FOOD INFLATION

SOP 6Abdul ManasAswin M NairAvanya RJohn PrakashShameem SameerVipin R

Sop owner: BOSS GEORGE P

INFLATION

Inflation is a rise in the general level of prices of goods and

services in an economy over a period of time

Inflation can have positive and negative effects on an economy

Current inflation rate: 8.62%(August 4,2011)

Inflation is calculated mainly by wholesale price index and

consumer price index

Causes of Inflation

Rise in production cost & labor costs

Speculation

External factors

Rising crude oil prices

Transportation costs

Food Inflation in India

Rise in the price of Food Items

Present Food inflation rate is 8.04 (August 4, 2011)

Calculated on the basis of Wholesale Price Index(WPI)

Calculated by Central Statistical Organization(CSO)

Price Indices

Wholesale Price Index(WPI)

Consumer Price Index(CPI)

Wholesale Price IndexWPI is calculated on a base year

The price from wholesale market is taken for calculation

WPI is available for every week

Wholesale Price IndexMeasure the change in average price level of

goods

A sample set of 676 items are taken for calculation

Primary Articles

Fuel and Power

Manufactured Goods

Calculation of WPI

WPI=(Price in Current year-Price in Base year)×100/ Price in base year

Consumer Price IndexMeasure estimating the average price of

consumer goods and services purchased by households

Mainly used by developed countries

Percent change in the CPI is the measure estimating inflation

Reasons for Food Inflation in India

Demand and Supply

Population

Exploitation of Land

Climatic changes

Reasons for Food Inflation in India

Change in fuel price

Lack of interest in agriculture

Hoarding of food products

Export of food products

Effects of food inflation

A large section of the population are losing out on their

purchasing power

Corruption in PDS shops

Force the common man to borrow money from banks and other

financial institutionsHigh food inflation will bring down India’s economic growth

Indians spending pattern

Government recommendationsRevised monetary policies

CRR

Repo

Reverse Repo

SLR

Opened several supply outlets

Government recommendations

• Asked the state government to reduce taxes on

food items

• Utility food items on subsidized rates

Counter measures • Effective use of monetary policy without affecting growth

rate

• Increase in productivity of agricultural land

• The essential commodities act

• Reduce the gap between the farm price and retail price

Counter measures

• Make the public distribution system effective

• Check on middleman

• Protected cultivation around metros

• Private sector participation

• Dehoarding mechanism must be strengthened

ConclusionIndia is a food deficient country. Under

this circumstance the survival of common man is becoming tougher and tougher. In order to keep pace with population growth, food production also needs to grow .It is very important for the Government to control the inflation and ensure that these circumstances do not arise again in the future. The passing of food security act will help to a great extend . So lets join our hands together for a happy nation .

THANK YOU