Food inflation and the way out: All you want to know

Jun 02 2014, 09:04 IST
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Rising food prices drove inflation in India up more than expected. Rising food prices drove inflation in India up more than expected.
SummaryPrimary culprit behind price rise is high incidence of wastage throughout the supply chain.

Rising food prices has driven inflation in India up more than expected, leaving the RBI with less room to support the economy amid fresh signs of slowing growth. Here are some facts about rising food inflation and how it can be brought down:

1. Food prices have been the primary driver of overall inflation, and within food, it is the prices of fruits and vegetables that have been persistently high.

2. This is an anomaly since between FY05-FY13, production of fruits and vegetables surged close to 5.3% per year, as compared to the 1.3% growth from FY98-FY04. Yet, inflation in these items rose by an average 8.9% with no change in the demand position, says ratings agency Crisil in a report.

3. The primary culprit behind the price rise is the high incidence of wastage throughout the supply chain, says the report that is titled ĎWhat a Waste!í

4. The value of fruits and vegetables wasted stood at a staggering Rs 70,000 crore in FY11 and Rs 63,000 crore in FY10.

5. Simply put, out of every 100 kg of tomato produced, only 73 kg reached the retail market, while the rest was wasted.

Food inflation

THE WAY OUT

* Crisil has identified several steps to lower inflation and reduce wastage:

* Moderate increase in minimum support price, to manage stocks and for sustainability

* Liquidate excess stocks and manage them better to prevent hoarding

* Abolish APMC Act to enable farmers trade freely

* Strengthen the logistics supply chain with a focus on back-end operations to cut wastage

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