{"id":183511,"date":"2022-05-09T20:16:04","date_gmt":"2022-05-09T14:46:04","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=183511"},"modified":"2022-05-10T11:29:04","modified_gmt":"2022-05-10T05:59:04","slug":"how-to-tackle-food-inflation-and-how-not-to","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/how-to-tackle-food-inflation-and-how-not-to\/","title":{"rendered":"How to tackle food inflation \u2013 and how not to"},"content":{"rendered":"\n<p><b><span data-contrast=\"auto\">News<\/span><\/b><span data-contrast=\"auto\">: Recently, The RBI raised the repo rate by 40 basis points (bps) and the cash reserve ratio (CRR) by 50 bps aimed to control inflation.\u00a0<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Why has the repo rate and CRR rate been increased in India?<\/span><\/b><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Domestic Food Inflation<\/span><\/b><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">India is seeing high food inflation in wheat, edible oils, maize etc.\u00a0 <\/span><\/p>\n<p><b><span data-contrast=\"auto\">Global Food Inflation<\/span><\/b><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The <\/span><b><span data-contrast=\"auto\">Food and Agriculture Organisation\u2019s food price index <\/span><\/b><span data-contrast=\"auto\">has recorded <\/span><b><span data-contrast=\"auto\">high inflation globally<\/span><\/b><span data-contrast=\"auto\"> among all commodity group due to <\/span><b><span data-contrast=\"auto\">supply disruptions<\/span><\/b><span data-contrast=\"auto\"> from the war, <\/span><b><span data-contrast=\"auto\">dry weather<\/span><\/b><span data-contrast=\"auto\"> in South America, <\/span><b><span data-contrast=\"auto\">high crude prices<\/span><\/b><span data-contrast=\"auto\"> inducing greater diversion of corn, sugar, palm and soyabean oil for bio-fuel, and so on. <\/span><\/p>\n<ul>\n<li><span data-contrast=\"auto\">Therefore, it can be said that the <\/span><b><span data-contrast=\"auto\">global food inflation<\/span><\/b><span data-contrast=\"auto\"> is getting \u201cgeneralised\u201d.\u00a0<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/li>\n<\/ul>\n<p><b><span data-contrast=\"auto\">India\u2019s vulnerability to global inflation: <\/span><\/b><span data-contrast=\"auto\">The transmission of the above global inflation to <\/span><b><span data-contrast=\"auto\">domestic food prices<\/span><\/b><span data-contrast=\"auto\"> basically depends on how much of a <\/span><b><span data-contrast=\"auto\">country\u2019s consumption\/production<\/span><\/b><span data-contrast=\"auto\"> is imported\/exported. Therefore, India is vulnerable to prices of <\/span><b><span data-contrast=\"auto\">edible oils <\/span><\/b><span data-contrast=\"auto\">and <\/span><b><span data-contrast=\"auto\">cotton<\/span><\/b><span data-contrast=\"auto\">. Their inflation can be transmitted to <\/span><b><span data-contrast=\"auto\">India\u2019s domestic food prices.<\/span><\/b><span data-contrast=\"auto\"> For example, <\/span><b><span data-contrast=\"auto\">two-thirds<\/span><\/b><span data-contrast=\"auto\"> of India\u2019s edible oil consumption is imported and a fifth of Cotton\u2019s production is exported.\u00a0<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Will the measures control inflation, especially food inflation?\u00a0<\/span><\/b><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Probably not yet. The RBI has been behind the curve by at least 4-to 5 months. It may be difficult to rein in <\/span><b><span data-contrast=\"auto\">food inflation<\/span><\/b><span data-contrast=\"auto\">, which is surging faster than the overall <\/span><b><span data-contrast=\"auto\">consumer price index (CPI)<\/span><\/b><span data-contrast=\"auto\">.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">India cannot remain insulated from the phenomenon of <\/span><b><span data-contrast=\"auto\">global food inflation<\/span><\/b><span data-contrast=\"auto\">. India is vulnerable to import prices of <\/span><b><span data-contrast=\"auto\">edible oils<\/span><\/b><span data-contrast=\"auto\"> and <\/span><b><span data-contrast=\"auto\">fertilisers<\/span><\/b><span data-contrast=\"auto\">.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">What are the opportunities from global food inflation?<\/span><\/b><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">There has been <\/span><b><span data-contrast=\"auto\">record breaking cereal export<\/span><\/b><span data-contrast=\"auto\"> in FY22. Among cereals, wheat exports and rice exports (crossed 20 MMT in FY22 in a global market of 50 MMT) have witnessed an unprecedented growth in FY22.\u00a0<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Therefore, the government has set a target of 10 MMT for wheat exports in FY23 and it has been expected to go even up to 15 MMT.\u00a0<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Way Forward<\/span><\/b><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">(A) Monetary Policy<\/span><\/b><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">If the RBI has to make up for lost time, it will have to repeat the raising repo rates and CRR by at least three more times in this fiscal year (FY23) to mop up excess liquidity in the system.\u00a0<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">(B) The government\u2019s side<\/span><\/b><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Global food inflation<\/span><\/b><span data-contrast=\"auto\"> is a reality. In order to contain its import of the inflation into domestic market, the <\/span><b><span data-contrast=\"auto\">domestic productio<\/span><\/b><span data-contrast=\"auto\">n should be stepped up. For this, the government should announce the <\/span><b><span data-contrast=\"auto\">kharif MSPs<\/span><\/b><span data-contrast=\"auto\"> with <\/span><b><span data-contrast=\"auto\">credible procurement plans<\/span><\/b><span data-contrast=\"auto\"> for oilseeds and pulses. The government should ensure timely availability of seed, fertiliser, crop protection chemicals and credit.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The government should not resort to<\/span><b><span data-contrast=\"auto\"> knee-jerk export bans <\/span><\/b><span data-contrast=\"auto\">or stocking controls. This will only disincentivise producers.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">T<\/span><b><span data-contrast=\"auto\">he public distribution system <\/span><\/b><span data-contrast=\"auto\">and PMGKAY should be rationalzied. The government can effectively target the<\/span><b><span data-contrast=\"auto\"> massive food subsidy <\/span><\/b><span data-contrast=\"auto\">and save resources for the higher import bill on edible oils and fertilisers.\u00a0<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">In the wake of <\/span><b><span data-contrast=\"auto\">lower production<\/span><\/b><span data-contrast=\"auto\"> and <\/span><b><span data-contrast=\"auto\">procurement<\/span><\/b><span data-contrast=\"auto\"> of wheat, rice can be used as a substitute for wheat in the NFSA and PMGKAY. The beneficiaries can be given option to receive cash in their Jan Dhan accounts in lieu of grains. This is permitted under NFSA. This can also save on the <\/span><b><span data-contrast=\"auto\">burgeoning food subsidy bill<\/span><\/b><span data-contrast=\"auto\">.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The <strong>policymakers should not suppress prices<\/strong> by intervening in the markets through stock limits on traders, putting minimum export prices or outright bans on exports etc.\u00a0<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Indian farmers should be allowed to <\/span><b><span data-contrast=\"auto\">access global markets<\/span><\/b><span data-contrast=\"auto\"> to augment their incomes. The government must facilitate minimising marketing costs and investing in efficient logistics for exports to develop more efficient <\/span><b><span data-contrast=\"auto\">export value chains<\/span><\/b><span data-contrast=\"auto\">.<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">(C) Climate Change Adaptation<\/span><\/b><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The <\/span><b><span data-contrast=\"auto\">massive Agri-R&amp;D investment<\/span><\/b><span data-contrast=\"auto\"> is needed to find <\/span><b><span data-contrast=\"auto\">heat-resistant varieties<\/span><\/b><span data-contrast=\"auto\"> of wheat and also create models for <\/span><b><span data-contrast=\"auto\">\u201cclimate-smart\u201d agriculture.<\/span><\/b><span data-contrast=\"auto\">\u00a0<\/span><span data-ccp-props=\"{&quot;134233117&quot;:true,&quot;134233118&quot;:true,&quot;201341983&quot;:0,&quot;335551550&quot;:6,&quot;335551620&quot;:6,&quot;335559740&quot;:276}\">\u00a0<\/span><\/p>\n<p><b><span data-contrast=\"auto\">Source<\/span><\/b><span data-contrast=\"auto\">: The post is based on articles \u201c<\/span><b><span data-contrast=\"auto\">How to tackle the food inflation and how not to?\u201d<\/span><\/b><span data-contrast=\"auto\"> published in the <strong>Indian Express<\/strong> on <strong>09<\/strong><\/span><strong>th<\/strong><span data-contrast=\"auto\"><strong> May 2022<\/strong>, and \u201c<\/span><b><span data-contrast=\"auto\">Food inflation has not started to hurt India yet. Stepping up production can help country duck global trend?<\/span><\/b><span data-contrast=\"auto\">\u201d published in the <strong>Indian Express<\/strong> on <strong>09<\/strong><\/span><strong>th<\/strong><span data-contrast=\"auto\"><strong> May 2022<\/strong>.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>News: Recently, The RBI raised the repo rate by 40 basis points (bps) and the cash reserve ratio (CRR) by 50 bps aimed to control inflation.\u00a0\u00a0 Why has the repo rate and CRR rate been increased in India?\u00a0 Domestic Food Inflation\u00a0 India is seeing high food inflation in wheat, edible oils, maize etc.\u00a0 Global Food&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/how-to-tackle-food-inflation-and-how-not-to\/\">Continue reading <span class=\"screen-reader-text\">How to tackle food inflation \u2013 and how not to<\/span><\/a><\/p>\n","protected":false},"author":10328,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10500],"class_list":["post-183511","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-indian-express","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/183511","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10328"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=183511"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/183511\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=183511"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=183511"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=183511"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}