With food inflation limited to dal roti, why govt policy may need changes

Source: The post is based on the article “With food inflation limited to dal roti, why govt policy may need changes” published in “Indian express” on 9th October 2023.

Syllabus: GS 3 – Indian Economy- inflation

News: The article discusses rising food prices in India, particularly in cereals and pulses, and how this inflation is a concern for the Reserve Bank of India and the government, especially with upcoming elections. It also explores the issues in the vegetable oil and milk sectors, suggesting a balanced approach to manage inflation and support both consumers and producers might be needed.

Why is the Reserve Bank of India worried?

The Reserve Bank of India (RBI) is worried due to rising food prices.

Overall retail inflation is at 6.8%, exceeding RBI’s target of 4% and the upper tolerance of 6%.

Notably, prices of cereals and pulses, staple foods in India, have surged to 11.9% and 13% respectively in August.

These inflation issues come at a sensitive time with national elections scheduled in six months.

What’s the issue with inflation in India?

Rising Food Prices: Food prices in India have surged, showing a 9.9% increase year-on-year in August. Key staples like cereals have spiked by 11.9% and pulses by 13% during the same period.

Vegetable Price Fluctuations: Inflation was very high for vegetables, with tomatoes showing a drastic inflation rate of 202.1% in July. However, tomato prices have eased, now being Rs 20 per kg, down from Rs 130 two months ago.

General Retail Inflation: Overall retail inflation is notably higher than the upper tolerance of 6%. This rise in inflation is particularly concerning as national elections are approaching in six months.

What should be done?

Balancing Consumer and Producer Interests: The government needs to ensure food prices do not spiral, especially with the national elections just six months away.

There’s a need to balance between maintaining lower prices for consumers and ensuring producers are not adversely affected.

Addressing Vegetable Oils Issue: With soyabean trading below the government’s minimum support price, despite a good crop, there’s pressure to raise the import duty on vegetable oils.

Navigating Milk Sector Challenges: After prices soared in the milk industry during a shortage, there is now a surplus due to increased production. Ensuring dairy farmers are not adversely impacted by the drop in prices for products like ghee will be crucial.