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FOOD INFLATION
SOP 6
                           Abdul Manas
                           Aswin M Nair
                           Avanya R
                           John Prakash
                           Shameem Sameer
                           Vipin 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 Index
 WPI is calculated on a base year


 The price from wholesale market is taken for
  calculation

 WPI is available for every week
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
Calculation of WPI

WPI=(Price in Current year-Price in Base
 year)×100/ Price in base year
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
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 institutions
 High food inflation will bring down India’s economic growth
Indians spending pattern
Government recommendations
 Revised 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
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 .
THANK YOU

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Food inflation

  • 2. SOP 6 Abdul Manas Aswin M Nair Avanya R John Prakash Shameem Sameer Vipin R Sop owner: BOSS GEORGE P
  • 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. Causes of Inflation  Rise in production cost & labor costs  Speculation  External factors  Rising crude oil prices  Transportation costs
  • 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. Price Indices  Wholesale Price Index(WPI)  Consumer Price Index(CPI)
  • 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. 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. Calculation of WPI WPI=(Price in Current year-Price in Base year)×100/ Price in base year
  • 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.
  • 12. Reasons for Food Inflation in India  Demand and Supply  Population  Exploitation of Land  Climatic changes
  • 13. Reasons for Food Inflation in India  Change in fuel price  Lack of interest in agriculture  Hoarding of food products  Export of food products
  • 14. 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
  • 16. Government recommendations  Revised monetary policies  CRR  Repo  Reverse Repo  SLR  Opened several supply outlets
  • 17. Government recommendations • Asked the state government to reduce taxes on food items • Utility food items on subsidized rates
  • 18. 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
  • 19. Counter measures • Make the public distribution system effective • Check on middleman • Protected cultivation around metros • Private sector participation • Dehoarding mechanism must be strengthened
  • 20. 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 .