From UPSC perspective, the following things are important :
Prelims level: Food inflation trend;
Mains level: Impact of food inflation;
Why in the News?
The recently released Consumer Price Index-Combined (CPI-C) data reveals that food inflation, particularly from pulses, vegetables, and cereals, is rising faster than the overall CPI inflation.
- The Consumer Price Index-Combined (CPI-C) is the index used to calculate headline inflation in India. It is calculated and published monthly by the Bureau of Labor Statistics.
Key Highlights of the CPI-C Data:
- On Current Inflation Rates: The general CPI inflation stands at 3.54%, while food inflation is notably higher at 5.06%, driven by increases in prices of pulses, vegetables, and cereals.
- On Inflation Dynamics in the Past: Over the past decade, food inflation has contributed to the overall volatility of prices. In 52 of the 124 months analyzed, food inflation exceeded the general CPI rate, indicating a significant and fluctuating impact on overall inflation.
- Expectations by the report: The RBI has highlighted that food inflation significantly influences inflationary expectations, which remain unanchored, often exceeding actual inflation rates.
(*Note: These data don’t include income taxes or investment items like stocks, bonds, and life insurance.)
Recently impact of good Monsoon on Food Production and Inflation:
|
Present Situation of Inflation in the Agri-Food Sector
- Volatility in Food Prices: Food inflation has been volatile, with instances of both high and low inflation. For example, food inflation was above 6% in 52 out of 124 months, while it was below 2% in 20 months, including periods of negative inflation.
- Supply-Side Factors: The disparities between food and retail inflation can be attributed to supply-side issues such as monsoon variability, crop failures, and government policies like minimum support prices (MSPs). Excess demand for specific food categories, such as oils and fats, has also contributed to higher inflation.
- Regional Disparities: Rural CPI inflation is higher (5.43%) compared to urban CPI (4.11%), reflecting the impact of agricultural conditions and market dynamics on rural households.
How Can the Gap Between Farmer and Consumer Be Reduced?
- Market-Driven Pricing: The government should reconsider its intervention in agricultural markets through MSPs, allowing market forces to determine food prices. This could help reduce production distortions and improve price signals for farmers.
- Enhancing Agricultural Productivity: Government expenditure should focus on increasing agricultural productivity through better technology and irrigation practices, which can lead to more stable food supplies and prices.
- Reducing Middlemen: Implementing measures to eliminate middlemen in the supply chain can help narrow the gap between what farmers receive and what consumers pay.
- Infrastructure Development: Improving infrastructure for storage and transportation can help reduce food wastage and ensure that food products reach consumers efficiently, further stabilizing prices.
Conclusion: Need to encourage the adoption of advanced agricultural technologies and sustainable farming practices to boost productivity and reduce the impact of supply-side disruptions, ensuring more consistent food supplies and stable prices.
Mains PYQ:
Q Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments. (UPSC IAS/2017)
Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024
