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Nature of Current Inflation in Food Prices

Food prices are supposed to be driving the current inflationary spiral. The analysis here shows that it is "food products" and not "primary food articles" which are mainly responsible for the surge in inflation. Among food products, oil cakes, edible oils and dairy products are the biggest contributors to the food price spiral. Contrary to popular perception, primary food articles - cereals and pulses - have not had much to do with rising prices.

COMMENTARYEconomic & Political Weekly EPW october 4, 200817Nature of Current Inflation in Food PricesR SthanumoorthyFood prices are supposed to be driving the current inflationary spiral. The analysis here shows that it is “food products” and not “primary food articles” which are mainly responsible for the surge in inflation. Among food products, oil cakes, edible oils and dairy products are the biggest contributors to the food price spiral. Contrary to popular perception, primary food articles – cereals and pulses – have not had much to do with rising prices. It has been more than seven months since India has been entangled in ris-ing headline inflation, measured by year-on-year changes in the wholesale price index (WPI). Indeed, in terms of du-ration, the present price spiral is the long-est since 2000-01.1 Several domestic and international factors have been identified as the causes of the present inflationary situation in India. A major one among them has been high food prices world-wide, caused due to the strengthening of global food demand against falling pro-duction [RBI 2008a].2It is pointed out that as India imports many food items, rising world food prices have been transmitted to domestic prices. However, an understanding of the nature and intensity of such “globally transmitted” food price inflation in India remains vague. Important ques-tions which remain unanswered are: Which category of food items has been causing damage to domestic food prices? Has the price increase occurred in a wide range of food items or only a few? Com-pared to the past, is the present food price inflation as critical as projected in the media? Anatomy of InflationAlthough during a major part of 2007 (May to December) India experienced low to moderate headline inflation, infla-tionary pressures slowly started building up from December 22, 2007 (Table 1, p 18). After that point of time, inflation, year-on-year (also known as point-to-point), increased by 8.89 percentage points from 3.74 per cent to 12.63 per cent in the week ending August 9, 2008. On an average basis, the inflation rate re-corded, period-on-period, during this 35-week period was 8.39 per cent (Table 2, p 18), which is the highest among the seven instances of inflationary pressures that have struck the Indian economy in the last 10 years. It appears that the price spiral was trig-gered by the rising prices of primary articles and manufactured products groups (Table 1). Later on, with the up-ward revision of the prices of petroleum products on two occasions (mid-February and June first week of 2008), mineral oils group (cost-push element) has added momentum to the overall price run.3 The fact that the overall inflation and the in-flation of primary articles and food prod-ucts (in the manufactured products group) started climbing even before the first fuel price revision in mid-February shows that the present inflationary pressure stemmed from supply side rigidities (Table 1). All the major product groups have contributed significantly to the current inflationary spiral implying that the price increase has occurred in a wide range of commodities. In terms of the average inflation (average of the 35 weeks), the fuel group emerges as the largest con-tributor of inflation followed closely by primary articles and manufactured products (Table 2). The fuel group infla-tion, year-on-year, has increased up to 14.63 percentage points during the last eight months or so compared to over 8 percentage points for primary articles and over 7 percentage points in the case of manufactured products(Tables 1 and 2). Acceleration was also witnessed in in-flation as measured by the consumer price index orCPI (Table 3, p 19). Between De-cember 2007 and June 2008, the year-on-year overall inflation according to the CPI has increased for all the consumer groups. Rural labourers (RL) and agricultural la-bourers (AL) groups recorded up to a 3.2 percentage point increase in the inflation rate during this period, followed by indus-trial workers (IW) (2.4) and urban non-manual employees (UNME) (2.2). Signifi-cantly, the increase observed in food group inflation was the largest among all the product groups and for all the con-sumer categories (Table 3). As in the case of WPI inflation, food and fuel groups emerge as the major drivers of the surging CPI since December 2007. The most af-fected consumer groups appear to beRL andAL. This is not surprising considering that food articles, which witnessed the largest increase inCPI, have relatively high weights inCPI-RL andCPI-AL [GoI 2008a].I am grateful to Krishna Kumar for motivating me to write on the current inflationary situation. I would like to thank Leena Mary Eapen for sparing her valuable time to discuss the various aspects of this paper and for her useful comments on this paper, Jyotirmoy Bhattacharya for his encouraging comments on an initial draft of this paper and Fathima Jasmine for her research assistance. The usual disclaimers apply.R Sthanumoorthy ( is with the Indian Institute of Management Kozhikode, Kerala.
COMMENTARYoctober 4, 2008 EPW Economic & Political Weekly18Primary Food ArticlesThough the rising prices of both food and non-food articles group are responsible for the sharp increase in the WPI inflation of primary articles, it transpires that the non-food articles have caused more dam-age than food articles (Tables 1 and 2).4 The peak inflation rate, year-on-year, of non-food articles was over 17 per cent, against over 7 per cent for food articles. On an average, the non-food articles have recorded inflation, period-on-period, of 13.52 per cent during the current price spi-ral against 5.01 per cent for food articles, which is much lower than the average overall inflation of 8.39 per cent. Interest-ingly, the period-on-period average infla-tion rate of 9.05 per cent recorded for food articles between December 23, 2006 and August 18, 2007 was much higher than in 2007-08 (Table 4, p 19).5Since the end of December 2007, inflation, year-on-year, of non-food articles has increased by up to 8.21 percentage points against 5.7 in the case of primary food articles (Table 1). Except milk, in the case of all other food articles the average inflation rate, period-on-period, has been much lower at present than it was a year ago (Table 4). To take the case of the much talked about foodgrains it recorded an average infla-tion rate of 8.54 per cent during the first eight months or so of 2007 compared to 4.64 per cent registered during the same period in 2008.In this context, it is interesting that, compared to the past experiences with re-spect toWPI inflation in primary food articles, the present situation is not as precarious as perceived. If we analyse the weekly trends in infla-tion, year-on-year, during the last decade we find two periods that have witnessed an inflation in prices of high primary food articles. One is a 37-week period in 1998 (the second week end of April to the third week end of December).6 During this period inflation in prices of the primary food articles, year-on-year, increased by a whopping 20 percentage points from 2.22 per cent in the week ended April11,1998to a peak of 22.45 per cent on November 7, 1998, with the overall period-on-period average inflation being 14.73 per cent.7 The other occasion which witnessed high food article inflation (average 9.66 per cent) was between December 2, 2006 and April 28, 2007.8 During this period the inflation of this product group reached a peak of 10.99 per cent. This clearly shows that the high prices of primary food arti-cles including foodgrains, are not the principal factor responsible for high over-all and food price inflation currently Table 1: Weekly Movements in Wholesale Price Index Inflation Rate(December 1, 2007 to August 16, 2008) (year-on-year variation in %)Date/Month/Year OverallPrimary Food Non-food Fuel MineralManufactured FoodNon-metallicBasicMetals Articles Articles Articles Group OilsProducts ProductsMinerals Alloysand ProductsMetalProducts1/12/2007 3.895.52 3.3112.22 2.42 5.18 3.86 2.458.63 3.68/12/2007 3.844.552.5110.72 2.36 5.04 4.08 3.068.58 3.2615/12/2007 3.844.472.3310.87 3.03 4.88 3.91 3.5 8.58 2.4522/12/2007 3.744.082.149.58 3.36 4.85 3.74 3.17 8.68 2.3629/12/2007 3.833.741.779.21 3.36 4.85 4.02 3.928.63 2.405/1/2008 4.576.219.30 2.5612/1/2008 4.364.491.9511.83 3.69 5.39 4.57 6.289.41 2.8619/01/2008 4.454.572.2711.30 4.04 5.98 4.51 5.999.57 2.9026/01/2008 4.786.132.2210.86 4.04 5.98 4.51 6.059.31 2.942/2/2008 4.745.952.0510.464.025.63 4.576.319.07 3.289/2/2008 4.986.793.1110.814.025.60 4.566.708.56 3.3616/02/2008 5.667.643.49 11.68 5.64 8.41 4.84 7.27 9.03 3.8223/02/2008 5.698.664.7112.42 5.64 8.41 4.55 7.96 8.70 3.771/3/2008 6.219.435.4713.326.709.32 4.709.135.41 4.808/3/2008 7.78 9.965.6114.97 6.82 9.43 7.26 8.49 5.35 18.5815/03/2008 8.0210.475.9416.25 6.78 9.33 7.52 9.085.82 20.3322/03/2008 7.859.896.2113.08 6.81 9.35 7.45 8.896.45 20.5529/03/2008 7.759.686.5411.43 6.78 9.30 7.34 9.406.45 20.355/4/2008 7.718.174.7610.656.999.60 7.809.255.8621.1912/4/2008 7.958.805.7310.386.99 9.63 7.97 8.975.86 21.3719/04/2008 8.239.366.0110.85 7.05 9.73 8.18 9.14 6.07 22.0726/04/2008 7.05 9.73 8.40 9.17 5.60 21.853/5/2008 8.739.496.0912.767.6410.80 8.8810.826.0820.7510/5/2008 8.579.035.2913.24 7.6410.80 8.7110.466.08 20.8017/05/2008 8.668.955.1213.24 7.79 11.11 8.87 11.495.54 19.9824/05/2008 8.909.745.9513.92 7.79 11.11 8.98 11.83 5.23 19.9831/05/2008 9.329.925.7415.17 7.86 11.20 9.69 13.105.28 19.807/6/2008 11.66 10.55 6.3615.75 16.25 25.50 10.28 13.42 5.29 21.1814/06/2008 11.80 10.78 6.3516.68 16.37 25.75 10.50 14.43 4.93 21.3421/06/2008 11.91 10.63 6.0517.02 16.24 25.53 10.76 15.02 4.67 21.2628/06/2008 11.89 10.84 6.15 17.42 16.27 25.57 10.64 14.65 4.67 21.615/7/2008 11.91 9.925.0216.52 16.94 26.69 10.79 13.61 4.46 22.3612/7/2008 11.89 10.15 5.4116.53 16.94 26.69 10.72 13.66 4.26 22.4019/07/2008 11.98 10.24 5.78 15.50 16.90 26.62 10.82 14.06 4.41 22.1926/07/2008 12.01 10.32 5.78 16.29 17.12 26.99 10.75 13.61 4.46 22.142/8/2008 12.44 11.43 7.2016.20 17.99 28.51 10.75 13.26 4.16 22.599/8/2008 12.63 11.83 7.4717.09 17.99 28.51 10.91 13.19 4.19 22.6516/08/2008 12.40 11.63 7.28 16.93 16.76 26.34 11.02 13.82 4.14 22.78The wholesale price indices used to calculate inflation rate are provisional for the period from June 28, 2008 to August 16, 2008.Source (Basic Data): Central Statistical Organisation ( 2: Average* Wholesale Price Index Inflation (December 22, 2007 to August 16, 2008)Items Average* Inflation Rate (Period-on-Period)Overall 8.39 Primary articles 8.79 Foodarticles 5.01 Non-foodarticles 13.52 Fuel, power, light and lubricants 9.38 Coalmining 9.49 Mineraloils 14.13 Manufactured products 7.85 Foodproducts 10.05 Beverages and tobacco products 8.6 Rubber and plastic products 6.63 Chemicals and chemical products 8.05 Non-metallic minerals products 6.27 Basic metals alloys and metal products 15.62 * Average inflation is calculated based on the change in the average value of the WPI over a certain period (e g, December 22, 2007 to August 16, 2008) with respect to the average value of the WPI over the corresponding period (e g, December 23, 2006 to August 18, 2007) the year before. Throughout this paper this method is followed to calculate the average inflation rate for a reference period wherever necessary. Source (Basic Data): As in Table 1.
COMMENTARYEconomic & Political Weekly EPW october 4, 200819witnessed in India.9 Interestingly, esti-mates of foodgrains production for 2007-08 show no sign of shortfall over the previous year.10 The Missing ElementThis being the case, in what way does food matter in the present inflationary situa-tion? One crucial aspect missing in our concern about food price inflation has been the prices of “food products” which come under the major group, namely, “manufactured products”. This product category was subject to a sharp increase in prices in recent times (Table 1). The WPI inflation of food products, year-on-year, increased from a mere 3.17 per cent in the week ending December 22, 2007 to 15.02 per cent in the week ending June 21, 2008, an increase of about 12 percentage points. On an average basis, food products have registered an inflation, period-on-period, of 10.05 per cent during the current price spiral against 5.01 per cent in the case of primary food articles (Table 2).11 More importantly, during the corresponding period last year the average food products inflation, peri-od-on-period, was only 3.76 per cent (Table 4). Signifi-cantly, unlike primary food articles, the year-on-year inflation of food products has increased unabated (Table 1). These findings sug-gest that the key reason be-hind the high food price infla-tion in India at present is the rising prices of food products and it has not much to do with the prices of primary food articles.Among food products, the blame should fall mainly on the three subgroups, namely, oil cakes, edible oils and dairy products for the current food price spiral.12 The inflation of oil cakes, year-on-year, hov-ered between 26.29 per cent and 53.47 per cent during the current price spiral (Table 6, p 20). In particular, oil cakes inflation witnessed a sharp increase from end-March 2008 onwards. It increased from 26.3 per cent on March 22, 2008 to 53.5 per cent on June 21, 2008 and re-mained close to 50 per cent level thereaf-ter. Edible oils inflation, year-on-year, in-creased from a high of 9.70 per cent on December 22, 2007 to 21.42 per cent in the week ended March 15, 2008. Subsequent-ly, it declined gradually13 to reach about 10 per cent in the week ended May 10, 2008, but climbed again to touch over 18 per cent by the beginning of July 2008. Dairy products inflation soared from 7.93 per cent at the beginning of the present price spiral to 11.29 per cent on May 24, 2008. After remaining at the level of close to 11 per cent till July 19, 2008 dairy prod-ucts inflation declined to reach about 7 per cent by August 16, 2008.Role of Oil Seeds and Edible OilsThe root cause of high inflation of oil cakes, edible oils and dairy products can be traced from the domestic output of oil seeds, a non-food article. Oil seeds are the primary source of edible oils and oil cakes production.14 Oil cakes are used as animal/livestock feed. Over the years, India has emerged as one of the largest consumers and importers of edible oils in the world. Presently, India accounts for 10 per cent of the world edible oil consumption and 14 per cent of world imports. The per capita consumption of edible oils, which was around 7.5 kg per annum in mid-1990s, is now over 11 kg [GOI 1997 and 2008b].15 Alarmingly, our dependence on imports has increased considerably over the years from 17 per cent of the consumption re-quirements in mid-1990s to nearly 40 per cent now [GOI 1997 and 2008b]. And this import dependency level is projected to continue till 2015.A look at the trends in the past 10 years reveals that a fall in the domestic produc-tion of oil seeds has always necessitated higher imports of edible oils and vice versa (Table 8, p 20). However, it appears that higher edible oils imports have not always Table 3: Consumer Price Index Inflation (year-on-year in %)Category December 2007 March 2008 May 2008 June 2008CPI-Industrial Workers (IW) (Base: 2001=100) General 5.5 7.9 7.8 7.7Food group 6.2 9.3 10.7 NAPan, supari, etc 10.3 10.9 7.2 NAFuel and light 2.3 4.6 3.8 NAHousing 4 4.7 4.7 NAClothing,bedding and footwear 3.5 2.6 3.4 NAMiscellaneous 4.7 6.3 6.3 NACPI-Urban Non-Manual Employees (UNME) (Base: 1984-85=100) General 5.1 6 6.8 7.3Food group 6.2 7.8 9.5 9.6Fuel and light 5.4 4.6 0.9 5.3Housing 4.7 4 3.8 3.8Clothing,bedding and footwear 4.1 4.3 3.9 3.4Miscellaneous Labourers (AL) (Base: 1986-87=100) General 5.9 7.9 9.1 8.8Food group 6.2 8.5 10 9.6Pan, supari, etc 11.3 10.4 11.1 11.2Fuel and light 6.3 8 7.3 8.9Clothing,bedding and footwear 1.3 1.8 2.9 3.1Miscellaneous 5.2 6.1 6.3 6.5CPI-Rural Labourers (RL) (Base: 1986-87=100) General 5.6 7.6 8.8 8.7Food group 6.2 8.2 10 9.6Pan, supari, etc 11.5 10.6 11 10.9Fuel and light 6.3 8 7.3 8.9Clothing,bedding and footwear 2.6 2.8 3.5 4.1Miscellaneous 5 6.2 6.6 6.8NA -Not available.Sources: (i) RBI (2008c); (ii) Ministry of Statistics and Programme Implementation, Government of India ( [For CPI-UNME June 2008]; (iii) Labour Bureau, Government of India ( [For CPI-IW June 2008 (General)].Table 4: Average Wholesale Price Index Inflation – Food Items (in %)Items December 23, December 22, 2006 to 2007 to August 18, 2007 August 16, 2008All commodities 5.55 8.39Primary articles 10.27 8.79 Foodarticles 9.05 5.01 Foodgrains 8.54 4.64 Fruits and vegetables 11.29 2.20 Milk 7.82 8.43 Eggs, meat and fish 7.09 2.40 Condiments and spices 18.56 6.28Non-food articles 13.30 13.52 Fibres 8.36 23.29 Oil seeds 28.65 18.53 Other non-food articles 3.29 1.92Food products 3.76 10.05 Dairyproducts 5.56 9.38 Grain mill products 13.37 4.89 Sugar, khandsari and gur -12.58 -4.03 Edibleoils 14.28 14.82 Oil cakes 21.33 41.47 Tea and coffee processing 6.89 2.56Source (Basic Data): As in Table 1.Table 5: Wholesale Price Index Inflation – Primary Food Articles(December 22, 2007 to August 16, 2008) Items Average Inflation Rate Range* (Period-on-Period(Year-on-Year Variation in %) Weekly Variation in %)Foodgrains 4.64 0.84 to 6.40Fruits and vegetables 2.20 -6.31 to 8.21Milk 8.43 6.44 to 10.20Egg, meat and fish 2.40 -0.67 to 9.63Condiments and spices 6.28 -4.40 to 16.12The complete data set are available from the author upon request. * - Based on year-on-year weekly WPI inflation figures for the period from December 22, 2007 to August 16, 2008.Source (Basic Data): As in Table 1.
COMMENTARYoctober 4, 2008 EPW Economic & Political Weekly20resulted in higher domestic prices edible oils. That is to say, it all depended on the prevailing international price of edible oils. Whenever the ruling international export price of edible oils was low, we were able to meet the domestic shortfall in edible oils availability through higher and cheaper imports with desirable effect on domestic edible oils inflation. On the other hand, whenever the international export price was ruling high, domestic price of edible oils was also ruling high irrespective of an increase or decrease in imports.Given this past experience, tracing the reasons for high edible oils prices during the current inflationary spiral is not a dif-ficult exercise. In the oil year 2006-07 (November to October), the production of oil seeds declined by 13 per cent from 27.98 million tonnes in the previous year to 24.28 million tonnes. This is the largest shortfall witnessed in the oil seeds pro-duction since 2002-03 (Table 8). The record drop in the oil seeds crop has ne-cessitated higher import of edible oils. As the ruling international price of edible oil was high, higher imports have resulted in higher domestic inflation of edible oils.16 What happened to the prices of edible oils since the end of 2007 is nothing but the continuation of the aforementioned trend witnessed in the oil year 2006-07. The an-ticipated fall in the production of oil seeds in the 2007-08 rabi season has ensued in higher edible oils imports since November 2007.17 This is clear from the fact that the total edible oils imports during the period November 2007 to July 2008 was about 10 per cent higher than the corresponding period last oil year (Table 8). As the higher imports have occurred against rising international prices of edible oils, the result was higher domestic edible oils prices. Since 2002 world edible oil prices have been gathering an upward momentum (Table 8) and during the last one year the prices have hit the roof.18 The global year-on-year edible oils inflation was in the range of 100.6 per cent to 104.3 per cent in March 2008 (over March 2007) [seeRBI 2008b, Table 40]. In June 2008 (over June 2007), the same figure was in the range of 50-83 per cent [seeRBI 2008c, Table 36]. A combination of factors – higher demand for vegetable oil from the biofuel industry,19 an upward movement in crude oil prices and the rising demand from the consumption markets such as India and China – has been responsible for the continuing bull-run in the world vegetable oils market. This is despite the world witnessing higher edible oils output during the last few years.20 As regards dairy products, it appears that the high inflation of oil cakes has passed through to the prices of dairy pro-ducts. The average inflation rate, period-on-period, of oil cakes during November 2007-July 2008 was 39.19 per cent, against 18.79 per cent recorded during the cor-responding period previous year. The high inflation of oil cakes is reflected in the average inflation, period-on-period, of dairy products (9.25 per cent) during November 2007 to July 2008, which is about 4 percentage points higher than the figure during the corresponding period the year before.ConclusionsAmong the various reasons identified for the present inflationary situation in India, soaring food prices have received consi-derable national attention. This article shows that the rising prices of “food pro-ducts” that come under the “manufactured products” group have been the major fac-tor responsible for high overall and food price inflation in India. Primary food arti-cles, including the foodgrains, have little to do with the rise in food prices. Interest-ingly, a look at the trends in the past 10 years reveals that the current primary food articles inflation, year-on-year, is not as precarious as perceived by the public. Also, among the primary articles, the non-food articles have caused more damage than food articles to overall inflation dur-ing the current price spiral. The three food products, namely, oil cakes, edible oils and dairy products, have found to be the major contributors of the current food price spiral. This implies that the present food price inflation in India is the result of the higher prices of only a few food items. The root cause of the high inflation of edible oils has been larger Table 6: Wholesale Price Index Inflation – Food Products(December 22, 2007 to August 16, 2008) Items AverageRange* InflationRate(Year-on-Year (Period-on-PeriodWeekly Variation in %) Variation in %)Dairy products 9.38 6.23 to 11.29Grain mill products 4.89 -1.22 to 9.46Sugar, khandsari and gur -4.03 -14.08 to 6.26Edible oils 14.82 8.87 to 21.42Oil cakes 41.47 26.29 to 53.47Tea and coffee processing 2.56 -0.61 to 9.24Note: As in Table 5.Table 7: Wholesale Price Index Inflation – Non-Food Articles(December 22, 2007 to August 16, 2008) Items Average Inflation Rate Range* (Period-on-Period(Year-on-Year Variation in %) Weekly Variation in %)Fibres 23.29 11.40 to 35.25Oil seeds 18.53 11.98 to 24.91Other non-food articles 1.92 -1.80 to 6.53Note: As in Table 5.Table 8: Edible Oils InflationOil Year Year-on-Year Growth Edible Oil Imports Year-on-Year Annual Average International Export (November to October) of Oil Seeds (in Million Tonnes) Growth of Imports WPI Inflation Rate Price of Vegetable Oils Production (%) of Edible Oils (Indices 1995=100)1998-99 16.09 4,393,421 Not Applicable Not Applicable 771999-2000 -16.324,494,953 2.3 -17.15742000-01 -10.964,833,8087.5 -2.49 712001-02 12.04 4,425,182 -8.517.81 832002-03 -28.175,114,44915.620.61982003-04 69.74 4,306,587 -15.8 4.981142004-05 -3.33 5,041,607 17.1-6.24 1022005-06 14.91 4,416,833 -12.4 -1.58 1032006-07 -13.22 4,714,760 6.7 12.94 NA2007-08 (Nov 07-July 08) -3,629,012 10.04* 14.11** NA(i) *Growth over November 2006-July 07; (ii) **November 2007 to July 08; (iii) Production, import and inflation figures pertain to the oil year (November to October) and not financial year; and (iv) NA - Not available.Sources: (i) The Solvent Extractors’ Association of India (For oil seed production and edible oil imports); (ii) Central Statistical Organisation ( (For inflation); (iii)WTO International Trade Statistics (various issues) (for export price).EPW Index 2006Readers can download the complete author and article index (PDF files) for 2006 from the EPW web site.The index for 2005 is also available on the same page.
COMMENTARYEconomic & Political Weekly EPW october 4, 200821edible oils imports since November 2007 at soaring international prices. Larger ed-ible oils imports were necessitated due to the anticipated fall in domestic production of oilseeds in the rabi season of the oil year 2007-08. In case of dairy products, the high inflation of oil cakes has fed into the prices of dairy products.Notes 1 This observation is based on the author’s compu-tation of the WPI inflation, year-on-year, on a weekly basis for the last 10 years. The full data set are available from the author upon request. 2 Current world food stocks have been the lowest in the last 25 years [RBI 2008a]. This has been attributed mainly to diversion of acreage for bio-fuels, higher energy and fertiliser prices and crop failures in some parts of the world due to weather-related factors. 3 Notably, after the fuel price revision on both the occasions, overall inflation; inflation of primary articles, in particular non-food articles; and infla-tion of manufactured products, particularly food products and basic metals have increased significantly. 4 The high inflation of non-food articles group was led by fibres and oil seeds (Table 7, p 20).As dis-cussed later, oil seeds play pivotal role in fuelling the present food price inflation. Interestingly, an analysis of the weekly trends in the inflation dur-ing the last one decade reveals that, on several oc-casions, on period-on-period average basis, the non-food articles have contributed more to the overall inflation than food articles.5 However, in the case of non-food articles, the average inflation was more or less same during both the periods. 6 In fact, this period has witnessed an overall infla-tionary situation (period-on-period average 6.33 per cent) fuelled mainly by the rising prices of the primary articles. The primary articles inflation, year-on-year, was up by 16.68 percentage points with an average of 13.77 per cent. 7 This must be attributed to the poor agricultural performance in 1997-98. Year-on-year growth of production was negative in 1997-98 for foodgrains (-3.60 per cent), cereals (-3.19 per cent) and pulses (-8.98 per cent) [RBI 2007]. 8 This could be due to the poor growth record of pulses output for two consecutive years, i e, 2004-05 (-11.94 per cent) and 2005-06 (1.98 per cent). 9 Among the primary food articles, condiments and spices subgroup has witnessed the largest per-centage point increase in the year-on-year infla-tion followed by fruits and vegetables and food-grains (see Table 5, p 19). Inflation rate of foodgrains, year-on-year, increased by 5.56 per-centage points from 0.84 per cent in the week ended December 22, 2007 to 6.40 per cent in the second week end of April 2008. After that it was hovering mostly over 5 per cent. Not only that, the foodgrains inflation has crossed 5 per cent limit only in March 2008. Hence, on period-on-period average basis, foodgrains have recorded an infla-tion of only 4.64 per cent during the current price spiral. The year-on-year inflation of milk, though not witnessed any significant change, mostly hovered over 8-9 per cent till mid-June 2008, but declined thereafter to reach 6.44 per cent on August 16, 2008.10 As per the second advance estimates released on February 7, 2008, the foodgrain production in 2007-08 has been pegged at 219.32 million tonnes compared to 217.28 in the previous year [GoI 2008b]. Moreover, in the beginning of February 2008, the foodgrains stock with the government agencies was 1.4 million tonnes higher than the buffer stock norm of 20.0 million tonnes applicable for January-March 2008 [RBI 2008a].11 The other occasions witnessing soaring prices of food products during the last one decade were: 1998 April second week end to 1998 December third week end (average 11.84 per cent); 2003 November last week end to 2004 February last week end (average 9.16 per cent); and 2002 December second week end to 2003 May last weekend (average 7.47 per cent).12 The year-on-year inflation of grain mill products picked up from -1.22 in last week end of December 2007 to reach a peak of 9.46 per cent on June 14, 2008. After that it declined gradually to reach the level of over 3 per cent on August 16, 2008. How-ever, it is to be pointed out that, like foodgrains, the inflation of grain mill products has crossed 5 per cent mark only in March 2008. Until then the grain mill products inflation was hovering between -1.22 per cent and 1.95 per cent.13 This might be the after-effect of import duty cut on edible oils to combat inflation. 14 There are about nine principal oilseeds based on which edible oils are produced in India [GoI 2008b]. They are groundnut, rapeseed/mustard seed, soyabean seed, sunflower seed, sesame seed, nigerseed, safflower seed, castor seed and linseed. The major secondary sources of edible oils are coconut, cottonseed, and rice bran. Oil cake is the solid residue that is left after crushing oil seeds to extract oil.15 Such a huge increase in consumption is attributed to a sharp increase in the purchasing power of the Indians and the improvement in the general standard of living of the Indian citizens. However, the current level of per capita edible oils con-sumption in India is much lower than the present world average of 23 kg [GoI 2008b].16 In the global vegetable oil market prices have reg-istered an enviable 30-40 per cent rise during July 2006 to July 2007. See ‘Price Outlook to Dominate Global Vegoil Meet’,The Hindu Business Line, July19, 2007 and ‘Disturbing Trends to the Fore in Vegoil Market’,The Hindu Business Line, November 3, 2007.17 The total rabi oilseeds sowing till November 2007 was 58.63 lakh hectares, against 74.76 lakh hectares during the same period last year. The shortfall was mainly due to the cold spell and lackof soil moisture (due to insufficient rains) in major rapeseed/mustard-growing areas such as Rajasthan and Madhya Pradesh. However, note that for the full oil season 2007-08 the edible oil industry had pegged the oil seed production figure at a slightly higher level (25.49 million tonnes) than the previous year. See ‘Crop Estimate: Edible Oil Body Joins Issue with Govt’, The Hindu Business Line, February 12, 2008 and ‘Lower Acreage, Frost Hit Rabi Oilseeds Output’, The Hindu Business Line, March 3, 2008. Also see RBI (2008b). 18 The current international prices of crude palm oil and soyabean oil are nearly five times higher than prices 5-6 years ago and twice the rates traded in 2006. See ‘Disturbing Trends to the Fore in Vegoil Market’, The Hindu Business Line, November 3, 2007 and ‘Industry, Trade Upbeat on Palm Oil Price Outlook’, The Hindu Business Line, February 26, 2008.19 The rising demand for bio-diesel has put tremen-dous pressure on the prices of edible oils in the international market in recent years. The major regions/countries producing bio-diesel from veg-etable oils include Europe (using rapeseed oil), US (with the use of soyabean oil), Malaysia and Indonesia (both using crude palm oil) (see ‘Global Vegoil Meet in Jakarta’,The Hindu Busi-ness Line, April 25, 2007; ‘Call to Increase Oilseeds Production’,The Hindu Business Line, March 14, 2007; and ‘World Vegetable Oil Prices May Soften Near-Term’,The Hindu Business Line, March 13, 2007).20See ‘Long-term Shift seen from Oilseed to Corn, Maize in US’, The Hindu Business Line, May 3, 2007.ReferencesGoI (1997): Annual Report 1996-97, Ministry of Con-sumer Affairs, Food and Public Distribution (Department of Food and Public Distribution), Government of India. – (2008a):Economic Survey 2007-2008, Ministry of Finance, Government of India, New Delhi. – (2008b):Annual Report 2007-08, Ministry of Consumer Affairs, Food and Public Distribution (Department of Food and Public Distribution), Government of India.RBI (2007): Handbook of Statistics on Indian Economy, Reserve Bank of India, October 1. – (2008a):Annual Policy Statement for the Year 2008-09,Reserve Bank of India, July 29. – (2008b): Macroeconomic and Monetary Deve-lopments in 2007-08, Reserve Bank of India, April 28. – (2008c):Macroeconomic and Monetary Develop-ments: First Quarter Review 2008-09, July 28.Call for PapersRedefining South-South Cooperation: Africa on the Centre Stage23-25 February, 2009Details of the conference are available at <>Submission of abstracts (300-350 words) by 30 October 2008 For abstract submissions/queries email, Cc, coordinatorconference@gmail.comOrganised by: Faculty and staff, Centre for African StudiesCoordinator; Renu ModiDirector, Centre for African Studies,University of Mumbai, Mumbai-400 098

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