Understanding India’s Food Inflation: The Role of Demand and Supply Factors
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Summary:
Over the past decade, India has seen a prolonged period of high inflation, to a large extent driven by persistently-high food inflation. This paper investigates the demand and supply factors behind the contribution of relative food inflation to headline CPI inflation. It concludes that in the absence of a stronger food supply growth response, food inflation may exceed non-food inflation by 2½–3 percentage points per year. The sustainability of a long-term inflation target of 4 percent under India’s recently-adopted flexible inflation targeting framework will depend on enhancing food supply, agricultural market-based pricing, and reducing price distortions. A well-designed cereal buffer stock liquidation policy could also help mitigate food inflation volatility.
Series:
Working Paper No. 2016/002
Subject:
Agricultural commodities Commodities Expenditure Food prices Inflation Prices Total expenditures
English
Publication Date:
January 5, 2016
ISBN/ISSN:
9781513581347/1018-5941
Stock No:
WPIEA2016002
Pages:
42
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