers can help to keep prices down.

Food Inflation in India - Recent trends

  • In October, India’s consumer price inflation eased to a four-month low of 4.87%.

  • While wholesale prices declined year-on-year for the seventh successive month by a minor 0.5%


  • Although only marginally lower than the 5% retail inflation in September.

  • Rural consumers still face a higher inflation of 5.1%, though

  • Core inflation, which excludes energy and food costs, has eased further and household services inflation dropped below 4% after several months above. 

  • The rise in prices of vegetables, which had surged over 37% in July, eased to 2.7% in October.

  • In food costs for households stayed firm at 6.6%, virtually unchanged from September, as other essential edibles saw faster price hikes or remained at elevated levels. 

  • Like pulses up 18.8% and cereals 10.7% inflated

  • This lead to worries about the kharif output and uncertain rabi prospects as well as hikes in minimum support prices for crops. 

  • Pulses prices were up 19.4% at the wholesale level, signalling that more pass-through to retail prices is likely.

Why Food inflation is high?

Factors that contribute to high food inflation in India

  • Supply and demand imbalances: India has a large and growing population, with a rising middle class that is demanding more food of higher quality..

The agricultural production has not kept pace with this demand, leading to supply shortages and rising prices.

  • Climate change: Climate change is having a significant impact on Indian agriculture, causing more frequent and severe droughts, floods, and heat waves. These extreme weather events damage crops and reduce yields, leading to higher food prices.

  • Infrastructure bottlenecks: India's infrastructure, including roads, storage facilities, and transportation networks, is often inadequate to handle the country's vast agricultural output

  • Government policies: Government policies, such as export bans and minimum support prices, can also contribute to food inflation. Export bans can reduce the supply of food available in the domestic market, driving up prices. 

  • High input costs: The costs of inputs such as fertilizers, pesticides, and labor have been rising in recent years, putting additional pressure on farmers' margins and contributing to higher food prices.

  • Wastage: A significant portion of India's food production is wasted due to inadequate storage, transportation, and handling facilities. This wastage can be as high as 30% for some fruits and vegetables.

How does it impact the Indian economy?

  • The MPC of the Reserve Bank of India, will not be too swayed by the October tidings. 

  • Excluding edible oils, whose 13.7% year-on-year drop in prices played a key role in moderating the Consumer Price Index, would have meant a 5.6% rise in prices. 

  • Base effects from last year, when the Ukraine conflict had spiked edible oil prices, will start to dissipate in coming months. 

  • While the 6.8% inflation recorded in October 2022 helped cool price rise last month, those base effects will surely ebb this month. 

  • Retail inflation had eased to 5.88% last November, with the food price index rising just 4.7%, from 7% in the previous month

  • The perceived retreat of inflation last month thus may only be fleeting. 

  • Households that seem to have adjusted to the continuous recent rise in living costs, by pulling back on discretionary spends and downsizing essential consumption.




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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Food inflation in India UPSC NOTE
Food inflation in India UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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