Food inflation and volatility in India: trends and determinants

2015

Average food inflation in India during the period 2006-2013 was one of the highest among emerging market economies, and nearly double the inflation witnessed in India during the previous decade. In this paper, we analyse the behaviour and determinants of food inflation in India. We find that both demand and supply factors have contributed to the recent surge in food inflation in India. On the demand side, we test the often-cited hypothesis that rising per capita income and diversification of Indian diets has raised the demand for high-value food products and thereby added to inflationary pressures. We find that rise in demand, relative to the supply of a commodity, results in upward pressure in commodity prices. Moreover, rise in prices of key inputs, minimum support prices and fiscal deficits have also impacted the prices of various commodities. Agricultural wage inflation is found to be a universal driver of food commodities inflation, as well as the aggregate food inflation. The ...

The International Food Policy Research Institute (IFPRI), established in 1975, provides evidence-based policy solutions to sustainably end hunger and malnutrition and reduce poverty. The Institute conducts research, communicates results, optimizes partnerships, and builds capacity to ensure sustainable food production, promote healthy food systems, improve markets and trade, transform agriculture, build resilience, and strengthen institutions and governance. Gender is considered in all of the Institute's work. IFPRI collaborates with partners around the world, including development implementers, public institutions, the private sector, and farmers' organizations, to ensure that local, national, regional, and global food policies are based on evidence.

Munich Personal RePEc Archive, 2014

Volatility in agricultural commodity prices is a priority policy agenda in the ongoing debate on commodity markets vis-à-vis food inflation. The extent of volatility in food commodities has been examined by comparing different indicators. In comparison to previous two decades, food prices are volatile globally and more in rice and wheat particularly during the decade since 2000. In contrast, the extent of price volatility in absolute and relative terms for India elucidated that rice and wheat are less volatile. Plausible drivers of price volatility have been empirically verified based on the arguments in economic forums besides elaborating its impact on economy. The study also highlights the various existing price stabilisation measures and concludes with a pragmatic approach of policy interventions to encounter the rising food prices.

Indian Journal of Economics and Development, 2014

The study has exclusively analyzed the major determinants of food inflation in India by using the monthly data from January 2006 to December 2013. Using Johansen's cointegration technique, it was shown that in long run, all major determinants of food inflation such as money supply, interest rate, exchange rate, crude oil and rainfall except world food prices affect food inflation significantly. The Error Correction Model was also used to comprehend the short run behavior of food inflation and its determinants. The error correction term turned out to be significant statistically which further confirmed the long run causality as well as the speed of convergence towards long run equilibrium. In short-run, only world food and crude oil prices affect the food inflation.

SSRN Electronic Journal, 2012

Inflation in general and food price inflation in particular has been a persistent problem in India over the past few years. Price stability is crucial for sustainable growth as persistent inflation implies higher demand relative to supply. Therefore, we analyse here demand and supply of food in India to understand the domestic policies needed to control food inflation. First, we estimate food demand in India by categories (cereals, vegetables, fruits, dairy products, meats, etc.) using the ARDL co-integration procedure using consumption data from the Food and Agricultural Organization (FAO) for 1967 onwards. We then project food demand in India until 2022 using our estimated relations. 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. We then consider supply side policies needed to ensure that this 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 and other technological measures to improve productivity, improved cold storage and transportation facilities to reduce waste (currently 30 per cent for perishable crops), reallocation of land from cereals and pulses to vegetables and fruits, etc. Thus, if good policies are followed, food inflation can be managed, possibly with limited imports when needed.

2012

This paper conducts a forensic examination of inflation in India with a focus on food price inflation, using a disaggregated high-frequency commodity-level dataset spanning last two decades. First, we document stylized facts about the behavior of overall, food and non-food inflation. Second, we quantify the contribution of specific commodities to food price inflation. We find animal source foods (milk, fish), processed food (sugar, edible oils), fruits and vegetables (e.g., onions), and cereals (rice and wheat) to be the primary drivers. Finally, we conduct case studies of the top contributors. Combining the insights from macro as well as micro analyses, the paper suggests specific policy implications

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. Abstract The paper evaluates government price policy in controlling food price variability using monthly indices of wholesale prices of wheat, rice and coarse-grains. Annual price analysis showed that inter-year variability in annual nominal prices declined for both wheat and rice in the nineties as compared to eighties. The variability declined for the real price of rice also but the real price of wheat and nominal and real prices of coarse grains displayed increased variability during the 1990s in comparison to 1980s. Analysis of monthly prices revealed that intra-year variability shot up for wheat while it came down for rice during the nineties in comparison to eighties. The rise in price wedge in wheat and in course cereals during the nineties was caused by rise in seasonally, trend and cyclical-irregular factors. In the case of rice, on the other hand, the contribution of these three factors was in different directions. The regression results indicated that the government actions of buying and selling were more successful in reducing the seasonal range in wholesale prices in the case of rice as compared to wheat. Variations in production of coarse grains also significantly caused seasonal hike in prices of wheat and rice but they were more close substitutes to wheat than to rice. Any deviation of cereals' availability from long term trend led to higher government intervention in terms of procurement and disbursement of wheat and rice. Similarly, deviations in own output of wheat and rice also led to higher intervention by the government in these two commodities. Deviations in rainfall, yield and wholesale prices were the significant variables, which lent instability into the production of wheat and rice.

BEMM, 2019

Instability in the prices of agricultural products has become a grave global concern in the present context and this calls for imminent and significant attention for seeking plausible solutions. Price instability is a general feature of competitive markets and it indicates important signs to producers and consumers. However, the efficacy of this system breaks down due to economic shocks. After any economic crisis there is often a steep and unpredictable increase in the prices of agricultural products. This anomaly needs the intervention of policy makers and strategists who must enlist measures to contain the price volatility. High volatility also has harmful and negative impact on poor people in a developing country, more so when they have to spend 70 percent of their income in procuring the food itself. According to FAO estimates, due to global financial crisis, around 80 million people have become malnourished. The financial crisis of 2007-2008, also known as the global financial crisis, is considered by many economists to have been the worst financial crisis since the great depression of the 1930s. Recession is an economic instability caused through the variation of aggregate demand and aggregate supply in economy. Due to the process of globalization it has both direct and indirect adverse impact on rest of the other countries in the world, be they the developed or the developing countries. In macroeconomics, the concept of instability refers to an uncertain movement of a random variable over a period of time. Volatility in agricultural commodity prices assumes a lot of importance because the uncertainty entailed is one of the major factors that affect the income security of producers and traders and it threatens the performance of agriculture as well as the welfare of the consumers. According to World Bank Report 2013, 1.2 million people are still living below 1.25 USD per capita per day. India's success in addressing food inflation, therefore, has important implications for global food security. Price rise adversely impacts the income and has substitution effect on food consumption by the poor, consequently, leading to serious implications on the household welfare. Price volatility can also have strong implications for food security policies such as public distribution system and minimum support price or procurement price that serve as safety nets for producers as well as consumers. This study attempts to examine the extent and graph of fluctuation of food prices in pre and post-recession from 2002 to 2015. The study maps normal volatility or more volatility of prices in wheat or rice in a stipulated timeframe. The research has elementally focused on the prices of two food crops which are wheat and rice because these two crops are staple crops of the country and help in meeting a significant proportion of the daily calorie needs of the people. The data has been taken from the reliable and authentic data sources such as MOSPI data set. The monthly data has been taken for the time period from 2002 to 2015 in context of the Indian economy. Furthermore, this time period has been divided into two sub-categories, in pre and the post-recession period. The main purpose of this study is to examine the impact, if any, of external shocks such as global financial recession on the instability of food prices in Indian economy. To fulfill this aim, we have applied the ARCH/GARCH (GARCH.1.1) Model. To conclude, in the pre-recession period, the instability in price of wheat and rice has increased with high rate but the instability on prices of wheat is higher as compared to prices of rice. This is largely due to the influence by (own shock) or due to the past information about prices of agriculture commodities. Further, in the post-recession period, volatility on food prices of wheat and rice is largely influenced by the global financial crisis and past information about the prices of agriculture commodities. This study aims at a more conclusive approach by enunciating some suggestions and recommendations for policymakers which are: Concerted efforts are required by all stakeholders to ensure more investment in agricultural sector including agribusiness. Pivotal shift in policy by the governments in the wake of looming economic volatility or instability is essential with the key focus on food security and trade policy that effectively stems the adverse impact of price rise on the consumers and producers. It is imperative to ensure the timely availability and accessibility to good quality seeds, eco-friendly fertilizers, sensitisation on irrigation techniques for farmers, providing subsidies as and when required to the target groups. Public Distribution System (PDS) also needs a more efficacious and equitable approach.

During the last several years, a country that has been making serious moves towards becoming an industrialized country and changing its status is India. The authors' purpose in this paper is to do an evaluation, historical, political and economic, to determine how successful India is, and where it is headed. In our attempt to do that we are going to start with an in depth economic analysis, which will give us the tools to derive conclusions. The rest of the paper will concentrate on statistical analysis. In order to do that, we are going to present economic data for India for about 36 years, including the GDP, unemployment, inflation, exports, imports, net exports, the growth rate and population. After we analyze the data, we are going to run several regression models, to show us the impact that one indicator had on others,