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Food Inflation in India: Causes and Consequences

Publisher: National Institute of Public Finance and Policy

This paper analyse the behaviour and determinants of food inflation in India. Both demand and supply factors have contributed to the recent surge in food inflation in India. On the demand side, the paper 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. 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 analysis indicates limited role of fuel and international prices. Finally, results suggest significant pass-through effects from food to non-food and to the headline inflation.

Author(s): Abhijit Sen Gupta, Rudrani Bhattacharya | Views(445) | Download (223)

  
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