In India, recent developments have shown an escalation in Consumer Food Price Inflation (CFPI). The year-on-year increase is 9.9%, primarily restricted to cereals and pulses. The driving force behind this rise is the necessity for the government to address issues impacting both producers and consumers.
The Reserve Bank of India (RBI) plays a significant role in managing inflation through its Monetary Policy Committee (MPC). These entities, along with the Lok Sabha, are constantly monitoring these increases and decreases in inflation and determining how to balance the Minimum Support Price (MSP) for farmers.
Current Status of Food Price Inflation and Disinflation in India
The food inflation in India is increasingly being driven by two major commodities: Cereals and Pulses. In recent months, inflation rose by 11.9% and 13% respectively. The annual retail price surge in vegetables was even higher, at 37.4% and 26.1%. Tomatoes serve as the best indicator of this inflation rate, showing staggering numbers of 202.1% and 180.3%.
On the other hand, there’s noticeable disinflation in essential commodities due to government strategies. For political reasons, most governments tend to favour consumers over producers. But in the current scenario, special attention must be given to vegetable oil and milk producers, among other commodities.
Understanding CFPI and Its Importance
The Consumer Food Price Inflation (CFPI) is a specific measure of inflation that solely focuses on the price fluctuations of food items. It calculates how much the prices of food products consumed by the average household are increasing over time. CFPI makes up a part of the broader Consumer Price Index (CPI).
The Reserve Bank of India uses CPI-Combined (CPI-C) to track price changes of specific food items that are typically consumed by households. These include cereals, vegetables, fruits, dairy products, meat, and other food staples.
An Overview of Consumer Price Index
CPI inflation, also known as retail inflation, measures the change in the cost of a basket of goods and services typically purchased by households. This includes food, clothing, housing, transportation, and medical care. There are four types of CPI: CPI for Industrial Workers, CPI for Agricultural Labourer, CPI for Rural Labourer, and CPI for Urban Non-Manual Employees.
Identifying Causes Behind Food Price Inflation
Multiple factors contribute towards food price inflation. Supply and demand imbalances, rising production costs, energy prices, currency exchange rates, trade policies, government interventions, global events, and long-term changes in climate patterns can all influence food prices.
Prudent Steps Towards Future
To tackle these issues, several measures can be taken. Increasing agricultural productivity through research and technology, strengthening food supply chains, promoting trade and market integration, fostering competition, and enforcing antitrust laws can help stabilize and reduce food prices in the long run.
The government strategies and policies also play a crucial role in managing inflation and providing appropriate support to producers without negatively impacting consumers. Thus, a well-rounded approach considering all factors is necessary to handle the complex issue of food inflation in India.
