What we see in these times that the

food The major factors that I see in the inflation growth process is basically related to the net national income and their consumption practices; the comparison of normal consumption practices ranging from normal essential products like dal to extra wanted products like milk, fruit . Government minimum support prices to weather

Production strategies still focused on staples Our production is focused largely on basic food grain such as rice and wheat. Not surprsing. keeping the overall inflation high. a compounded average annual growth rate of 13%. have also infected the inflation process to touch more height. This year the increase was marginal.conditions to increase in exports of grains etc. This has put pressure on prices. fruit and vegetables . 1)income facing growth but agriculture products (demands) going down. or the price for government purcahses. milk and meat prodcuts is falling short of demand. Compouned average growth in wheat MSP in the last four years was about 15%. while supply of fruit and vegetables .095 in 2004-05 to Rs 43749 in 2009-10 . In the recent years. The higher incomes have encouraged greater consumption of richer foods -. growing less than 2% per annum for most of the last decade. have increased sharply in recent years.pulses. milk and meat products. Agricultural productivity has lagged this rapid growth in incomes . but that of winter pulses is up 20%. at a given time prices of one or more of these is always rising sharply. The per capita availability of pulses has remained almost stagnant. High support prices create a floor for prices Minimum support prices (MSP). The relatively risk-free wheat and rice cultivation because of the government supported prices has discouraged cultivation of other market crops. We notice Farm productivity has lagged income growth Per capita net national Income has grown from Rs 24. The economic costs of procurement for rice and wheat . demand for which is not so income elastic. large transfers of purchasing power through the rural employment guarantee scheme have also added to demand pressure.

But since 2005. Monetary intervention may not help Nearly every input into prodcuiton of farm goods from fertiliser to labour has seen a sharp escalation in prices.have gone up by 40% and 36% since 2005-06 . is supply falling short of demand . The key issue. food prices dropped after monsoons. as winter crop arrived. These high prices set a floor on market prices. India food exports to rise 12% . indicating that other drivers of inflation had become stronger than seasonal effects. Indian economy took off from 2004-05 . Incidentally . Seasonality in food prices not so stark The government had pitched its hopes on good monsoons to lower food prices. but over the past few years the relationship has weakened. Earlier. there has been a secular rise in inflation regardless of the time of the year. In such a situation monetary policies will not help too much in bringing down food inflation. however.

Sign up to vote on this title
UsefulNot useful