{"id":6377,"date":"2020-02-20T10:51:39","date_gmt":"2020-02-20T05:21:39","guid":{"rendered":"https:\/\/triumphias.com\/blog\/?p=6377"},"modified":"2020-02-20T10:51:39","modified_gmt":"2020-02-20T05:21:39","slug":"effects-of-food-inflation-in-an-economy","status":"publish","type":"post","link":"https:\/\/triumphias.com\/blog\/effects-of-food-inflation-in-an-economy\/","title":{"rendered":"Effects of food inflation in an economy"},"content":{"rendered":"<p><span style=\"color: #0000ff;\"><strong>Relevance: Prelims\/Mains: G.S paper III: Indian Economy: Inflation<\/strong><\/span><\/p>\n<p><span style=\"color: #ff0000;\"><strong>Context:<\/strong><\/span><\/p>\n<p><a href=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-large wp-image-6380\" src=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-1024x768.jpg\" alt=\"\" width=\"810\" height=\"608\" srcset=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact.jpg 1024w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-150x113.jpg 150w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-300x225.jpg 300w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-768x576.jpg 768w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-880x660.jpg 880w\" sizes=\"auto, (max-width: 810px) 100vw, 810px\" \/><\/a><\/p>\n<ul>\n<li>It is said that food inflation has made a comeback, both in India and globally.<br \/>\n\u2022 The Indian food inflation may be influenced by global price movements.<\/li>\n<\/ul>\n<p><span style=\"color: #ff0000;\"><strong>Analyzing the scenario in both India and World perspective:<\/strong><\/span><\/p>\n<ul>\n<li>The UN Food and Agriculture Organisation\u2019s (FAO) food price index is a measure of the change in international prices of a basket of major food commodities.<br \/>\n\u2022 With 2002-04 (100 points) as a base period to the index, it touched 182.5 points in January 2020, the highest since December 2014.<br \/>\n\u2022 Also, the year-on-year inflation rate based on this index has risen steadily from 1.13% in August 2019 to 11.33% for January 2020.<br \/>\n\u2022 This sharp surge in global food prices is reflected in trends in India.<br \/>\n\u2022 Consumer and wholesale food inflation rates for December 2019 were the highest since November 2013 and December 2013 respectively.<br \/>\n\u2022 Simply put, since October 2019, food inflation has made a comeback, both in India and globally.<\/li>\n<\/ul>\n<p><span style=\"color: #ff0000;\"><strong>Factors contributing to the inflation:<\/strong><\/span><\/p>\n<p><span style=\"color: #ff0000;\"><strong>Local factors:<\/strong><\/span><\/p>\n<ul>\n<li>While the recent rise in domestic food prices has been blamed largely on \u201clocal\u201d factors,<br \/>\n\u2022 Poor rainfall during the monsoon season (June-July 2019)<br \/>\n\u2022 Too much of rainfall thereafter till about mid-November.<br \/>\n\u2022 This led to both reduced\/delayed kharif sowings and damage to the standing crop at maturity\/harvesting stage, some of it is also \u201cimported\u201d.<\/li>\n<\/ul>\n<p><a href=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-infl.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-6378\" src=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-infl.jpg\" alt=\"\" width=\"960\" height=\"720\" srcset=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-infl.jpg 960w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-infl-150x113.jpg 150w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-infl-300x225.jpg 300w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-infl-768x576.jpg 768w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-infl-880x660.jpg 880w\" sizes=\"auto, (max-width: 960px) 100vw, 960px\" \/><\/a><\/p>\n<p><span style=\"color: #ff0000;\"><strong>Foreign factors:<\/strong><\/span><\/p>\n<ul>\n<li>Since India imports most of its edible oil, higher international prices would have been automatically transmitted to the domestic market.<br \/>\n\u2022 As global prices can be transmitted to the domestic market through exports, the government has foreclosed that possibility by restricting onion shipments since September 2019.<\/li>\n<\/ul>\n<p><span style=\"color: #ff0000;\"><strong>Period of divergence:<\/strong><\/span><\/p>\n<ul>\n<li>The FAO food price index and the domestic consumer food price index (CFPI) inflation rates started moving in tandem from March 2018.<br \/>\n\u2022 They exhibited a significant divergence in the period prior to that.<\/li>\n<\/ul>\n<p><span style=\"color: #ff0000;\"><strong>FAO index:<\/strong><\/span><\/p>\n<ul>\n<li>The FAO index peaked at 240 in February 2011, but remained at 200-plus levels until July 2014.<br \/>\n\u2022 Global prices crashed after that, and stayed low up to early 2016, with the FAO index dipping to 149.3 in February 2016.<\/li>\n<\/ul>\n<p><span style=\"color: #ff0000;\"><strong>Domestic food index:<\/strong><\/span><\/p>\n<ul>\n<li>It also fell by early 2016, as lower global commodity prices reduced the demand for Indian farm exports, even as they made imports cheaper.<br \/>\n\u2022 However, the actual fall in domestic inflation took place after September 2016 which had more to do with domestic factors than global prices.<br \/>\n\u2022 Between August 2016 and October 2017, the FAO index inflation exceeded the corresponding CPFI rate.<\/li>\n<\/ul>\n<p><span style=\"color: #ff0000;\"><strong>Present situation:<\/strong><\/span><\/p>\n<ul>\n<li>Both international and domestic food prices are showing signs of renewed hardening.<br \/>\n\u2022 So the question now is how sustainable this trend is. There are at least three bearish factors currently at play.<br \/>\n\u2022 The novel coronavirus epidemic that has reduced Chinese buying of everything like palm oil, milk powder, meat, etc from outside.<br \/>\n\u2022 The price of crude oil is another factor.<br \/>\n\u2022 The prospect of a bumper rabi (winter-spring) crop in India is the third one. The kharif harvest turned out to be not so good because of excess and unseasonal rain.<br \/>\n\u2022 Against these bearish factors are the relatively \u201cbullish\u201d factors.<br \/>\n\u2022 Global palm oil ending stocks this year are projected to be the lowest since 2009-10 and sugar is also expected to move into deficit.<br \/>\n\u2022 Supply tightness is being seen both globally and in India, even in milk.<br \/>\n\u2022 If Brent crude too, were to rally again, there could be uncertainty ahead.<\/li>\n<\/ul>\n<p><a href=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-inflation.png\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-6379\" src=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-inflation-1024x683.png\" alt=\"\" width=\"810\" height=\"540\" srcset=\"https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-inflation-1024x683.png 1024w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-inflation-150x100.png 150w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-inflation-300x200.png 300w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-inflation-768x512.png 768w, https:\/\/triumphias.com\/blog\/wp-content\/uploads\/2020\/02\/impact-of-inflation-120x80.png 120w\" sizes=\"auto, (max-width: 810px) 100vw, 810px\" \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Relevance: Prelims\/Mains: G.S paper III: Indian Economy: Inflation Context: It is said that food inflation has made a comeback, both<\/p>\n","protected":false},"author":1,"featured_media":3299,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[123,42,43],"tags":[392],"class_list":["post-6377","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","category-general-studies-iii-technology-economic-development-bio-diversity-environment-security-and-disaster-management","category-indian-economy","tag-union-public-service-commission-upsc"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/6377","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/comments?post=6377"}],"version-history":[{"count":1,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/6377\/revisions"}],"predecessor-version":[{"id":6381,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/posts\/6377\/revisions\/6381"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/media\/3299"}],"wp:attachment":[{"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/media?parent=6377"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/categories?post=6377"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/triumphias.com\/blog\/wp-json\/wp\/v2\/tags?post=6377"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}