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

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Understanding the Nature and Causes of Food Inflation

The main reason for the current surge in food prices is the supply shock due to the drought in 2009 and the carry-over effect of the low growth of food production in 2008-09. As the frequency of such shocks is expected to rise, India needs to have an effective food management strategy to deal with these episodes. It also needs to explore various other options for price stabilisation like maintaining buffer stocks and using trade. The economy has to invest heavily in expanding storage capacity for various types of foods in both the public as well as private sectors. Due to fluctuations in growth, the export of some commodities in one or two years is followed by their imports, which invariably involves a large variation in costs and prices. As India is a net exporter of food, a part of what is now exported needs to instead become part of domestic stabilisation stocks.

DROUGHT, OUTPUT AND INFLATION

Understanding the Nature and Causes of Food Inflation

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