Social Policy & Administration

Is Food Inflation in India Driven by Demand or Supply?

Is Food Inflation in India Driven by Demand or Supply?

While domestic food price inflation is high globally, consumer food price inflation in India has increased from 0.68% to 8.38% between September 2021 and April 2022.

Authors

Deepanshu Mohan, Associate Professor of Economics and Director, Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities, O.P. Jindal Global University, Sonipat, Haryana, India.

Hemang Sharma, InfoSphere Team, Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities, O.P. Jindal Global University, Sonipat, Haryana, India.

Anirudh Bhaskaran, InfoSphere Team, Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities, O.P. Jindal Global University, Sonipat, Haryana, India.

Soumya Marri, InfoSphere Team, Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities, O.P. Jindal Global University, Sonipat, Haryana, India.

Anushka Chib, InfoSphere Team, Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities, O.P. Jindal Global University, Sonipat, Haryana, India.

Malhaar Kasodekar, InfoSphere Team, Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities, O.P. Jindal Global University, Sonipat, Haryana, India.

Summary

Inflation has continued to peak at an all-time high in all economies around the world, with food and energy prices skyrocketing to unprecedented levels. Even industrially developed nations like the US, Canada, and the Eurozone, which experienced decades-long of stable price levels have struggles to keep prices under control.

While domestic food price inflation is high globally, consumer food price inflation in India has increased from 0.68% to 8.38% between September 2021 and April 2022. Overall inflation rate was recently reported to be around 7% with most of the price rise stemming from high food and fuel prices.

High levels of global food inflation are being driven by multiple reasons such as the COVID-19 pandemic-induced supply chain concerns and the ongoing Russia-Ukraine war.

Multiple lockdowns and subsequent disruptions in the logistics of the supply accounted for a swift rise in food inflation prices. This was further exacerbated during the economic recovery, when demand for food and essentials rose even more.

However, just as demand-driven inflation was declining, a war in Europe caused an increase in input energy costs for commodities, worsening the inflation prices.

This article, involving a critical analysis of inflation trends in India undertaken by Centre for New Economics Studies (CNES) InfoSphere team at Jindal School of Liberal Arts and Humanities, O.P. Jindal Global University, deliberates whether the current inflation trends in India are driven by the supply side or the demand side, with a special focus on studying food inflation patterns.

Published in: The Wire

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