Food sector inflation has been on a downward trajectory, as per the Economic Survey. Here are the five reasons that contributed to it.
Despite growing inflation in various sectors, food inflation went down considerably in 2021, leading to a decline in retail inflation, finds the Economic Survey 2021-22. “Food inflation, as measured by the Consumer Food Price Index (CFPI), averaged at a low of 2.9 per cent in 2021-22 (April to December), as against 9.1 per cent in the corresponding period last year,” the Survey states.
While the overall inflation for the food and fuel group stood at 5.6 per cent in December 2021, the inflation in vegetables went down by 3 per cent in December, becoming the only sector with lowering inflation in that month. “CPI (Consumer Price Index) is still within Reserve Bank of India’s (RBI’s) target band, supported by a dip in food inflation,” stated Madan Sabnavis, chief economist, Baroda Corporate Centre, the research wing of Bank of Baroda, in a report.
During 2021-22 (April to December 2021), the contribution of ‘food and beverages’ declined from 59 per cent to 31.9 per cent, states the Economic Survey. While the outbreak of Covid-19 caused the prices to rise during April 2021, certain factors led to a fall in prices after the second wave of Covid-19 was over.
Inflation in prices of vegetables like onion and potato remained negative throughout the year as rail services and other modes of communication ensured the transfer of food across India. Kisan Rail trains enabled speedy movement of perishables from production or surplus regions to consumption or deficient regions. Under this service, Indian Railways operated 1,900 Kisan Rail services, transporting approximately 6.23 lakh tonnes of perishables, including fruits and vegetables.
The average inflation of the ‘meat and fish’ group has been low during 2021-22 (April to December) at 8.0 per cent compared to 15.4 per cent in 2020-21. Due to proactive supply management efforts by the government, the average inflation for meat, pulses and related products has been low.
One of the major challenges was storage. Due to the lack of proper infrastructure, there was lack of storage facilities, which led to wastage of vegetables and other food items. Various schemes like Mission for Integrated Development of Horticulture (MIDH), Agricultural Marketing Infrastructure (AMI) and Operation Green have enabled small farmers to enhance their holding capacity and thus sell their produce at remunerative prices and avoid distress sale.
Various pulses have been brought under the free import category, thereby reducing their price. Basic import duty and Agriculture Infrastructure and Development Cess on masoor have been brought down to zero and 10 per cent, respectively. The duty on edible oil has also been reduced.
With the ease of some restrictions and an increase in area sown for Kharif pulses to a new high of 142.4 lakh hectare (as on October 1, 2021), there has been a downward trajectory in pulses inflation, as per the Economic Survey.