As per data by RBI, in the period 2016-2020, the average food inflation was 2.9 percent. This has more than doubled in the 2020s to an average of 6.3 percent. It reached as high as 8.7 percent in April 2024.    

Causes of persistently high food inflation in India:

1. Supply and Demand Imbalances: Factors such as extreme weather events, crop failures, or pest infestations can reduce the supply of agricultural products, driving up prices. Conversely, a surge in demand, perhaps due to population growth or changes in consumer preferences, can also lead to higher prices if supply cannot keep up.
2. Temperature and Weather Challenges: Issues like adverse weather conditions, weak monsoons, and heatwaves led to cereal and pulse double-digit inflation in April 2024.
3. Fuel Price rise: An increase in fuel inflation by 1% leads to a 0.13% rise in food inflation, and the effect slowly declines through the next 12 months.
4. Post Harvest Losses: Approx 74 million tonnes of food is lost in India each year primarily due to inadequate storage and cold chain management further adding to food inflation.
5. Increase in input cost:  A report by the Fertilizer Association of India(2023) highlighted a 25% increase in fertilizer prices due to global supply chain issues.
6. Government Policies: E.g. Minimum Support Price leads to higher market prices for food grains and limits on stock holdings of essential commodities may lead to market speculation and artificial scarcity, spiking prices.
7. Trade Policies: Restrictions on imports can limit the variety of available food products and potentially drive up prices.

Effectiveness of the monetary policy of the RBI to control this type of inflation:

1. Inflation Targeting: By focusing on headline inflation, which includes food and fuel prices, the Reserve Bank of India (RBI) can anchor inflation expectations and prevent food inflation from spiraling into general inflation
2. Indirect Impact of Interest Rate Adjustments on Food Inflation:  By adjusting the repo rate, the RBI influences liquidity in the market, which in turn affects consumer demand.
3. Exchange Rate Management and Imported Food Inflation: In 2021, global food prices surged, especially edible oils. The RBI’s management of the exchange rate helped soften the impact of these global price hikes on domestic food inflation, though not fully.
4. Transmission of Monetary Policy to Agricultural Sector Credit: Monetary easing during 2020-2021, which lowered interest rates, helped to maintain credit flow to the agricultural sector during the pandemic. 

However, Monetary policy faces certain limitations as:

1. Food inflation in India is often driven by supply-side factors, such as poor infrastructure (irrigation, roads, cold storage), inefficient distribution systems, hoarding, and agricultural productivity issues.
2. Seasonal fluctuations in food prices (driven by rainfall, crop output, and global food prices) often deviate from the general inflation trend.
3. Fiscal Policy Impact – Eg- Government providing higher MSP
4. Effectiveness also depends on external factors such as global commodity markets and oil prices, over which the RBI has limited control.
5. High Share of Food in Consumption Basket: In emerging economies like India, where food constitutes a large portion of household expenditure (around 45% or more), food inflation directly affects overall inflation, making it harder for monetary policy alone to control it​
6. Lagged Impact: Monetary policy actions like interest rate hikes may take several quarters to influence inflation. However, food price shocks tend to be more immediate, meaning that monetary policy adjustments may not be timely enough to prevent short-term inflation spikes​

Government Measures Complementing RBI’s Monetary Policy:

1. Improving agricultural infrastructure like irrigation, cold storage, and rural roads.
2. Price stabilization measures such as buffer stock management through the Food Corporation of India (FCI).

Therefore as noted by Reserve Bank of India “the persistence of food inflation underscores the need for effective policy measures that address both demand and supply dynamics.