Food Inflation

Conext (TH | IE): The Monetary Policy Committee decided to keep the policy repo rate unchanged at 6.50% as of April 5, 2024. This marks the seventh consecutive time rates have remained steady.
The MPC also decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth.
The RBI has indicated that headline inflation will moderate in the coming months, aided by a favourable base effect lasting until July 2024.

Key Highlights

Overall inflation has been somewhat controlled, dropping to 5.1% in January and February 2024.
Core inflation has also decreased steadily over nine months to its lowest level in the series.
The fuel component of the CPI stayed in deflation for six consecutive months, but food inflation pressures intensified in February.
For 2024-25, assuming a normal monsoon, CPI inflation is projected at 4.5%.
The central bank has retained GDP growth at 7% and retail inflation at 4.5 % for fiscal 2024-25.

Food inflation has been volatile, reaching 7.8% in February 2024.
Sustained inflationary trends in nonperishable food categories, such as pulses and spices, raise concerns.
Factors driving food inflation change frequently.
The concern is to prevent spillover effects to the rest of the Consumer Price Index (CPI).

CFPI measures the change in retail prices of food products consumed by a defined population group in a given area, using a base year as a reference.
The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation (MOSPI) releases CFPI for three categories (rural, urban, and combined) separately on an all-India basis.
Like the Consumer Price Index (CPI), the CFPI is calculated monthly.
The base year presently used is 2012.

WPI food index is a new Food Price Index launched on 12 May 2017 as part of the revised WPI series with the base year 2011-12.
The WPI food index shows price changes in food items with price quotations from producers. On the other hand, the CPI Food Price Index uses price quotations from retailers.
The WPI Food index is compiled by taking the aggregate of WPI for “Food Products” under “Manufacture Products” and “Food Articles” under “Primary Article” using weighted arithmetic mean.
The WPI is historically the most commonly used price index for measuring inflation in India.

Globally, the food price index is being released by the Food and Agriculture Organization of the United Nations.
The FAO Food Price Index is a measure of the monthly change in international prices of a basket of food commodities.
It consists of the average of five commodity group price indices (Cereal, Vegetable Oil, Dairy, Meat and Sugar).

It occurs when price levels in the current year are compared to those of the previous year. E.g,
- If inflation was high in the previous year, part of the potential increase is already considered, resulting in relatively lower inflation rates for similar price increases in the current year.
- Conversely, if inflation was low in the previous year, even a small rise in the price index will lead to a high current inflation rate.

To know more about Food Inflation in India, Visit > Deglobalisation of Food Inflation