Food inflation - one of the burning issues in India today which is affecting all sectors of our economy is a big threat to the life and livelyhood of the common man in the country. Recent data on food inflation status shows that prices of almost all vegetables,fruits and protein based food items increased by an average of 0.63% pushing the overall food inflation rate to 10.05%. It was 17.05% in january this year and redused gradually during the month of February and was 9.52% in the last week of February. But it came back to double-digit again. What are the causes of this high fluctuation in food prices and what are the solutions for them.This article throws light on these vital issues.
What is food inflation?
First,let's look what does food inflation mean. It means a high increase in food prices due to high demand and inadequate supply. It is measured on wholesale price index.(WPI)
Causes
There are many reasons for the inflation of food prices. The root cause is the demand supply missmatch. Following are the main causes of this missmatch.
(1) Natural causes
Natural causes include supply and distribution side constraints and risks due to natural calamities such as unseasonal rains,cyclones, floods,droughts,pests and diseases leading to devastating effect on crop and livestock. All these natural problems result in defficiancy in supply.(It is to be noted that the demand is always increasing due to rising population and a significant shift in the consumption pattern of the expanding middle class.
(2) High cost of inputs.
India is a sigmificant importer of phosphatic and complex fertilisers and large subsidies provided to them would be usustainable in the long run leading to balooning fiscal deficit which lead to inflation. Another problem of input cost is the rising prices of fuel which is a key input for transportation of agri commodities to processing or consumption centres. So crude oil prices affects the input cost and leads to inflation to a great extent.
(3) Hoarding and black marketing.
Illegal trading activities like hoarding and black marketing by intermediaries in the distribution system is a major problem faced by the country.
(4) Unscientific farming.
Relectance from the part of farmers in adopting new technologies in farming is a major problem faced by Indian agricultural sector.
(5) Low productivity.
As compared to developed countries,India's crop yields are low and in some cases less than world average. Yield growth rates in 2001-2010 have stagnated to <1.5 percent for rice and wheat as compared to over three percent in the 1980s.
(6) Non-availability of high yeald seeds at low price.
Even though many universities research labs and other corporate entities have developed good high productive seeds having good resistance to diseases, they are not easily available to small farmers at a low cost.
(7) Unrealistic whether forcasting system.
Whether forcasts are vital information to farmers in reducing the risk of bad whether and taking advantage of good whether conditions. Today, in India whether forcasting system is not modernised and it should become realistic and we should ensure that it reached to evrery farmers.
Remedies/Solutions.
Following are considered as major solutions to tackle food inflation and productivity problems.
(1) Increase in farm productivity.
There are limitations in expanding agricultural acreage. So there is great significance in improvementin yealds,frpm the available land.
Urgent focus is needed to enhance farm productivity by way of technology transfer in seeds,advanced agricultural practices including farm mechanisation and drip irrigation and other agri-inputs.
(2) Lower the cost of inputs.
Government should take immediate measures on redusing the cost of inputs.
(3) Increase the share of irrigated land.
Water would play an extreamely important role in food security and food prices. to cater this need,various irrigation projects can be viable long term solution.
(4) Improve storage and processing infrastructure.
Inefficient and insufficient post harvest storage infrastructure results in loss of over 10 percent of food grains and fruits & vegitables produced. Improvement in post harvest processing and storage utilities can also significantly contribute to reduction in losses and longer shelf life for perishable.
(5) Improvements in supply chain.
Incentives should be given to processors and organised retailers to procure directly from the farmer groups and minimise the layers in supply chain which add to the pricrs of agri-commodities.
(6) Broadening the procurement base.
Policies should be taken to improve the procurement base in water abundant areas in the North-East.
(7) Public distribution system.
Improving the public distribution system by a better coordination with the central government would keep a check on horders and black marketers.
(8) Advanced whether risk modeling and forecasting systems.
Advanced whether information from renowned whether institutions should be sought to decide the regions and quatum of insurance required to cover the risk.
(9) Development of crops that can withstand abnormal whether conditions.
Agriculture universities and private players are working on developing draught tolerant crops. IRRI in Manila is working on paddy strains that can withstand submerged water conditions in fields and in saline waters. Boosting such studies and enabling commercial launch will help mitigating the risk of crop loss by draught or flood.
(10) Adoption of new technology.
Without dought, tecnolgy like new communication systems and supplay chain management systems can improve food production and processing.
CONCLUSION
Tackling food inflation is the key priority of the Government and policy makers as it impacts the weaker sections of the society. The issue should be tackled by addressing supply side risks through economic and policy oriented actions and by mitigating risks due to natural calamities. Only an integrated approach would ensure long term food security.
What is food inflation?
First,let's look what does food inflation mean. It means a high increase in food prices due to high demand and inadequate supply. It is measured on wholesale price index.(WPI)
Causes
There are many reasons for the inflation of food prices. The root cause is the demand supply missmatch. Following are the main causes of this missmatch.
(1) Natural causes
Natural causes include supply and distribution side constraints and risks due to natural calamities such as unseasonal rains,cyclones, floods,droughts,pests and diseases leading to devastating effect on crop and livestock. All these natural problems result in defficiancy in supply.(It is to be noted that the demand is always increasing due to rising population and a significant shift in the consumption pattern of the expanding middle class.
(2) High cost of inputs.
India is a sigmificant importer of phosphatic and complex fertilisers and large subsidies provided to them would be usustainable in the long run leading to balooning fiscal deficit which lead to inflation. Another problem of input cost is the rising prices of fuel which is a key input for transportation of agri commodities to processing or consumption centres. So crude oil prices affects the input cost and leads to inflation to a great extent.
(3) Hoarding and black marketing.
Illegal trading activities like hoarding and black marketing by intermediaries in the distribution system is a major problem faced by the country.
(4) Unscientific farming.
Relectance from the part of farmers in adopting new technologies in farming is a major problem faced by Indian agricultural sector.
(5) Low productivity.
As compared to developed countries,India's crop yields are low and in some cases less than world average. Yield growth rates in 2001-2010 have stagnated to <1.5 percent for rice and wheat as compared to over three percent in the 1980s.
(6) Non-availability of high yeald seeds at low price.
Even though many universities research labs and other corporate entities have developed good high productive seeds having good resistance to diseases, they are not easily available to small farmers at a low cost.
(7) Unrealistic whether forcasting system.
Whether forcasts are vital information to farmers in reducing the risk of bad whether and taking advantage of good whether conditions. Today, in India whether forcasting system is not modernised and it should become realistic and we should ensure that it reached to evrery farmers.
Remedies/Solutions.
Following are considered as major solutions to tackle food inflation and productivity problems.
(1) Increase in farm productivity.
There are limitations in expanding agricultural acreage. So there is great significance in improvementin yealds,frpm the available land.
Urgent focus is needed to enhance farm productivity by way of technology transfer in seeds,advanced agricultural practices including farm mechanisation and drip irrigation and other agri-inputs.
(2) Lower the cost of inputs.
Government should take immediate measures on redusing the cost of inputs.
(3) Increase the share of irrigated land.
Water would play an extreamely important role in food security and food prices. to cater this need,various irrigation projects can be viable long term solution.
(4) Improve storage and processing infrastructure.
Inefficient and insufficient post harvest storage infrastructure results in loss of over 10 percent of food grains and fruits & vegitables produced. Improvement in post harvest processing and storage utilities can also significantly contribute to reduction in losses and longer shelf life for perishable.
(5) Improvements in supply chain.
Incentives should be given to processors and organised retailers to procure directly from the farmer groups and minimise the layers in supply chain which add to the pricrs of agri-commodities.
(6) Broadening the procurement base.
Policies should be taken to improve the procurement base in water abundant areas in the North-East.
(7) Public distribution system.
Improving the public distribution system by a better coordination with the central government would keep a check on horders and black marketers.
(8) Advanced whether risk modeling and forecasting systems.
Advanced whether information from renowned whether institutions should be sought to decide the regions and quatum of insurance required to cover the risk.
(9) Development of crops that can withstand abnormal whether conditions.
Agriculture universities and private players are working on developing draught tolerant crops. IRRI in Manila is working on paddy strains that can withstand submerged water conditions in fields and in saline waters. Boosting such studies and enabling commercial launch will help mitigating the risk of crop loss by draught or flood.
(10) Adoption of new technology.
Without dought, tecnolgy like new communication systems and supplay chain management systems can improve food production and processing.
CONCLUSION
Tackling food inflation is the key priority of the Government and policy makers as it impacts the weaker sections of the society. The issue should be tackled by addressing supply side risks through economic and policy oriented actions and by mitigating risks due to natural calamities. Only an integrated approach would ensure long term food security.
