NRAI Conclave Session 2:

The Food Inflation Challenge

• Trends in Food Inflation in India

� Increasing Wholesale Price Index (WPI)

� Record High Inflation Rate of ~ 18 per cent
� Global Cost Push
� Record highs for commodities including sugar

• Views on Rising Inflation

� Supply Side – Production Capacity constraints and

reduced investments due to earlier recession
� Demand Side – Increased Consumption due to GDP
growth
� Consumption lead – Improvements in customer
sentiment and resultant change in buying patterns for
last six months
 NRAI Conclave Session 2:
The Food Inflation Challenge
• Means of Tackling Rising Demand and Insufficient Supply

� Raising productivity/ offsetting cost increases

� Innovations with unit packaging
� Price increases based on competitive environment
� Finding new vendors

• Impacts of Sustained Food Inflation

� Consumer and buying behavior – will lead to contraction of

demand due to price increases
� Margins of restaurants being “squeezed”
 NRAI Conclave Session 2:
The Food Inflation Challenge
• Required Regulatory Stimulus

� Fiscal and Monetary Policy inputs by the Central and

State Governments
� Control of intermediaries in the supply chain who are
profiting
� Monitoring of hoarding
� Reduction of wastages of grains and other essential
commodities in the Public Distribution System

• Solutions

� Review purchasing strategy

� Short -term versus Long-term contracts
� Incentivize lower rates with better payment terms