Academic journal article Journal of Economics, Finance and Administrative Science

Food Price Inflation in India: The Growing Economy with Sluggish agriculture/Inflacion De Los Precios De Los Alimentos En India: Crecimiento Economico Y Letargo Agricola

Academic journal article Journal of Economics, Finance and Administrative Science

Food Price Inflation in India: The Growing Economy with Sluggish agriculture/Inflacion De Los Precios De Los Alimentos En India: Crecimiento Economico Y Letargo Agricola

Article excerpt

1. Introduction

India is experiencing high rate of GDP growth in the last two decades although the growth remains very uneven across sectors. The GDP is growing at a rate of 7-9% on an average per annum, but in agriculture the annual average growth rate is only 1.5% during this period. The share of agriculture in GDP has declined to less than 15%, although more than 50% of the population of the country is still dependent on agriculture for their livelihood. Like in many other developing countries the economic growth in India has been coupled with high rate of inflation. A major economic challenge the country is facing in the recent years is high food price inflation. From January 2008 to July 2010, the food price inflation rate year-on-year basis was recorded 10.20% (Nair & Eapen, 2012). From October 2009 to March 2010 food price inflation announced every week hovered around 20% (Basu, 2011). The researchers have tried to explain this price rise in terms of various factors including the effect of food crisis in the international market in the recent time (Gulati & Saini, 2013; Basu, 2011; Nair & Eapen, 2012). The Study of Robles (2011) shows that there is evidence of positive transmission effects of international prices on domestic agricultural markets in Asian and Latin American countries. Similar view has been expressed by Carrasco and Mukhopadhyay (2012). Baltzer (2013) however, notes that not all countries are equally hit by global food crisis. He states that in several countries, domestic prices are largely unrelated to international prices and reflect purely local shocks such as harvest failures, political turmoil etc. This study also finds that there is a close relationship between international and domestic prices in Brazil and South Africa, but the price pass-through from international to domestic market in China and India is almost nil. The level of transmission of international prices to domestic prices depends on a country's dependence on imports of food items and the inputs used in agricultural production. But India's dependence on the imports of agricultural products is not high except certain items like edible oils, sugar and pulses. In fact, India is a net exporter of food grains for the last thirty years although India's dependence on the import of petroleum and petro products including fertilizers is really very high. The management food economy and government intervention into the market for food grains through procurement and public distribution to maintain stability of food prices is an important issue in the present context. A sizeable buffer stock of food grains is maintained in India through public procurement to iron out the price fluctuations arising out of seasonal and sudden supply shocks especially in the years of crop failure. But Basu (2011) has shown that, the release of food grains was inadequate in the time of price rise although the food reserve in the country was above normal limit. So, the management of food economy was not up to the mark.

Like the price of any other commodity, agricultural price is also a market outcome and demand and supply in the market play an important role in the determination of price. The market imperfection can create distortion in the functioning of the market and influence price by controlling supply. A typical agricultural marketing channel is: Farmer - Local assembler - Central wholesaler - Retailer - Consumer. The retail prices are determined nearly in a perfectly competitive market situation. However, a few traders dominate in the wholesale market both as buyers and sellers. They act as both oligopolists and oligopsonists at the bottleneck of the marketing process (Nicholls, 1955; Sasmal, 2003). In the study of Osborne (2005) in the context of Ethiopia it is found that there are general forms of imperfect competition among rural wholesale traders, although there is no conclusive evidence of imperfect competition among the traders in larger and more centrally located markets. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.