FARM SOWING AND FOOD PRICE OUTLOOK

Why in the news?

Despite deficient rainfall in 12 states, overall farm area sown increased by 10.3% from last year.
This rise is expected to help mitigate the recent upward trend in food prices, according to Bank of Baroda economists.
Significant increases were noted in rice, pulses, and oilseeds acreage, with a notable 20% rise nationally by mid-July.

source:eduscience

Understanding Food Inflation Metrics In India:

Consumer Food Price Index (CFPI):
- Monitors retail price changes of food products for specific population groups in rural, urban, and combined areas.
- Released monthly by CSO, MOSPI, using 2012 as base year.
Wholesale Price Index (WPI) Food Index:
- Part of revised WPI series since May 2017, with base year 2011-12.

Reflects food item price fluctuations based on producer quotations, distinct from CPI Food Price Index.

Global Food Price Index:
- Compiled by FAO, tracks monthly international price shifts of food commodities.
- Includes indices for Cereal, Vegetable Oil, Dairy, Meat, and Sugar, providing a global perspective on food price trends.

What is the Base Effect ?

Compares current year prices with the previous year’s levels.
High inflation in the prior year leads to lower current inflation rates for similar price increases.
Low inflation in the previous year results in higher current inflation rates for even minor price index rises.
Essential for policymakers and economists to interpret and manage food inflation trends effectively.

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