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What's the article about?
- It talks about the rise in food inflation.
Relevance:
- GS3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment; Prelims
Context:
- There is a sharp increase in the retail prices of several crucial food items over the past one month — from the essential vegetables of tomato, onion and potato to the basic cereals of rice and wheat, tur dal, the commonest protein source in vegetarian households, and even loose tea.
- In this article, the writer analyzes the causes behind this rise in food inflation.
Measuring food inflation in India:
- The retail food inflation in India is captured by the Consumer Price Index (CPI).
- The CPI calculates the difference in the price of commodities and services such as food, medical care, education, electronics etc, which Indian consumers buy for use.
- The CPI has several sub-groups including food and beverages, fuel and light, housing and clothing, bedding and footwear.
- It is released by the National Statistical Office (NSO).
Analysis:
- Main drivers of the food inflation:
- Kitchen essentials such as tomatoes, onions, potatoes (TOP), tur dal, rice, etc are seeing sharp rise in the retail prices. This directly affects the budget of most of the Indian households.
- Causes for such sharp rise in prices:
- Seasonality component: Due to the cropping season and monsoon, this part of the year (june-july) sees higher food inflation almost every year.
- Other factors: The prices of farm produce and their supply is largely determined by factors including timing of the harvest and the prices prevailing at the mandis when the farmers transport their crop to the markets.
Way Forward:
- With the monsoon rains 13% in deficit so far this year, and the outlook for spatial and temporal distribution in the coming months clouded with uncertainty by the El Niño, there is a real risk that food prices could cause retail inflation to accelerate again.
- Policymakers need to walk the talk and retain laser focus on taming inflation. After all, as the Reserve Bank of India’s economists noted in the latest bulletin, “the path to high but sustainable inclusive growth has to be paved by price stability”.
