JOIN US Food inflation this year is expected to remain subdued despite fluctuating monsoon as the recent trend of build-up in wholesale and retail prices has been at a lower level compared with previous years.
Currently both the CPI (consumer price inflation) and WPI (wholesale price inflation) inflation are hovering at 4.8 per cent and 3.8 per cent in May and are expected to remain below six per cent by December 2015.
A research done by PHD Chamber of Commerce suggested that that in the past 25 years, among the various demand and supply side factors, it was the increasing income that explained the food inflation in India.
The research analysis showed that monsoon behaviour had little correlation with rising or declining food inflation. The poor correlation between the two means that even in years of good monsoon, inflation could rise and vice versa.
Farm champs not rainfed
On the other hand, the major foodgrain producing states were not much dependent on monsoon behaviour as they have proper irrigation facilities.
The analysis showed that there was a high degree of correlation between per capita income and growth of food inflation, with around 40 per cent of the food inflation explained by rising income levels of people.
It was the increase in per capita income that had caused a dietary shift in the consumption pattern of households. This is found to be a major contributor to higher food inflation in the economy.
“Rising per capita income during the past many years, and diversification of diet towards high value food products like milk, eggs, meat, fish, pulses, vegetables, and fruits, etc. is one of the reasons for rising inflation,” the research said.