Eco Research Paper

MICROECONOMICS
&
MACROECONOMICS

RESEARCH PAPER: FOOD INFLATION IN INDIA

NAME: DHARA PATEL

PROF: DR. ESIN CAKAN
(ECON- 6601 SPRING – 2015)
Abstract

Inflation denotes paying more for goods comparatively due to increase in prices due to the disproportionate changes in amount of supply and demand. Indian inflation rate is measured in the Whole Price Index (WPI). The inflation can be controlled through certain measures like fiscal measures, monetary measures, physical or non-monetary measures and most important customers. They should buy products in bulk and stock it before the prices go high or start cutting down on optional consumption. While government has taken preventive measures to control the inflation by banning on export products for essential commodities and bank has diverse reserve ratios like CRR, SLR, Repo Rate, even the savings deposits rate of interest has rambled to overcome the problem of inflation. But still inflation, is not under control and increasing year after year. In addition WPI helps in understanding the movement of prices relating to substance transactions of purchases, typically for the further sales. ”As the Government and RBI starts grappling with some of the complex problem of inflation and rejuvenating economic growth we all hope that the spectacle of India’s growth story will take off once again. Fiscal deficit and Economic Reforms- the twin issues deserve importance because they probably hold the key to revival of economic growth.” (Pande)
Introduction

The topic I have chosen regarding food inflation in India because I feel it’s very much necessary to overcome with this issues. Since past few years government is taking crucial measures to control the inflation, but still it increases year after year. When spoken about sustainable economic development, growth with stability is the most imminent key factor as fluctuations in prices creates an atmosphere of uncertainty conducive to development activities in the economy. What inflation denotes is paying more for goods comparatively due to increase in prices. This is due to the amount of supply decreasing through hoardings rapidly for the prices to go up with same high demand for goods. For example, let the price of a particular vegetable, say onions is Rs.60 per KG this year while the next year the price becomes approximately Rs.62.4, then the rate of inflation is 4%. In direct words Inflation brings no gain to common man except for few hoarders and investors. (PARVATHAMMA) .Recent research has seen the growth rate has falling. Optimal inflation rises arises as the basis theme in deciding an adequate monetary policy through an effective inflation, whether it should be in the range of 1-3 %, the inflation rate that persists in the industrialized economy or should it be in the range of 6-7%. There are certain problems seen deciding on the elaborate inflation and its measurements. Firstly, the measurement is biasedly calculated about the inflation rate noting it comparatively more than the one in nature. Secondly, a problem often arises when the improvisations on quality of the product requires to be captured ultimately affecting the price index. Consumers’ prefer for cheaper goods which affects the consumption basket at costs for the increased expenditure on the cheaper goods that takes time for measuring inflation and increasing weights. The Boskin Commission has measured 1.1 per cent of the increased inflation in USA annually. They also point out that developed countries’ comprehensive study on inflation to be fairly low as compared to developing countries. Inflation causes an increase in the amount of currency which is circulated resulting in a relatively sharp fall in its value and rise in prices due to increase in the volume of paper money issued or of gold mined It also experiences a relative increase in expenditures as when the supply of goods fail to meet the demand of it. Inflation is a cause rather than an effect. A persistent

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