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Food Inflation in India: Causes and Consequences

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  • Bhattacharya, Rudrani

    (National Institute of Public Finance and Policy)

  • Sen Gupta, Abhijit

    (Asian Development Bank)

Abstract

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 contribution of agricultural wages has increased significantly in the post-NREGA era. Our 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.

Suggested Citation

  • Bhattacharya, Rudrani & Sen Gupta, Abhijit, 2015. "Food Inflation in India: Causes and Consequences," Working Papers 15/151, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:15/151
    Note: Working Paper 151, 2015
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    References listed on IDEAS

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    Cited by:

    1. K. U. Gopakumar & Vishwanath Pandit, 2017. "Food inflation in India: protein products," Indian Economic Review, Springer, vol. 52(1), pages 157-179, December.
    2. Sugandha Huria & Kanika Pathania, 2018. "Dynamics of Food Inflation: Assessing the Role of Intermediaries," Global Business Review, International Management Institute, vol. 19(5), pages 1363-1378, October.
    3. J. V. Meenakshi, 2016. "Trends and patterns in the triple burden of malnutrition in India," Agricultural Economics, International Association of Agricultural Economists, vol. 47(S1), pages 115-134, November.
    4. Tan Ngoc Vu & Chi Minh Ho & Thang Cong Nguyen & Duc Hong Vo, 2020. "The Determinants of Risk Transmission between Oil and Agricultural Prices: An IPVAR Approach," Agriculture, MDPI, vol. 10(4), pages 1-14, April.
    5. Sekhar, C.S.C. & Roy, Devesh & Bhatt, Yogesh, 2017. "Food inflation and food price volatility in India: Trends and determinants," IFPRI discussion papers 1640, International Food Policy Research Institute (IFPRI).
    6. C. S. C. Sekhar & Devesh Roy & Yogesh Bhatt, 2018. "Food inflation and volatility in India: trends and determinants," Indian Economic Review, Springer, vol. 53(1), pages 65-91, December.
    7. Radhika Pandey & Ila Patnaik & Ajay Shah, 2019. "Business Cycle Measurement in India," Societies and Political Orders in Transition, in: Sergey Smirnov & Ataman Ozyildirim & Paulo Picchetti (ed.), Business Cycles in BRICS, pages 121-152, Springer.
    8. repec:ags:aaea22:335623 is not listed on IDEAS
    9. Rudrani Bhattacharya & Abhijit Sen Gupta, 2017. "What Role Did Rising Demand Play in Driving Food Prices Up?," South Asian Journal of Macroeconomics and Public Finance, , vol. 6(1), pages 59-81, June.
    10. Rudrani Bhattacharya, 2016. "How does Supply Chain Distortion affect Food Inflation in India?," Working Papers id:11261, eSocialSciences.
    11. Gautam K Kshatriya & Subhendu K Acharya, 2016. "Gender Disparities in the Prevalence of Undernutrition and the Higher Risk among the Young Women of Indian Tribes," PLOS ONE, Public Library of Science, vol. 11(7), pages 1-22, July.

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    More about this item

    Keywords

    Food Inflation ; Engel Curves ; QUAIDS Model ; SVEC Model ; India;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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