ARMY INSTITUTE OF LAW, MOHALI

SEMINAR 2024

TOPIC- FOOD INFLATION IN INDIA : IMPACT ON CITIZENS

Date of Submission – 12th February 2024

Submitted by:

Tanvi Garg

BA LLB 4th Year- 9th Semester

Roll No. 2068

1
 ACKNOWLEDGEMENT

I Tanvi Garg, student of BA LLB 4th Year (9th Sem.) Roll No. 2068, hereby express my
gratitude to all those who helped me making this Seminar Project.

I, especially thank (Coordinator- Seminars), for giving such a good topic- ‘Food Inflation in
India : Impact on Citizens’ for my seminar presentation over which good amount of research
can be done. I also thank ma’am for her never- ending support and guidance.

I have taken a huge support from various internet sources to complete this project.

Thank You,

Yours Sincerely,
Tanvi Garg
BA LLB 4th Year.

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 INDEX

Page
S.No. Content
No.

1. Abstract 4

2. Introduction 5

3. What is food inflation and how to calculate inflation rate ? 5

4. Food inflation trends 6

5. Causes of food inflation in india 7

6. Impact of food inflation 9

7. Government’s steps to control food inflation and its critique 12

8. Optimal policy to tackle food inflation 14

9. Conclusion 16

10. References 17

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 FOOD INFLATION IN INDIA : IMPACT ON CITIZENS

ABSTRACT

Food inflation in India has become a significant concern, particularly in the wake of the covid-
19 pandemic and the ongoing conflict in Ukraine. this paper explores the multifaceted impact
of food inflation on Indian citizens, considering its implications for household budgets,
economic recovery, and welfare outcomes. We delve into the various factors driving food
inflation, ranging from weather conditions and global market dynamics to government policies
and changing consumption patterns.

The study discusses the trends of food inflation in India, highlighting the significant increase
in food prices in recent years. It attributes the inflation to factors such as input cost inflation,
positive demand-supply gaps, rising fodder prices, and the impact of weather conditions on
agricultural production. The paper also critically examines the effectiveness of government
interventions, such as export bans and import duty reductions, in addressing food inflation,
highlighting their limitations and unintended consequences.

Furthermore, we propose a comprehensive set of policy measures to address food inflation,

including short-term interventions to stabilize prices, medium-term strategies to enhance
agricultural productivity and supply chain resilience, and long-term initiatives to promote
sustainable farming practices and climate resilience. By adopting a holistic approach to food
inflation management, India can mitigate the adverse effects on consumers, farmers, and the
economy, while ensuring food security and inclusive growth.

KEYWORDS - Food inflation, Consumer Food Price Inflation (CFPI), Wholesale Price Index
(WPI), inflation trends, Export Ban and Import Duties

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INTRODUCTION

In the aftermath of the pandemic, further exacerbated by the ongoing conflict in Ukraine, the
confluence of food price surges has exerted a profound impact on the overall inflationary
landscape in India. The escalation of inflationary pressures has precipitated a scenario where
millions of households across the nation are compelled to curtail their food expenditures,
resorting to tapping into their savings to meet fundamental needs. Economists caution against
the perils of prolonged high inflation rates, as such a scenario risks depleting the aggregate
household savings pool, thus impeding future economic recuperation by constraining consumer
spending.

The sustained elevation of food inflation carries weighty implications for the welfare of Indian
citizens, given that food constitutes a substantial 45% of the consumption basket. In a nation
where 11.28% of the population, comprising approximately 270 million individuals, resides
below the poverty line1 and already subsists on food consumption levels hovering below the
subsistence threshold, persistent high food inflation amplifies their vulnerability manifold. In
light of these stark realities, the imperative of effecting a meaningful stabilization of food
inflation cannot be overstated. This underscores the urgent need for a comprehensive
understanding of the underlying causal factors and attendant consequences.

WHAT IS FOOD INFLATION AND HOW TO CALCULATE INFLATION

RATE ?

Inflation is defined as a sustained increase in the general level of prices for goods and services.
It is measured as an annual percentage increase. As inflation rises, every rupee you own buys a
smaller percentage of a good or service. Food inflation is the rise in the price of food
commodities. It is a dynamic concept. The increase in production, labour and transportation costs,
population and climate changes, hoarding of food products, and land exploitation cause food
inflation.

There are two indices that are used to measure inflation in India - the consumer price index
(CPI) and the wholesale price index (WPI). These two measure inflation on a monthly basis

1
NITI Aayog, "Major Policy Initiatives, Jan 2024", NITI Aayog (accessed on Feb. 12, 2024),
https://www.niti.gov.in/sites/default/files/2024-01/MPI-22_NITI-Aayog20254.pdf.

5
taking into account different approaches to calculate the change in prices of goods and services.
The study helps the government and the Reserve Bank of India (RBI) to understand the price
change in the market and thus keep a tab on inflation.

Consumer food price inflation - Consumer Food Price Inflation (CFPI) is a vital indicator
used in economic analysis to gauge the rate at which the prices of essential food items within
a typical consumer's expenditure basket are increasing. It offers insights into the dynamics of
food price movements, which hold significant implications for household budgets and overall
inflationary trends. CFPI is a subset of the broader Consumer Price Index (CPI), which serves
as a comprehensive measure of inflation in an economy. The Reserve Bank of India (RBI)
utilizes the CPI-Combined (CPI-C) as a key reference point for monitoring CFPI.
This metric meticulously tracks the price fluctuations of a designated assortment of food
commodities commonly consumed by households. These include staple foods like cereals,
vegetables, fruits, dairy products, meats, and other essential food items. CFPI essentially
provides a focused assessment of inflationary pressures specifically within the realm of food
consumption, offering valuable insights into the affordability and accessibility of basic
nutritional necessities for the populace.

Wholesale price index - The WPI, which refers to the Wholesale Price Index, analyzes the
inflation of only goods across 697 commodities. The WPI-based wholesale inflation considers
the change in prices at which consumers buy goods at a wholesale price or in bulk from factory,
mandis, etc.

FOOD INFLATION TRENDS

2024
India’s retail inflation eased to a three-month low of 5.1% in January from 5.7% a month
earlier, with food price rise cooling a bit to 8.3% compared with 9.5% in December 2023. The
Consumer Price Index (CPI) dropped 0.11% while the Consumer Food Price Index fell 0.73%.
However, Reserve Bank of India which held its repo rate at 6.50% for a sixth consecutive
meeting on Feb. 8, highlighted "large and repetitive food price shocks" as one of the biggest

6
risks to the ongoing disinflation trend. 2 Further the Central bank expects inflation to average
5% in the April to June quarter as well, before it hits its stated inflation target of 4% in the next
quarter.3

The concern remains as rural inflation at 5.34 percent continues to rule higher than urban
inflation at 4.92 percent. The sticky components of food inflation — higher prices of spices,
vegetables, and pulses — have persisted, and in some categories, prices in rural areas have
edged higher than in urban areas. 4

2023

2023 was particularly challenging one, as the country was hit by intense heatwaves, erratic
rains, floods, droughts, storms and cyclones. Food price shocks turned India protectionist this
year, as the country went from being the largest exporter of rice and a big overseas seller of
sugar and fresh vegetables to banning or restricting overseas shipments and trade of most
commodities.

India’s retail inflation, which is measured by the consumer price index (CPI), surged to 5.69%
in December 2023 from 5.55% % in November 2023. The wholesale Price Index (WPI), which
calculates the overall prices of goods before selling at retail prices, stood at 0.73% in December
2023, from 0.26% in November in 2023.5

One of the major contributors to inflation was the high prices of food — vegetables and pulses.
Inflation in vegetables was at 27.03 percent, pulses at 19.54 percent, and in spices at 16.36
percent. Interestingly, prices of edible oil have been on a slide, falling 14.96 percent. Inflation

2
The Hindu, Retail Inflation Eases to 5.1% in January, a 3-Month Low, The Hindu (Feb. 12, 2024),
https://www.thehindu.com/business/Economy/retail-inflation-eases-to-51-in-january-a-3-month
low/article67838256.ece.
3
The Indian Express, Retail Inflation Eases to 3-Month Low of 5.1% in January, The Indian Express (Feb. 12,
2024), https://indianexpress.com/article/business/economy/retail-inflation-eases-to-3-month-low-of-5-1-in-
january-9157792/.
4
Moneycontrol, High Food Prices and Rural Inflation Remain Major Concerns in an Election Year,
Moneycontrol (Feb. 12, 2024), https://www.moneycontrol.com/news/business/high-food-prices-and-rural-
inflation-remain-major-concerns-in-an-election-year-12252711.html.
5
The Hindu, Retail Inflation Accelerates to Four-Month High of 5.7%, The Hindu (Feb. 7, 2024),
https://www.thehindu.com/business/Economy/retail-inflation-accelerates-to-four-month-high-of-
57/article67734406.ece.

7
for meat and fish at 1.19 percent, fuel at 0.60 percent, and cereal and (related) products at 7.83
percent.6

The country prohibited overseas shipments of wheat in March 2022, white rice in July 2023
and onions in December 2023, after exporting a record 2.5 million tonnes in the financial year
that ended March 31 2023, with 671,125 tonnes sold to Bangladesh, its biggest buyer. India
also fixed a rare export floor price of $950 a tonne on premium long-grain basmati rice.7

CAUSES OF FOOD INFLATION IN INDIA

1. Role of high minimum support prices: One of the key reasons attributed to the spikes in
food prices are the hefty increases in minimum support prices (MSP) of food grains (rice
and wheat).8 The procurement of food grains by the government at higher MSP can cause
high food inflation due to three reasons
(a) First, it sets a higher benchmark for market prices of food grains thereby feeding into
food price inflation expectations.
(b) Second, it necessitates a hike in the prices of food grains supplied by the government
through the public distribution system (PDS) and Open Market Sale Scheme (OMSS).
(c) Third, it edges out private trade thereby reducing the quantum of food grains available
for consumption by ordinary consumers.

2. Covid 19 and Ukraine – Russia: High levels of food inflation are being driven by
multiple reasons such as the COVID-19 pandemic-induced supply chain concerns and the
ongoing Russia-Ukraine war. Multiple lockdowns and subsequent disruptions in the
logistics of the supply accounted for a swift rise in food inflation prices. This was further
exacerbated during the economic recovery, when demand for food and essentials rose even
more. However, just as demand-driven inflation was declining, a war in Europe caused an
increase in input energy costs for commodities, worsening the inflation prices.

6
Business Standard, Rural Retail Inflation Remained Higher Than Urban in 18 Out of 22 Months, Business
Standard (Nov. 19, 2023), https://www.business-standard.com/economy/news/rural-retail-inflation-remained-
higher-than-urban-in-18-out-of-22-months-123111900670_1.html.
7
Outlook India, Govt Cuts Floor Price of Basmati Exports to USD 950 Per Tonne, Outlook India (Feb. 11, 2024),
https://business.outlookindia.com/economy-and-policy/govt-cuts-floor-price-of-basmati-exports-to-usd-950-
pertonne#:~:text=The%20government%20has%20reduced%20the,shipments%20in%20the%20global%20mark
et.
8
Balakrishnan, Pulapre, Agriculture and Economic Reforms: Growth and Welfare, 35 ECONOMIC &
POLITICAL WEEKLY, 999–1004 (2000).

8
 3. Weather conditions - The rainfall data from the India Meteorological Department (IMD)
on the exceptionally dry conditions in August, the driest recorded since 1901, have
contributed to a negative deviation in rainfall for the monsoon season. Uneven and erratic
monsoons affected the Kharif sowing. Lower rainfall levels in August affected flowering
of crops, leading to concerns over food inflation and production levels.

4. El nino- More than half of India's population is dependent on agriculture and allied sectors
for their livelihood. The agriculture sector, which contributes roughly around 18 per cent
to the national output, is heavily dependent on the monsoon.9 The effects of the abnormal
warming of the central and eastern equatorial Pacific Ocean waters towards Ecuador and
Peru – generally known to suppress rain in India – are already beginning to be felt.

5. Rising income and diversification of diets - A factor, which has often been argued as
driving food inflation in India, relates to rising income and diversification of diets raising
the demand for high-value food products, and thereby adding to inflationary pressures.
Bhattacharya and Sen-Gupta (2015) calculate the demand-supply gap for major food
commodities including, cereals, pulses, vegetables, fruits, milk, and meat and fish, and
find empirical support for this hypothesis.10 A varied combination of factors is found to
drive different components of food inflation.

(a) Inflation in milk, vegetables, and meat and fish are driven by input cost inflation and
positive demand supply gap. What also contributed were rising fodder prices. These have
risen at more than 10% for almost all of 2022, more than 20% since May, with the last
three months witnessing 30%.11
(b) Rise in cost of production and MSP are the main drivers of cereal inflation there are
essentially cost-push pressures, worsened by supply shocks. Cereal prices were rising even
before the Ukraine-Russia war. These pressures got strengthened after a poor domestic
wheat crop last rabi season due to a heat wave and then a decline in rice production in the
kharif crop due to uneven and deficient monsoon rainfall.

9
Agarwal, N., Impact of food inflation on households in India: Evidence from NSSO data, JOURNAL OF
INTERNATIONAL DEVELOPMENT AND COOPERATION, 31-48 (2017).
10
Bhattacharya, Rudrani, and Sen-Gupta, Abhijit, Food Inflation in India: Causes and Consequences , Working
Paper 2015-151, NATIONAL INSTITUTE OF PUBLIC FINANCE AND POLICY, (2015).
11
The Economic Times, World Milk Day: Why the Price is Rising, When Will it Stabilise?, The Economic Times
(Jun. 1, 2023), https://economictimes.indiatimes.com/industry/cons-products/food/world-milk-day-why-the-
price-is-rising-when-will-it-stabilise/articleshow/100670458.cms?from=mdr.

9
 (c) During the last two years, 2022-23 and 2021-22, production of wheat seems to have
suffered due to heatwaves in the major wheat producing states in India. As a result, trade
estimates of wheat production significantly differ (by at least 5 to 6 MMT lower) from the
official estimates of GOI. This difference in estimates created a trust gap in the market,
which put pressure on wheat prices. A part of the blame also lies with the government for
ignoring rising wheat-price signals and intervening effectively much later, with an export
ban.

IMPACT OF FOOD INFLATION

1. The significant increase in food prices in recent years tends to undermine the food security
and livelihoods of the most vulnerable. Poor spend a large proportion of their income on
food and have little capacity to adapt to prices rise. The increase in food prices leads to
poor outcomes in nutrition, health, and education of children, through four pathways:
impact on poverty; macroeconomic impact and its effect on employment and the social
sector; impact on nutrition and social protection programs; and women’s well-being and
intra-household decision making.12
2. Effects on production: Inflation has a favourable effect on production when there are
under-utilized or under-employed resources in existence in an economy. Rising prices
breed optimistic expectations within the business community, in view of increasing profit
margins, because the price level moves up at a faster rate than the cost of production. 13
3. Effects on Income distribution: All producers, traders and speculators gain during
inflation because of the windfall profits which arise, because prices rise at a faster and
higher rate than the cost of production. During inflation, the distribution of shares to the
profiteers increases more than that of the wage earners or fixed-income earners, such as
the renter class. Prices of all factors do not rise in the same proportion. Since the effort of
inflation on the incomes of different classes of earners varies, there are serious social
consequences.
4. Changing diets: More people becoming rich, people eat more of fruits and vegetables
which take more energy and land and meat consumption has gone up (5 tons of grain to
produce 1 ton of pork).

12
Mehta, S., & Singh, G., Understanding food inflation in India: Causes, factors, and policy implications, 6
INTERNATIONAL JOURNAL OF FOOD AND AGRICULTURAL ECONOMICS, 91-101 (2018).
13
Kumar, S., & Kumar, A, Understanding food inflation in India: Evidence from VAR analysis, 8 SOUTH ASIAN
JOURNAL OF MACROECONOMICS AND PUBLIC FINANCE, 135-159 (2019).

10
5. Serious Implications for Poor - Increasing food prices have serious welfare implications
for the poor. It reduces purchasing power and consumption level of the poor. Pinstrup-
Anderson (1985) has found that low income consumers in developing countries typically
spend 60-80% of their incomes on food and due to increase of food prices, real income
decreases by 5.5% to 9% at the lowest decile. 14
6. Cascading effect on non-food inflation and aggregate CPI inflation - Ten months after
a shock, food inflation explains 40% and 61% variations in non-food and aggregate CPI
inflation, respectively. The transmission to non-food inflation occurs through rise in cost
of labour inputs, substitution effects, and real income effect of producers in food sector. 15
Apart from direct pass-through to aggregate inflation via food’s share in the consumption
basket, it also rises indirectly via rise in non-food prices.
7. Rural and Urban Disparity – Rural consumers are more susceptible to food inflation
than their urban counterparts. Rural wages are unable to keep pace with rising inflation
and uneven rainfall has caused an even more increase in rural joblessness reducing the
purchasing power. In February 2024, Rural inflation stands at 5.34 percent which
continues to rule higher than urban inflation at 4.92 percent.16
8. State Disparity -There are also disparities between states. Differences on the magnitude
of the impact depend on commodity whose price increases., Rajasthan, Bihar, Uttar
Pradesh and Madhya Pradesh are strongly affected by an increase in wheat price, at the
opposite, nineteen states are weakly affected. As many as seven States recorded inflation
of over 6% — the RBI’s tolerance threshold for inflation — led by Odisha (8.7%), Gujarat
(7.1%), Rajasthan (6.95%), and Haryana (6.7%).17
9. Impact on vulnerable children and their mothers - The food inflation increases the risk
of child undernutrition and wasting and stunting among 1.27 million pre-school children
On average, a 5 percent increase in the real price of food increases the risk of wasting by
9 percent and severe wasting by 14 percent. These risks apply to young infants, suggesting
a prenatal pathway, as well as to older children who typically experience a deterioration in

14
Pinstrup-Anderson, Food prices and the poor in developing countries, 12 EUROPEAN REVIEW OF
AGRICULTURAL ECONOMICS, 69-81 (1985).
15
Anand, Rahul, Peiris, Shanaka, and Saxegaard, Magnus, An Estimated Model with Macrofinancial Linkages for
India, Working Paper WP/10/21, INTERNATIONAL MONETARY FUND, (2010).
16
The Economic Times, Explainer: Why is Rural Inflation Trending Higher Than Urban Inflation?, The Economic
Times (accessed on Feb. 12, 2024), https://economictimes.indiatimes.com/news/economy/indicators/explainer-
why-is-rural-inflation-trending-higher-than-urban-inflation/articleshow/105985571.cms?from=mdr.
17
The Hindu, Retail inflation accelerates to four-month high of 5.7%, The Hindu (accessed on Feb. 12, 2024),
https://www.thehindu.com/business/Economy/retail-inflation-accelerates-to-four-month-high-of-
57/article67734406.ece.

11
 diet quality in the wake of food inflation. Male children and children from poor and rural
landless households are more severely impacted. Food inflation during pregnancy and the
first year after birth also increases the risk of stunting for children 2-5 years of age. This
evidence provides a strong rationale for interventions to prevent food inflation and mitigate
its impacts on vulnerable children and their mothers.18

GOVERNMENT’S STEPS TO CONTROL FOOD INFLATION AND ITS

CRITIQUE

1. The government banned the export of wheat, broken rice, non-basmati white rice, and
onions. It also reduced import duties on edible oils and pulses to boost domestic supply and
control price rise.
(a) Effect on Income of Farmers - Sudden ban on wheat exports, instead of bringing
wheat inflation down, led to greater uncertainty in the market and wheat inflation
surged, when GOI also banned exports of wheat flour (atta) products. It may be noted
that in financial year FY22, India exported 7.5 MMT of wheat, and with Russia Ukraine
war from March 2022 onwards, the global prices were in upswing. India could have
exported even more, which would have benefitted farmers as domestic prices were
rising in tandem with the global trend. But by banning exports of wheat and wheat
products (atta), unloading 3.4 MMT of wheat under open market operations at prices
below economic cost, and then putting stocking limits on traders and millers, the market
prices were dragged down to the level of the MSP announced. The current imposition
of export bans, open market sales also indicate “negative market price support” by
government, reducing incomes of farmers
(b) Undermining India's reputation as a reliable exporter - Rather than initially
imposing an export duty of say 10 to 15 percent, and then gradually increasing it to
calibrate the impact on domestic prices, GOI suddenly went ahead to ban export of non-
basmati rice, which created panic not only in many African importing countries but also
amongst Indian diaspora in USA. This is not in line with the spirit of G20 proposals to
ensure global food security, as it has hit the African countries most which account for
a substantial (53.89 percent) share of non-basmati exports from India. India even

18
Headey, D., Ruel, M. Food inflation and child undernutrition in low and middle income countries, 14 NAT
COMMUN, 5761 (2023).

12
 imposed an MEP of $1200 per tonne on basmati rice. As per traders the MEP fixed is
much higher than the existing price quotations impacting the competitiveness of India’s
basmati rice in global market. It is important to recognize that it takes years to build
export markets, and sudden policy shifts like this can undermine India's reputation as a
reliable exporter.
(c) Impact on farmers’ price realization - export duty of 40 percent was also imposed
on onion in August 2023, sensing a flare up in prices during the upcoming festive
season. India is the largest exporter of onion with a share of 22 percent in global trade
of onion. This export restriction has negatively impacted farmers’ price realization.

2. The Union food ministry directed all sugar mills and distilleries to stop using sugarcane
juice for the production of ethanol for the 2023-24 season, to ensure an adequate supply of
sweetener for domestic consumption and prevent any hike in its retail prices. This move is
expected to release 1.8-2 million tonnes of sugar additionally in the domestic market which
would help curb the rise in prices amidst reports of a fall in sweetener output in Maharashtra
and Karnataka this season.19

3. Government has readied stocks to release onions at a subsidized rate of ₹25 a kilogram to
curb the escalating onion prices, through the National Cooperative Consumers' Federation
of India Ltd (NCCF), NAFED, Kendriya Bhandar, and other state-controlled cooperatives.
"Prices have started coming down and it is well within the tolerance band. As of 3 February
2024, we have released 3.96 lakh tonnes of onions in the market at that price.20

4. The reduction of effective import duty on crude sunflower oil and crude soybean oil from
30.25 percent in August 2021 to 5.50 percent in October, 2021 had resulted in retail inflation
of refined oil reducing from 43.97 percent CPI YoY in August 2021 to 13.54 percent in
February 2022 CPI YoY. To further cool down the price both the oils became duty-free with
each receiving a 2 MMT tariff-rate quota for the coming two financial years and retail

19
Financial Express, Economy: Govt takes a slew of steps to curb food inflation, Financial Express (accessed on
Feb. 12, 2024), https://www.financialexpress.com/policy/economy-govt-takes-a-slew-of-steps-to-curb-food-
inflation-3331207/.
20
Press Information Bureau, Cabinet Committee on Economic Affairs (CCEA), Govt. takes steps to moderate
onion prices, Press Information Bureau (accessed on Feb. 12, 2024),
https://pib.gov.in/PressReleasePage.aspx?PRID=1974673.

13
 inflation reduced to 5.5 percent in September 2022 and remained negative since February
2023.21

5. In addition to these measures, the government also took steps to liberalize trade policy for
pulses by abolishing import duties on tur and urad since March 2022 with a view to increase
the domestic availability

OPTIMAL POLICY TO TACKLE FOOD INFLATION

SHORT-RUN POLICY
1. Reducing import duties
(a) Instead of protectionist trade policy, it is important to calibrate trade policy efficiently
to control rising inflation in the commodity. For instance, the timely reduction in
import duties on edible oils substantially reduced the domestic prices of palm oil and
soft oils such as soybean and sunflower over the past year.
(b) To cool down the prices and to control the panic of shortages in the market, import
duty for wheat should be reduced from 40 percent to say 5 percent and the government
can import 5-6 MMT of wheat. However, to the extent possible, the landed cost should
not be lower than MSP to ensure that farmers do get at least the MSP.
(c) Similarly, to curb inflationary pressures in spices, the government should consider
reducing the total import duty, which currently stands at 36.5 percent for cumin seed
and ginger, and 70 percent for dry chillies, to a more moderate rate of 5 percent or
even eliminating it entirely. 22 Hence, the optimal policy mix should be reducing
import duties to bridge the gap between demand and supply.
2. Buffer stocks
Government should build buffer stocks for volatile vegetable staples like TOP (Tomato,
Onion, Potato) during the harvest season. This will help farmers realize stable prices in the
glut period. The stocks can be systematically released over the lean period, or during
festive season when demand is high, to cool down the prices. However, offloading should
not be undertaken at prices lower than the economic cost, which can disincentivise farmers
and traders to invest in storage. To facilitate this, an expansion of cold storage

21
Gulati, et al, Tackling Food Inflation: Is restricting exports and imposing stocking limits the optimal policy?,
ICRIER Policy Paper, (2023).
22
Ghosh, S., & Roy, D, Food inflation in India: The way forward, 19 JOURNAL OF PUBLIC AFFAIRS, (2019).

14
 infrastructure is important, and the use of solar energy for perishable storage is a cost
effective and energy-efficient way to go about it.

MEDIUM TERM POLICY

1. Dehydrated Substitutes - The processing sector needs to be boosted. The promotion

of use of dehydrated onion, tomato puree that can be viable substitutes for consumers
during the period of price pressure on fresh produce will also help. To curb inflationary
pressure on onion and tomato, at least 10 percent of fresh produce should be processed.
2. Farmer Producer Organisations - To strengthen the processing sector, Farmer
Producer Organisations (FPOs), farmer cooperatives can play a pivotal role in
organising small farmers and facilitating the development of this sector. In 2018- 19,
the government announced a scheme “Operation Greens” with an outlay of Rs.500
crores to promote FPOs, logistics, processing facilities and professional management
for TOP commodities.23 These funds could significantly boost the processing of fresh
vegetables to curb inflation pressure.

LONG-RUN POLICY
1. Investments in Research and Development - The government needs to increase
investments in R&D, which stands at paltry 0.48 percent share of agriculture GDP in
order to augment productivity.
2. Innovative farming practices - Given the increasing severity of climate change
effects in the coming years, it is important to invest in innovative farming practices,
drought-resisting seed varieties, expanding micro irrigation infrastructure including soil
moisture sensors, drip irrigations for efficient use of water to make agriculture climate
resilient.
3. Revamp The Entire Policy Matrix - To tame food inflation, we need to revamp the
entire policy matrix in light of climate change, and boost reform in marketing and trade
policies, moving away from outdated export restrictions and pro-consumer agriculture
price policies, often at the cost of farmers.

23
Patra, S., & Chakraborty, P. Food inflation in India: Determinants and policy implications, 75 INDIAN
JOURNAL OF AGRICULTURAL ECONOMICS, 239-256 (2020).

15
CONCLUSION

To sum up, the nature and composition of food inflation has changed in the recent years.
As per capita income has increased the demand for food has shifted towards protein, fruits
and vegetables. As supply response has not been adequate, there have been price pressures.
In addition, the agricultural sector experienced cost-push both in terms of increasing price
of material inputs and labour.

In 2023, India experienced significant food inflation due to a combination of factors,

including adverse weather conditions, supply chain disruptions, and government policies.
Intense heatwaves, erratic rains, floods, droughts, storms, and cyclones contributed to crop
losses and reduced agricultural output, leading to shortages and price spikes in essential
food commodities. Additionally, the country implemented protectionist measures in
response to the inflationary pressures, such as banning or restricting overseas shipments of
various commodities like rice, sugar, and fresh vegetables. These restrictions disrupted
global trade and further exacerbated domestic supply shortages, leading to higher prices for
consumers.

Looking ahead to 2024, India must prioritize investments in agricultural infrastructure,

research and development, and institutional capacity building to strengthen the resilience
of the agricultural sector and mitigate the impact of external shocks such as adverse weather
conditions and global market dynamics. Moreover, policy coordination and collaboration
between government agencies, agricultural stakeholders, and international partners are
critical to ensure the effectiveness and sustainability of food inflation mitigation efforts.

By adopting a comprehensive strategy that combines short-term stabilization measures with

medium and long-term reforms, India can not only mitigate the adverse effects of food
inflation on consumers, farmers, and the economy but also promote inclusive growth,
environmental sustainability, and food security for all citizens. With concerted action and
effective policy implementation, India can navigate the challenges posed by food inflation
and build a more resilient and sustainable agricultural sector for the future.

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