INFLATION CONCERNS DUE TO FOOD PRICES: RBI BULLETIN

Why in the news?

Food price pressures threaten inflation outlook, impacting wages, rent, and inflation expectations.
The argument that food price shocks are transitory is refuted based on the past year’s experience.
Headline inflation rose to 5.1% in June 2024 from 4.8% in May, driven by increases in food, fuel, and core components.

Indices Measuring Food Inflation in India:

Consumer Price Index (CPI):
Measures retail inflation, tracking prices of a basket of goods.
Types: CPI for Industrial Workers (IW), Agricultural Labourer (AL), Rural Labourer (RL), Urban Non-Manual Employees (UNME).
Consumer Food Price Inflation (CFPI):
- Component of CPI, focusing on food items like cereals, vegetables, and dairy.
- Measured using CPI-Combined (CPI-C).
Wholesale Price Index (WPI):
- Tracks bulk prices of goods sold to businesses.
- Components: Primary Articles (22.62%), including Food Articles (cereals, vegetables, meat) and Non-Food Articles (oil seeds, minerals).

source:toi

Key Government Initiatives to Control Food Inflation:

Subsidised Commodities: Increased distribution of subsidised onions, tomatoes, wheat, and sugar.
Reduction in Import Duty: Lower duties on pulses to boost domestic production.
Export Bans: Bans on wheat and broken rice exports to stabilise domestic supply.
Ban on Stockpiling: Limits on wheat stocks for traders and retailers to prevent hoarding.
Operation Greens: Stabilises Tomato, Onion, and Potato (TOP) supplies year-round.
Floor Prices: Minimum export price for onions set at $800/tonne to control rising prices.

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