Food Inflation in India: Why has it become never ending

“If inflation is the devil, food inflation is its strongest arm.

Inflation is the most regressive form of taxation. It takes its toil most on the poor and takes away maximum purchasing power from the hands of those who have minimum ability to pay. This is why it is taken as the most regressive form of taxation and no conscious society would like to have a high inflation rate. However, it is the food inflation that hurt the poor the most. These people spend maximum portion of their expenditure on food items and sky rocketing food prices add to their fate of starvation. The reigning food inflation in India currently is hurting not only the poor but, is taking its toil on every one and fuelling the inflationary spiral which has made life tough for the policy makers.

After falling to around 7-8% in July from the mammoth height of 18% it attained in January 2011, food inflation in India is again showing an upward trend. For the week ending September 24,2011 it was at 9.41%. 

Although the food production scenario in country has improved during the present Kharif season due to normal rainfall received in most part of the country and hence, cereals prices aren't showing drastic upward trend yet food inflation has become persistent phenomenon in the country. If we have a closer look at contributors to this high inflation we find out that green vegetables and protein based items are the biggest culprit. So, two reasons instantly hit my brain as cause of persistently high food prices. 

The first being, change in consumption pattern of Indians. With increase in income levels the demand for protein rich products and green vegetables have gone up in India. However, Indian agriculture has not been swift enough to catch on the pattern and accordingly adjust its cultivation pattern. It still is mostly subsistence based and hence, there is a demand supply mismatch in these items contributing to high inflation for these items. The second reason is the persistently high fuel prices. In the week ending September 24 it stood at 14.69%. High fuel prices definitely contribute to the cost of transportation of food items. Thus, making them dearer. 

Apart from these two causes there are definitely causes like poor state of Indian agriculture, wastage of food items due to lack of proper warehousing and policy loopholes on part of govt. which collectively have compounded over decades to worsen the situation to the stage in which it manifests itself presently. RBI has already made 12 rate hikes since March 2010 but, the situation still seems out of control. Structural change in Indian economy in forms of improvement of infrastructure for agriculture, change in cropping pattern and improving supply chain are long run solutions to this problem. 

"India definitely needs second Green Revolution and this time a more sustainable one."