News:The United Nations Food and Agriculture Organisation’s(FAO’s) food price index has touched 182.5 points in January 2020, the highest since December 2014.
Facts:
About FAO Food Price Index(FPI):
- The FAO Food Price Index(FPI) is a measure of the change in international prices of a basket of major food commodities with reference to a base period of 2002-04.
How FPI has affected India:
- The surge in global food prices is reflected in trends in India as well. Annual consumer food price index(CFPI) inflation which stood at 2.99% in August 2019 has reached 13.63% in January,2020.
- The inflation in the wholesale price index for food articles has also increased from 7.8% in August 2019 to 11.51% in January 2020.
Factors for rise in food inflation:
Domestic Factors:
- Indian Agricultural production is dependent on monsoon.Hence,poor monsoonal rainfall during the first half (June-July) has impacted the sowing season which led to reduced/delayed Kharif sowing.
- The increase in the retail prices of onion was purely due to the failure of the domestic Kharif crop.
Global Factors:
- India imports two-thirds of its edible oil requirement and that is why higher international prices are automatically transmitted to the domestic market such as in the case of Palm oil.
Additional information:
Imported Inflation:
- Imported inflation is when the general price level rises in a country because of the rise in prices of imported commodities.
- The two key contributors to India’s imports are: Crude Oil and Gold.The rise in the prices of these two products usually lead to rise in the import bill of the country.
