Managing Food Inflation in India
DOI:
https://doi.org/10.17010/aijer/2024/v13i1/173411Keywords:
Consumer Price Index Food Inflation
, Wholesale Price Index Food Inflation, Persistence, Volatility, India.JEL Classification Codes
, E31, C32, E52Paper Submission Date
, August 10, 2023, Paper sent back for Revision, February 1, 2024, Paper Acceptance Date, February 20, 2024Abstract
Purpose : This paper aimed to analyze the trends in both wholesale price index food (WPIF) inflation and consumer price index food (CPIF) inflation in India and quantify the persistence and volatility in both measures of food inflation and their sub-components. The study used monthly data for the period 2012M4 to 2023M12.
Methodology : The study employed a univariate technique of quantifying persistence for the components of WPIF and CPIF inflation in India. Volatility of these components was also calculated using the simple measure of standard deviation.
Findings : The results suggested higher persistence in CPIF than in WPIF inflation. However, volatility remains the same in both of them. The disaggregated items of cereals, pulses, milk, and spices showed high persistence; whereas, pulses, fruits, vegetables, and certain manufactured products showed high volatility.
Practical Implications : The study identified the persistence-volatility pattern of components of food inflation in India. This pattern acted as a useful guide in formulating policies to control food inflation in the economy. Certain individual food items showed high volatility in overall food inflation, and short-term policies could effectively control their prices. However, items that exhibited high persistence in price changes require long-term policies to control their prices.
Originality : This paper discussed the persistence and volatility of the disaggregated components and uniquely compared trends in both CPIF and WPIF inflation together. Finally, the paper used the newly constructed consumer food price index for analysis as compared to the CPI-industrial worker (CPI-IW) used in some of the studies.
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