ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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What Is Driving Rural Inflation at a Higher Rate?

Consumer price inflation in rural areas has been persisting at a higher rate than that in urban areas and the gap between the two has stood at 1.5 percentage points in May 2016. Inflation of both series slowed considerably during the last two years or so, the moderation in rural areas has been slower than in urban areas. This was partly due to compositional differences accompanied by divergent price movements and partly due to higher marketing costs and trade margins resulting from the prevailing rural–urban divide in terms of infrastructure bottlenecks, inadequate logistics support, etc.

What Is Driving Rural Inflation at a Higher Rate?

Consumer price infl ation in rural areas has been persisting at a higher rate than that in urban areas and the gap between the two has stood at 1.5 percentage points in May 2016. Infl ation of both series slowed considerably during the last two years or so, the moderation in rural areas has been slower than in urban areas. This was partly due to compositional differences accompanied by divergent price movements and partly due to higher marketing costs and trade margins resulting from the prevailing rural-urban divide in terms of infrastructure bottlenecks, inadequate logistics support, etc.

Inflation with Disinflation?

Price inflation in India as measured by the Wholesale Price Index and the Consumer Price Index has shown diverging trends. While WPI indicates a disinfl ationary situation for 16 months, CPI indicates inflation. Explaining the construction of the two indices, the trends of subgroups of both indices are presented. It is found that the different sample sizes and weightages of commodity groups of both indices and price interventions in the market explains, at least in part, this odd situation of infl ation along with disinfl ation.

Pulses: Need for Production Expansion

Pulses are an indispensable part of the Indian diet, but ever increasing prices are making them unaffordable for the poor. The persistent gap between demand and supply of pulses is only expected to widen if domestic production levels are not raised substantially through necessary policy measures.

Commodity Futures Trading at the Crossroads

The Forward Markets Commission and Securities Exchange Board of India merger may provide a relatively strong regulator, but the move needs to be supplemented with better information and warehouse networks to achieve the desired objectives of effi cient price discovery and price-risk management in commodity futures markets.

Expert Committee on Commodity Futures: Agreements and Disagreements

In its recent report, the expert committee on commodity futures concludes that futures trade in India has increased the price volatility of largely traded commodities (urad, chana, wheat) during periods of excess liquidity. It finds an increase in prices for commodities that have small market sizes and scarce deliverable supplies (mentha oil, wheat). In contrast, futures trading has led to a reduction in volatilities and aided better discovery for other commodities (soya oil, hessian). It appears that futures trade in agricultural commodities is beneficial for only those commodities that fulfil the basic selection criteria for futures trading accompanied by stringent and timely regulatory actions.

Impact of Futures Trading on Commodity Prices

The article attempts to explore the effect of the introduction of futures trading on spot prices of pulses. It finds that volatility in urad as well as pulses prices was higher during the period of futures trading than in the period prior to its introduction as well as after the ban of futures contracts.
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