India’s food inflation

Source: The post on India’s food inflation has been created, based on the article “Climate change is driving food prices up. This can no longer be ignored” published in “Indian express” on 17th April 2024. 

UPSC Syllabus Topic: GS Paper3-Indian economy-Inflation  

News: The article discusses India’s food inflation since 2019, highlighting that high food prices have significantly contributed to overall inflation. It criticizes the government’s ineffective measures, such as monitoring rice and wheat stocks, and suggests that deeper issues like global warming and inadequate agricultural output are driving the inflation. 

For details information on Inflation in India read here  

What is the current situation of inflation in India?

Since 2014, inflation in India has been relatively low, but it started rising sharply in 2019-20 before the COVID-19 pandemic and the war in Ukraine. This suggests domestic factors are a major cause.
Food products, especially, form a significant part of this inflation, often contributing more than 50% to the overall inflation rate. 

What are the deeper causes of inflation?

1. Global warming is a major cause of inflation, particularly affecting agricultural yields in regions like North India.

2. Rising temperatures have led to decreased wheat yields, contributing to lower supply and higher prices.

3. The consistent shortfall in agricultural production relative to increasing demand drives food inflation.

4. Ecological issues such as declining water tables and soil degradation further reduce agricultural output.

5. The indirect effects of these ecological problems also impact industrial costs, adding to the overall inflationary pressures.

What measures has the government taken?

1. The government has required wholesale traders and retailers dealing in rice and wheat to report their stock holdings every Friday. 

2. This measure is part of a broader concern about high food inflation and is intended to monitor and possibly control market supplies. 

3. The policy reflects a shift from earlier plans to repeal the Essential Commodities Act, indicating a move towards tighter regulation of essential food items. 

Why are government measures not so effective?

1. Government measures like mandatory stock reporting for rice and wheat traders are seen as temporary rather than effective solutions.

2. These measures do not address the root causes of inflation, such as supply shortages and increased production costs.

3. The perishable nature of goods like rice and wheat limits the traders’ ability to manipulate the market through stockpiling.

4. Historical patterns show that prices typically decrease after the harvest season, indicating that traders have incentives to sell rather than hoard.

5. The real drivers of inflation, like global warming affecting agricultural yields, are not directly tackled by these measures. It requires sustainable agricultural practices to stabilize prices.

Question for practice: 

Discuss the effectiveness of the government’s measures in addressing India’s food inflation