Food inflation

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Food inflation

  1. 1. FOOD INFLATION
  2. 2. SOP 6 Abdul Manas Aswin M Nair Avanya R John Prakash Shameem Sameer Vipin RSop owner: BOSS GEORGE P
  3. 3. 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
  4. 4. Causes of Inflation Rise in production cost & labor costs Speculation External factors  Rising crude oil prices  Transportation costs
  5. 5. 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)
  6. 6. Price Indices Wholesale Price Index(WPI) Consumer Price Index(CPI)
  7. 7. Wholesale Price Index WPI is calculated on a base year The price from wholesale market is taken for calculation WPI is available for every week
  8. 8. Wholesale Price Index Measure 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
  9. 9. Calculation of WPIWPI=(Price in Current year-Price in Base year)×100/ Price in base year
  10. 10. Consumer Price Index Measure 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
  11. 11. Reasons for Food Inflation in India Demand and Supply Population Exploitation of Land Climatic changes
  12. 12. Reasons for Food Inflation in India Change in fuel price Lack of interest in agriculture Hoarding of food products Export of food products
  13. 13. 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 institutions High food inflation will bring down India’s economic growth
  14. 14. Indians spending pattern
  15. 15. Government recommendations Revised monetary policies  CRR  Repo  Reverse Repo  SLR Opened several supply outlets
  16. 16. Government recommendations• Asked the state government to reduce taxes on food items• Utility food items on subsidized rates
  17. 17. 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
  18. 18. Counter measures• Make the public distribution system effective• Check on middleman• Protected cultivation around metros• Private sector participation• Dehoarding mechanism must be strengthened
  19. 19. Conclusion India 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 .
  20. 20. THANK YOU

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