7 Reasons Why Food Prices are Increasing in India

Food Prices have become one of the most important topics in India over the last 2 years.A Deficient Monsoon season in 2009 was the primary cause of a sharp rise in Food Prices leading to Food Insecurity for a majority of the India.A recent study found that more than half of the Indians still live in poverty making Food Prices perhaps the most important issue for them.With a vast majority of Indians living on wages below $2/day,increasing food prices can mean hungry stomachs to even sometime starvation.Not that starvation is new to the Indian state with parts of  Eastern India particularly Orissa infamous for starvation deaths.Food inflation in India has continued to rage even in 2010 with prices increasing by a whopping 17-18%.What has led to this sharp rise in food prices which has made the lives of poor Indians even more miserable.The causes are both local and external and have been listed down

1. Higher Food Prices worldwide as Food Futures are treated as an Asset Class by Investment Banks and their Clients
2. MNREGA scheme which has led to labor shortages amongst rural workers and higher wages
3. Lower agricultural growth in India compared to the much faster GDP growth
4. Rising percentage of Middle Class in India which is demanding increasing quantities of better quality food products.With increasing incomes,people prefer to eat more meat which is more foodgrain intensive than a vegetarian diet
5. High general Inflation is also a contributor to higher Food Prices
6. Inefficiency in the Food Supply Chain.India wastes a huge amount of Food due to an antiquated supply structure which involves middlemen and mandis.These middlemen add no value and lead to higher retail prices for food besides indulging in hoarding practices.Foreign investment in the Retail area has been prevented by these vested interests.
7. Dependence of Indian Agriculture on Monsoon Rains.India’s low investment in Irrigation has implied that a majority of the crop growing areas are dependent on seasonal rains.This was brought out starkly when Monsoon Rains failed in 2010

India’s Food-Price Inflation Holds Near 11-Year High – Bloomberg

India’s benchmark measure of food inflation held near an 11-year high, highlighting the challenge policy makers face in curbing inflation without hurting a nascent economic recovery.An index of food articles compiled by the commerce ministry increased 18.22 percent in the week ended Dec. 26 from a year earlier, following a 19.83 percent gain in the previous week. Food-price inflation accelerated to 19.95 percent in the week to Dec. 5, the fastest pace since Dec. 1998.Price gains eased in the week to Dec. 26 from the previous week as costs of some food items softened. Prices of vegetables gained 30.97 percent in the week, compared with 46.7 percent rise in the prior period, while fruits rose 7.87 percent, less than 10.35 percent, today’s report showed. Milk prices increased 12.6 percent from 13.6 percent.

Summary

Rising Food Prices is a Burning Topic for India despite a lack of attention given to it by mainstream media outlets.There has been a massive amount of food insecurity amongst ordinary Indians who are finding it difficult to meet their basic nutritional requirement.The current government has not done enough to alleviate this problem despite increasing revenues derived from a rapidly growing economy.The proposed Food Security Bill will be an important Law to solve this food crisis if is not diluted by vested interests.