Food Price Inflation in India: Causes and Cures

This paper analyses the demand and supply of food in the context of food security in India so as to understand the domestic policies needed to control food problems and food inflation. First, we could consider supply side policies needed to ensure that the rising demand can be met and food inflation controlled. Concerted action will be needed to increase agricultural yields, given that cropped land will be hard to increase. These include improving irrigation facilities, better seeds, improved cold storage and transportation facilities, reallocation of land from cereals and pulses to vegetables and fruits, etc. Second, we estimate food demand in India by categories such as cereals, vegetables, fruits, dairy products, and meat using consumption data available under different studies. Our analysis shows that the structure of demand by food category is in the process of undergoing significant changes with rising income levels, and that the demand for fruits, vegetable, cooking oils, dairy products, and meat will increase by 60–75 per cent over the next 10 years, while demand for cereals will increase only 10 per cent, and that for pulses will decline slightly. Finally, we discuss the food security issues and required measures to be followed by the government for ensuring food security in future.

Over the last several years, food price inflation has become a major problem in India. Price stability is crucial for sustainable growth as persistent inflation implies higher demand in relation to supply. Thus, there is an urgent need to understand this problem and to respond with appropriate agricultural policies to keep food prices stable if we are to reduce hunger and poverty in India. One reason for the rising food prices could be increasing demand for food, as the income levels increase with rapid economic growth. Another reason could be supply and distribution problems. Increases in international prices of foods could also be a factor. However, in India, import of cereals particularly is too low, hence food inflation is likely driven by domestic factors.

PurposeThe purpose of this paper is to investigate the food price inflation convergence across countries and regions. This study aims to identify the key drivers for food price inflation across countries and regions.Design/methodology/approachWe test whether the international food price inflations are converging over time using the log t convergence test and clustering analysis. These inflation data are collected from the Food and Agriculture Organization of the United Nations.FindingsThe test results suggest that there is little evidence of overall convergence. Then we utilize a clustering algorithm and the results support that there is strong evidence of multiple convergence clubs. In addition, we examine the transition path of the various convergence and find that social stability regulation together with economic conditions are important determinants of convergence club membership.Research limitations/implicationsFirst off, local conflict and economic environment result in food supply and prices, but this study is limited to the dynamics of prices.Practical implicationsFood prices inflations are not converging to single common price inflation, but there exist subgroups of countries or regions within which food price inflation tends to converge. These groupings tend to be related to the economic development and social stability of countries and regions.Social implicationsThe authors believe that any analysis of food price inflations that does not consider the political environment and economic conditions dynamics will likely be omitting important components of food price dynamics.Originality/valueThis study uses a unique data set covering 198 countries and regions and provides a comprehensive analysis of international food price inflation convergence identifying the key drivers of convergence club membership.

The present study investigates the impact of macroeconomic factors on food price inflation in India utilizing the monthly time series during January 2006–March 2019. The long-run relationship is confirmed among the variables using the ARDL bounds testing approach to cointegration. The coefficients of long-run estimates show that per capita income, money supply, global food prices, and agricultural wages are positively and significantly impacted food price inflation in both the short and long-run. While food grain availability has a negative and significant impact on food price inflation in both the short-run and long run. Further, the short-run estimates revealed that real exchange rate positively impacts food price inflation. However, the coefficient is insignificant in the short-run. The Granger causality estimates show that a short-run bidirectional causality is confirmed among per capita income, the exchange rate, per capita net availability of food grain and food price inflation. Further, there is evidence of unidirectional causality running from global food prices to food price inflation. However, there is no causal relationship running from money supply and agricultural wages to food price inflation in the short-run.

This study investigates the relationship between food price indices and inflation in Nigeria, highlighting the significant impact of food price volatility on inflation and economic stability. Annual data from 2008 to 2024 sourced from the Food and Agriculture Organization (FAO) and the Central Bank of Nigeria was used for the analysis. Descriptive analytical tools, multiple linear regression, and time series models were used for the findings. Results showed that the trend of food was upward from 2021, there was significant reduction in the consumption of meat and dairy as revealed by negative skewness of their price indices and the significant difference from the regression outcomes. The findings highlight the importance of addressing price fluctuations to enhance economic resilience and mitigate rising inflation, particularly in a predominantly agrarian economy like Nigeria.

PurposeThe purpose of this paper is to investigate how the rising domestic food price inflation in India is influenced by global macroeconomic factors like crude oil, exchange rate, foreign aid, global food prices and trade openness from January 1993 to December 2022.Design/methodology/approachThe study has employed the structural break, autoregressive distributed lag cointegration tests to assess the stationarity and long-term relationship between the variables and the Toda–Yamamoto Granger causality test to demonstrate the causal relationship between the variables.FindingsThe study highlights the long-term relationships among variables, shedding light on the influence of global macroeconomic factors on domestic food price inflation in India. It reveals that food price inflation in India is positively influenced by crude oil prices and global food prices while being negatively affected by currency rates, foreign direct investment and trade openness.Originality/valueBased on the findings, the study suggests that initiatives to reduce demand for crude oil and imported food products could help mitigate domestic food price inflation in India. Addressing the depreciation of the exchange rate is crucial to combat significant inflation in domestic food prices, calling for specific government interventions. Furthermore, promoting trade liberalization and foreign direct investment in the agricultural sector could help alleviate domestic food price inflation, emphasizing the importance of reducing customary trade barriers to encourage investment and trade openness.

India has experienced persistent food price inflation over the past three decades, posing significant challenges for policymakers and consumers alike. This study examines the influence of key determinants, including temperature, rainfall, food subsidies, crude oil prices, the global food price index and money supply, on food price inflation in India. Using monthly data from December 1991 to December 2021, the analysis employs the autoregressive distributed lag (ARDL) co-integration framework and dynamic ARDL simulation technique to assess both short-run and long-run effects. The results reveal that crude oil prices, temperature, rainfall and money supply exert a significant positive influence on food price inflation in the long run, while food subsidies are weakly associated with a reduction in inflation. In the short run, only crude oil prices and rainfall show a significant impact. These findings highlight the complex drivers of food inflation in India and suggest that targeted interventions, such as curbing oil dependency, promoting climate-resilient agriculture and refining food subsidy mechanisms can help stabilise domestic food prices. JEL Codes: B22, C22, E31

Background Food bank use has been rising in the EU, raising concern about food hardship and associated health consequences. While attributed to economic downturn or rising costs of living, no studies have systematically examined food hardship in the EU or investigated explanatory factors. Here we examine within-country trends in food hardship over 2004 to 2012, and test the hypotheses that economic downturn and rising costs of living are associated with rising food hardship, but that effects are mitigated by social protection spending. Methods Data on GDP, unemployment, food price inflation, housing cost inflation, average wages, and social protection spending per capita were compiled for 21 EU countries with available data from Eurostat and OECD databases for 2004 to 2012. We constructed indices for costs of living relative to wages from data on food inflation and housing inflation relative to wage inflation. Fixed effect multiple regression models were used to examine how GDP, unemployment, wages and costs of living indices related to food hardship, as indicated by reported inability to afford meat or equivalent. Results After a steady decline in food hardship from 2004 to 2009, this trend reversed, with food hardship rising from an average prevalence of 7.72% (SD = 7.06) to 9.10% (SD = 7.86) from 2009 to 2012. There was marked variation however, where food hardship continued to decline in some countries over this period, but rose by over 5 percentage points in others. We observed that for every 1 percentage point rise in unemployment, there was a 0.45 percentage point increase in food hardship (95% CI: 0.039 to 0.86%), and for every $100 increase in average wages, food hardship declined by 0.34 percentage points (95% CI: –0.53 to –0.15%). Food price and housing cost inflation were not directly related to food hardship, but there was a significant interaction between food price inflation and wage inflation, which indicated that a combination of rising food prices and falling wages compounded to increase food hardship more than either factor alone. Social protection had significant modifying effects on associations of food hardship with unemployment and the index of food price inflation relative to wages. Where there was high social protection, associations were not detectable. Conclusion Food hardship has been rising across countries in the EU in association with unemployment, falling wages, and rising food prices relative to wages, but social protection spending mitigated these associations.

This study examines the dynamic linkages between food price inflation and its volatility in the context of Sri Lanka. The empirical evidence derived from the monthly data for the period from 2003M1 to 2017M12 for Sri Lanka. The relationship between inflation rate and inflation volatility has attracted more attention by theoretical and empirical macroeconomists. Empirical studies on the relationship between food inflation and food inflation variability is scarce in the literature. Food price inflation is defined as log difference of food price series. The volatility of a food price inflation is measured by conditional variance generated by the FIGARCH model. Preliminary analysis showed that food inflation is stationary series. Granger causality test reveals that food inflation seems to exert positive impact on inflation variability. We find no evidence for inflation uncertainty affecting food inflation rates. Hence, the findings of the study supports the Friedman-Ball hypothesis in both cases of consumer food price inflation and wholesale food price inflation. This implies that past information on food inflation can help improve the one-step-ahead prediction of food inflation variability but not vice versa. Our results have some important policy implications for the design of monetary policy, food policy thereby promoting macroeconomic stability.

The relationship between inflation rate and inflation volatility has attracted more attention by theoretical and empirical macroeconomists. Empirical studies on the relationship between food inflation and food inflation variability is scarce in the literature. This study examines the intertemporal dynamic linkages between food price inflation and its volatility in the context of Sri Lanka. The empirical evidence derived from the monthly data for the period from 2003M1 to 2017M12 for Sri Lanka. Food price inflation is defined as log difference of food price series. The volatility of a food price inflation is measured by conditional variance generated by the FIGARCH model. Granger causality tests show that food inflation seems to exert positive impact on inflation variability. Hence, the findings of the study supports the Friedman hypothesis in both cases of consumer food price inflation and wholesale food price inflation. This implies that past information on food inflation can help improve the one-step-ahead prediction of food inflation variability but not vice versa. Our results have some important policy implications for the design of monetary policy, thereby promoting macroeconomic stability.

Retail food prices rose dramatically in late 2021. Some argue that this food price inflation was due to “greedflation,” or firms increasing downstream prices simply because they can. In this study, we investigate the sources of “overshifting” store‐level cost shocks into downstream prices, or the apparent ability of retailers to pass along price increases that are proportionately larger than increases in cost. We use exogenous changes in minimum wages as our setting and study how food retailers pass increases in labor costs along to consumers in the form of higher food prices. We derive a new theoretical model of retail price pass‐through and show that demand curvature, market power, and consumer search behavior each likely affect observed rates of retail price pass‐through. Our structural analysis shows that, after controlling for the primary determinants of wage pass‐through, market power and demand curvature explain much of the variation in cost pass‐through, although general price inflation has an important role in accentuating the rate of minimum wage pass‐through. Our findings have important implications for minimum wage policy, and for understanding the role of cost shocks in food price inflation.

Purpose : This paper aimed to analyze the trends in both wholesale price index food (WPIF) inflation and consumer price index food (CPIF) inflation in India and quantify the persistence and volatility in both measures of food inflation and their sub-components. The study used monthly data for the period 2012M4 to 2023M12. Methodology : The study employed a univariate technique of quantifying persistence for the components of WPIF and CPIF inflation in India. Volatility of these components was also calculated using the simple measure of standard deviation. Findings : The results suggested higher persistence in CPIF than in WPIF inflation. However, volatility remains the same in both of them. The disaggregated items of cereals, pulses, milk, and spices showed high persistence; whereas, pulses, fruits, vegetables, and certain manufactured products showed high volatility. Practical Implications : The study identified the persistence-volatility pattern of components of food inflation in India. This pattern acted as a useful guide in formulating policies to control food inflation in the economy. Certain individual food items showed high volatility in overall food inflation, and short-term policies could effectively control their prices. However, items that exhibited high persistence in price changes require long-term policies to control their prices. Originality : This paper discussed the persistence and volatility of the disaggregated components and uniquely compared trends in both CPIF and WPIF inflation together. Finally, the paper used the newly constructed consumer food price index for analysis as compared to the CPI-industrial worker (CPI-IW) used in some of the studies.

The inflation picture is more heterogeneous in transition and developing economies. In Ethiopia, the year-on-year food inflation has increased by 42.0 percent in September 2021 as compared to the one observed in September 2020. The main objective of this study is to investigate the dynamics of food price inflation and its determinants in Ethiopia. For data analysis autoregressive distributed lag (ARDL) to con-integration model was used. The results suggested that food price inflation appears to be strongly significant and positive in explaining current food inflationary pressures in the short-run and negative in the long run. In effect, a one percent rise in food prices in the previous year causes the actual food prices to increase in short-run and declines in the long-run. These results emphasized the importance of inflation inertia and persistent price-price spiral movement in Ethiopian food price dynamics. Money supply positively influenced food price inflation growth in the short-run and in long-run. In the same way, the exchange rate influenced food price inflation positively in the short-run and long-run. Food inflation is also negatively influenced by real gross domestic product in US Dollar in both the short-run and long-run. In the same way government budget deficit and general consumer price index affected food price inflation significantly. Therefore, as policy recommendation, policy makers need to take appropriate measure to follow tight monetary policy and find the right balance between money demand and economic growth when needed without over-pumping money into the economy which causes inflation. As it is inferred from the research work the influence of exchange rate on food price is for both the short-run and long-run so that the government needs to focus on the way to control instability in exchange rate by devising a right macroeconomic policy to constrain the upward spiral movement of food price inflation. In regarding budget deficit and general consumer price index, the right decision to stabilize the country’s economy by the government is required. Keywords: Food Price Inflation. Dynamics, ARDL, Con integration DOI: 10.7176/JESD/13-21-03 Publication date: November 30 th 2022

Marking the twentieth anniversary of the Food and Agriculture Organization (FAO) the annual report on the state of food and agriculture reviewed the progress achieved during the second postwar decade, 1954/1955–1964/1965. In his foreword Director-General B. R. Sen noted three distinct phases of FAO's history. In the first, covering the postwar decade, FAO played a role in the task of reconstruction. The second phase, coinciding with the second postwar decade, had been marked by a number of significant developments in science and communications, in demography, and in national aspirations which influenced the outlook and work of FAO. Calling attention to the unprecedented rate of population growth and lagging food supply, FAO had warned that this trend implied a grave peril for the future peace and security of the world. The Freedom from Hunger Campaign launched by FAO in 1960 had represented a response to this new awareness of the dimensions of hunger and malnutrition in the world and of the responsibility of the world community to face the problem. The third phase of FAO's work, opening with the third postwar decade, would be a critical period. Mr. Sen referred to FAO studies, contained in the report, which indicated that the total food supplies of the developing countries would have to be increased fourfold in the next 35 years to give their rapidly expanding populations an adequate diet. The task of FAO, which would depend on the willingness of the leaders of the nations to devote a large share of the world's resources to meet the crisis, would be to assist in laying the foundation for this increase.

The demand for raw and fresh dairy products with the desired organoleptic characteristics and health benefits led to research in non-thermal processing technologies aiming to retain all the product qualities and nutrients. Irradiation is an emerging non-thermal technology used in destroying micro- and macroorganisms that might exist in food by exposure to either gamma (γ) rays from radioactive isotopes (cobalt60 or caesium137) or an electron accelerator (electron beam or X-radiation) under a controlled environment. With the endorsement of many international food and health organisations such as the Food and Agriculture Organization (FAO) and World Health Organization (WHO), irradiation is becoming more widely researched as a process to maintain quality, improve safety and reduce quarantine and post-harvest loss. Irradiation has the potential for allergenicity reduction and the provision of a sterile diet for immunocompromised patients. Unlike other food categories, the use of irradiation as a preservative technique on dairy products has received little attention due to the complexity of the product varieties. Whilst being accepted in some countries, the adoption of irradiation as an alternative measure of treating and preventing potential problems in the food chain faces strict opposition in many countries. In this review, the focus is on the radiation processing as an emerging technology and its specific application on dairy products.